Given the role analytics has played in reshaping industries and rewarding innovative adopters over the last two decades, it is surprising how frequently we are asked: “Does this analytics stuff really work?” More often than not, the reason for the skepticism is prior efforts that did not produce the expected competitive advantage.
Such skepticism led us to study the impact that analytics has had on our clients over the last 20 years. Our surprising finding: Efforts to adopt analytics upset the balance of power in the C-suite, and this shift often had a negative impact on analytics initiatives.
Given the myriad other factors buffeting companies at any given time, the design of our assessment was intentionally simple. We only included companies that had implemented a major analytics initiative with an innovation or similar agenda. Our team examined each organization over at least a four-year timespan. Success was measured quantitatively by the firm’s performance (profit and growth) vs. that of its competitors, and also qualitatively by interviews with senior executives who were involved, but not deeply invested, in the efforts (typically the CFO).
Frankly, the results surprised us: Only a little more than one in three of the three-dozen companies that we studied met the objectives of their analytics initiatives over the long term. Clearly, driving major innovations with analytics was harder than many executives expected.
Further study of the less-successful cohort revealed that leadership issues were often at the heart of the problems.
Shaped by history, personalities, and events, levels of influence among the members of the C-suite were not all equal. But in order to function effectively, the rivalries and politics had evolved to a tacit equilibrium. While skirmishes occurred constantly on recurring allocation matters (i.e., budgets and plans), the balance of power proved to be quite resilient. This benefited these organizations in many ways, including providing a stable direction for employees.
But the commitment to advanced analytics disrupted this equilibrium. Since there was no natural owner of analytics within the traditional organizational structure, multiple executives competed hard to own the new capability.