Overrated analytics?

It would never occur to me to ask seriously whether business analytics are overrated. And if I posed the question in this blog, you would already know my answer before I reached a conclusion. Not surprisingly, my answer is unequivocally no. If anything, business analytics are somewhat underrated.

Still, it is a legitimate question and one posed by Bloomberg BusinessWeek Research Services in a recently published report called "The Current State of Business Analytics: Where Do We Go From here?" (You can download the survey here if you have an account at The Data Warehouse Institute.) While the answer derived from their research is less emphatic than mine, it is ultimately supportive of my position.

I’m not going to review all of the information in the report. But there are a few key areas of interest relating to the question at hand. First, there is the expansion of business analytics within companies. Compared to a similar survey conducted in 2009 when 90% of $100+ million companies around the globe said they used business analytics, 97% say they do today. Further, 58% of respondents say their use of analytics increased significantly or moderately in the past 12 months.

Another point in the survey underscoring the acceleration of analytics in business is the hunt for talent. Forty-three percent of those polled have current plans to add to their analytics personnel, while another 22% acknowledge they need more people in the area, but for various reasons are not recruiting today.

That growth tells me that virtually every mid-to-large enterprise accepts the value of analytics. Perhaps the only data-driven business tool more prevalent in an organization today is the spreadsheet.

That’s because, as the report notes, "money talks." The top three reasons companies are using analytics are to reduce costs, improve profits, and manage risk. In short, analytics are successful because they can directly help an enterprise succeed in their business.

The report’s authors seem to equivocate on the value of analytics in one area because the survey reveals that companies continue to rely on intuition more than they do data. In its words, "While organizations recognize that business analytics provide additional insight for decision-making, survey results seem to show that analytics cannot fully replace experience and knowledge." They put the ratio at 60/40 in favor of intuition over analytics.

That’s not a bad thing, from my perspective. And, in fact, a more nuanced survey might have discovered how tightly integrated intuition and analytics are in the most successful enterprises. By that, I mean, the best queries and models executed inside an analytics engine are those derived from business experience. Good intuition leads to savvy queries, which bring the best results. In fact, the report supports my interpretation by noting that in companies "using analytics effectively," that 60/40 ratio of intuition to analytics shifts to 53/47.

To me, the ideal balance for effective organizations is a 50/50 balance of business know-how and analytics. Maybe the next Bloomberg BusinessWeek poll will show that. Until then, I’ll argue that business analytics is slightly underrated.

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