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Analytics as a Source of Business Innovation and Competitive Advantage

New MIT research reveals that the use of analytics helps companies beat the competition. The study identifies several factors behind this, including: wider dispersion of analytics within companies as well as a stronger focus on specialized, innovative applications that have strategic benefits.

Not long ago, Keith Moody was the only data analyst at Bridgestone Americas Inc. He was located in the credit division in Brook Park, Ohio, and saw analytics take off — in other companies. When Bridgestone Americas named a data-savvy executive, Gordon Knapp, as chief operating officer in March 2014, Moody was given the opportunity to build a new analytics department for Bridgestone Retail Operations, the company’s U.S. network of tire and auto repair stores. Today, Moody reports to the interim president, Damien Harmon, as director of analytics for Bridgestone Retail Operations, where he is making up for lost time.

Moody’s team is influencing management practice in virtually every part of the organization. Working with the real estate department, the analytics team pinpoints the best locations for new stores. Working with operations, it automates provision of inventory to 2,200 stores.1 Working with human resources, it determines the best allocation of 22,000 employees so that Bridgestone retail locations have the right people on-site to deal with peak demand — and don’t have workers sitting around with time on their hands. What’s more, Moody’s team is looking for ways to use driver data, such as odometer readings and other telematics data, to encourage car owners to come in for new tires or a tune-up before they hear a rattle under the hood and have to look for the nearest repair shop. This new reliance on analytics to inform executive decision making and to develop new services reflects a cultural shift for Bridgestone’s operations in the United States.

What’s happening at Bridgestone provides a window into the state of analytics across industry. After years of enthusiasm and frequent disappointment, a growing number of companies are developing the tools and, increasingly, the skills to move beyond frustration. They are progressively able to access large pools of data and use analytics to inform decision making, improve day-to-day operations, and support the kinds of innovation that lead to strategic advantage and growth.

MIT Sloan Management Review’s seventh annual data and analytics survey, conducted during 2016, reveals a sharp rise in the number of companies reporting that their use of analytics helps them beat the competition. These survey results include responses from 2,602 managers, executives, and data professionals from companies around the globe. The findings reverse a three-year trend in our survey data (2013-2015), in which fewer companies year over year reported a competitive advantage from their use of analytics.

So, why the reversal? What changed? Our findings offer clear signals that companies are increasing their use of data and analytical insights for strategic purposes and are using data and analytics to innovate business functions as well as entire business models. Indeed, analysis of our survey results and interviews with more than a dozen executives and scholars indicates that the ability to innovate with analytics is driving the resurgence of strategic benefits from analytics across industries. In this report, we delve into the enablers of innovation with analytics and find that data governance capabilities, especially around data sharing and data security, form the foundation for these innovation processes.

The four key findings from our research are:

More companies report competitive advantage from their use of data and analytics, reversing a three-year trend. According to several indicators in our 2013, 2014, and 2015 surveys, fewer companies were deriving competitive advantage and other important benefits from their investments in analytics than in previous years. According to this latest survey, however, that trend seems to have reversed, and more companies are now seeing gains. This is due to several factors, including wider dispersion of analytics within companies and better knowledge of what analytics can do, as well as a stronger focus on specialized, innovative applications that have strategic benefits.

Innovation from analytics is surging. The share of companies reporting that they use data and analytics to innovate rose significantly from last year’s survey. Organizations with strong analytics capabilities use those abilities to innovate not only existing operations but also new processes, products, services, and entire business models.

Data governance fosters innovation. Companies that share data internally get more value from their analytics. And the companies that are the most innovative with analytics are more likely to share data beyond their company boundaries. Survey results show that strong data governance practices enable data sharing, which then enables innovation. To be most effective, data governance needs to be embedded in an organization’s culture. Tactics are not the same as cultural norms. Data governance needs to be more than a system of tactics to derive business value — it must actually influence organizational behavior.

Smart machines create opportunity for innovative thinking. Smart machines that draw inferences from data on their own and learn by using algorithms to discern patterns in masses of data are no longer confined to research labs and limited applications such as speech recognition. The most analytically mature companies use artificial intelligence to augment human skills and to take on time-consuming tasks, freeing managers to spend more time on strategic issues.

Source: S. Ransbotham and D. Kiron, “Analytics as a Source of Business Innovation,” MIT Sloan Management Review, February 2017. The authors conducted the research and analysis for this report as part of an MIT Sloan Management Review research initiative sponsored by SAS.