Data-driven Decisions a Best Practice, but Still Not Mainstream
Technology itself provides few game-changing benefits. It's all in how organizations apply technology to improve their business processes. Business intelligence is a case in point.In 2003 Nicholas Carr created a stir among tech professionals by writing a Harvard Business Review article, titled "IT Doesn't Matter" (that he later extended into a book, "Does IT Matter? Information Technology and the Corrosion of Competitive Advantage"). As he wrote on his website:
... It doesn't enable individual companies to distinguish themselves in a meaningful way from their competitors. Essential to competitiveness but inconsequential to strategic advantage: that's why IT is best viewed (and managed) as a commodity.
I think he's right in a sense. Technology itself provides few game-changing benefits. It's all in how organizations apply technology to improve their business processes. Business intelligence is a case in point.
Writing on his blog, Andrew McAfee, a principal research scientist at the Center for Digital Business in the MIT Sloan School of Management, discusses research produced with colleague Erik Brynjolfsson that shows a strong connection between business performance and emphasis on data-driven decision making. Companies that were one standard deviation higher in being data-driven had 4 percent higher productivity and 6 percent higher profits than their peers, the two men found.
But isn't BI a commodity? Apparently not. McAfee notes (and provides a graph to illustrate) most companies rated themselves somewhere between 3 and 4 on the men's aggregate 5-point scale, and many others said they were below average. While most companies no doubt agree data-driven decision making is a best practice, a good number of them have yet to adopt it. Others are trying, but are struggling with it.
... Good exploitation of technology leads to good business performance. Good exploitation of technology depends on a set of best practices. These practices are not widely adopted. Therefore not all firms will be able to exploit technology well. And therefore firms will have different levels of performance.
I got a similar story last summer when I interviewed Jeanne Harris and Robert Morison, co-authors along with Tom Davenport of "Analytics at Work: Smarter Decisions, Better Results." They found that about 40 percent of business decisions aren't based on data. Harris told me:
Very few companies are very thoughtful about how they make decisions. That's the most far-reaching implication of our new book. Companies need to really look at which decisions are strategically important to them, and become a lot more thoughtful about how they make them.