But excitement doesn’t easily translate into impact for your organization.
“There’s a huge amount of effort and investment and focus on data analytics right now,” he says Tom O’Toole, senior associate and clinical professor of marketing at the Kellogg School, who was previously CMO at United Airlines and CMO and CIO at Hyatt Hotels Corporation. “But the reality is that companies still struggle to understand how, in practice, to connect analytics to business outcomes.”
A fundamental problem is that companies typically approach analytics development as a technical challenge: hire data scientists, adopt the right software, and then reap business benefits. But getting real business value from analytics, says O’Toole, requires deeper business changes.
The key is for companies to create an environment in which employees think about asking business questions that can be answered with data, and are free and able to ask such questions.
O’Toole agrees with his colleagues that analysis is a leadership problem. “After working with a number of companies, particularly this year, I’ve seen that connecting analytics to business results is fundamentally a cultural problem.”
Here, O’Toole outlines four ways leaders can lay this cultural foundation.
Create a culture of intellectual curiosity
First and foremost, gathering meaningful data insights that result in business value requires a culture of constant questioning.
“It’s about the encouragement, the anticipation, and the ability for people to say, ‘Hmm, I wonder how we could use data to predict it or improve it or optimize it?'” O’Toole says.
Questions should be welcomed from all corners of an organization, with no part of the business considered off limits. Although analytics are often discussed in relation to revenue and marketing, their value can and should extend to any part of an organization.
O’Toole describes how earlier this year he was discussing analytics with the senior leadership team of a financial services firm when its general counsel wondered aloud how data and predictive analytics could be used to identify potential instances of a particular type of regulatory problem. compliance.
“People didn’t expect the lead attorney to be the one asking how to use predictive analytics to deal with an issue,” O’Toole says, “but he did. And, anticipating and avoiding the compliance issues he had in mind would have real business value in avoiding the costs associated with lawsuits, customer settlements and complaints.”
Building a culture of intellectual curiosity starts in the hiring process. And O’Toole says conversations about a wide range of topics can provide useful insights into how a job candidate thinks about data.
“For example, if you discover that someone is interested in what’s driving crime rates in a particular geographic area—and that they’re using data to understand and uncover patterns—well, that might not be directly relevant to your business, but it might to show how their minds use data to solve problems.”
Make curiosity a criterion for progress
Organizations should have an explicit expectation that employees use data in new ways to answer new questions. One way to do this is to define intellectual curiosity as a key criterion for progress.
“This isn’t just ‘how many interesting questions have you asked and answered in the last six months?’ says O’Toole. “This is more of a mindset assessment: How do you look at and advance the business in new ways using data?”
He likens the concept to the requirement that employees communicate effectively and work well with others in the organization. Although ability is difficult to measure, it is undeniably a practical and important factor in promotion decisions, particularly as one advances to higher levels.
Companies also need to give their employees enough room to explore the questions they care about — even if those questions don’t present obvious applications or quick revenue prospects.
“You just can’t hold everything to the metric of immediate, short-term economic relevance,” says O’Toole. “There are business questions that can generate significant value, but it’s hard to put a short-term ROI like some HR metrics like the impact of employee health and well-being on other business phenomena.”
So, what margin is the right amount?
There’s no clear answer, but O’Toole believes the risk of supercharging curiosity is better than the cost of stifling it.
Demonstrate spiritual honesty
Curiosity combined with data can generate unexpected insights. But these ideas will be useless if they are ignored or closed.
“Don’t reject answers just because they’re uncomfortable or don’t support your parish view or functional role or opinion or because they challenge established practices—simply put, because it’s not what you want to hear.” says O’Toole. “Intellectual honesty isn’t a term you hear companies talk about when they first get into analytics, but it’s imperative.”
O’Toole tells a story told by Eric Anderson when he was a young analyst at a financial services firm. Tasked with analyzing which branches should be closed to maximize business productivity, Anderson answered the question in depth and to the point, only to be told by a senior executive that he was going to block the analysis from going forward because he was against closing branches .
“If people take the initiative to ask interesting questions and pursue the answers, then there’s nothing worse than being met with a reflexively negative reaction, with a ‘no, I don’t want to hear that,'” says Toole. Even subtle criticism from senior leaders can drastically reduce people’s willingness to forward honest information.
“If you want to torpedo an intellectually curious culture very quickly, this is a good way to do it.”
Turn information into action immediately
O’Toole says it is imperative to work on how to connect data to the business in action to increase business efficiency and create business value.
“Ultimately, the success and sustainability of the current surge of interest, initiatives and investment in data analytics will depend on producing business impact,” he says.
This means, of course, that a company must take action based on data-driven insights. While there is no single roadmap for this, timely execution is critical to success.
“Very often companies start a proposal for a multi-year program subject to funding approval and IT prioritization that will begin the following year to enable or act on data analytics,” says O’Toole. “Sometimes that’s necessary, but you have to ask what can be done now—how can we use the data information tomorrow or today?”
A key to this is open communication between functions, so that employees tell each other what they’ve learned from the data.
“People with a different perspective often come up with interesting ways to act on information to benefit the business as a whole. So if in doubt, please share information.”