Nearly two-thirds of companies with well-established advanced analytics strategies report operating margins and revenues of 15% or more, according to a report developed by Forbes Insights, in collaboration with EY.
The report, Data & Advanced Analytics: High Stakes, High Rewards, revealed that those organizations who have an analytics strategy that is well-established and central to the overall business strategy, rated their competitive ability in data and analytics as market-leading. Of these organizations, 66% achieved revenue growth of 15% or more, while 63% reported that operating margins had increased 15% or more in 2016. In addition, 60% of these companies said they also improved their risk profiles.
With returns of this caliber, a data and analytics strategy is both effective and necessary for global organizations. Over the next two years, more than half of the global executive respondents are planning to invest at least US$10m in data and advanced analytics.
“Traditional process-driven organizations are now being disrupted by the new era of businesses that use data as a strategic asset,” says Manik Bhandari, EY Asean Analytics Leader, Ernst & Young Advisory Pte Ltd. “Companies have moved from pilot projects that originated in business units or countries to using data and advanced analytics at an enterprise level to rethink and reimagine their entire business to identify new opportunities.”
The survey of more than 1,500 global executives (73 in Singapore) from companies with at least US$500m in annual revenues was designed to deliver a maturity assessment of how proficient organizations are in applying analytics throughout their operations.
Based on the maturity assessment scores, Asia-Pacific tops the leaderboard due to its strengths in data monetization and advanced usage of sophisticated technologies but respondents are concerned with the cost of and difficulty with capturing quality data.
China maintains top spot
By country, China maintains the number one spot in the ranking, while the United States comes in second, up from fifth, and the UK holds steady in third place.
Bhandari adds: “Singapore is also racing to grow its analytics capabilities for the digital economy. The government has made significant investments in strengthening the country’s market access and connectivity, human capital, infrastructure, strong intellectual property and data security regulations. This presents huge opportunities to Singapore organizations to grow and mature their analytics capabilities, particularly for certain sectors with advanced data capturing systems such as health care, transport and security services.”
In terms of industry rankings, telecommunications came in first place while consumer products and retail dropped to tenth in the ranking from fourth in 2015. Technology takes the number two spot this year, followed by manufacturing in third place. In the area of emerging technologies, market-leading organizations use predictive modeling (67%), artificial intelligence (53%) and robotic process automation (43%).
More work needed on enterprise-wide analytics strategy
In a similar EY and Forbes Insights survey a year ago, only 16% of respondents had achieved an analytics strategy that infuses insights across functions such as HR, finance and the supply chain, compared to 23% of this year's respondents, indicating some progress globally. Among the Singapore respondents surveyed this year, only 4% of organizations have achieved an enterprise-wide analytics strategy, where analytics strategy is well-established and central to the overall business strategy.
Bhandari observes: “We are seeing an increasing level of interest from clients to coordinate the current uneven pockets of analytics activity and adopt a structured roadmap and strategy for the organization’s analytics transformation. In many sectors, analytics maturity tends to be unbalanced across the organization. For example, in financial services institutions, retail banking services often lead in the use of customer analytics while regulatory services could be lagging in analytic capabilities that are focused on anti-money laundering.”
This year’s survey indicates that there still needs to be a heavy focus on the people who are applying the analytics, making the decisions and changing business processes within organizations. Forty-four percent of Singapore respondents (global: 41%) felt there was still a lack of collaboration between IT, the data and analytics team and the business team, and 47% of Singapore respondents (global: 40%) saw the lack of people with analytics skillsets as a challenge when designing data analytics initiatives.
Bhandari says: “Singapore is fast building up its analytics talent by embedding analytics curricula in schools and universities but the local talent pool will likely remain constrained.
This digital capability gap may not be a perennial challenge if organizations are able to shift their mindsets to think globally and effectively use talent pools in different locations through leveraging technologies in connectivity and cloud.
“At the same time, Singapore’s limited analytics talent pool may be best utilized by focusing on proprietary product development to create software products and services that can generate recurring revenue streams, as opposed to a services business model where revenue is predominantly driven by the pool of professionals available.”
Bruce Rogers, Forbes Chief Insights Officer, says: “The top pain points in successfully imbedding analytics strategically throughout the business continue to be around the human element, not the technology. Collaboration, culture and skills were cited as key hurdles throughout the business life cycle, creating a wider divergence between organizations that are focusing on the people aspects – and separating winners from losers.”