31 May 2018
Analytical culture: the key to unlocking big data’s potential?
James Walker, Zaeem Bhanji and Artur Reszka
- Analytical culture is a soft element of an organisation’s makeup that encourages decision-making based on rational assumptions and robust, granular analysis
- In addition to improving the rigour of decision-making, analytical culture empowers innovators to improve the long term performance of an organisation
- Fostering analytical culture requires strong and lasting senior support to develop internal expertise and implement change
We now generate 2.5 quintillion bytes of new data every day, bringing the potential to transform a vast array of business activities from retail to mining. However, having access to big data is not enough by itself, it needs to be used in the right way to have the greatest possible impact.
Using data ineffectively is an endemic problem for many large and well-established companies who are used to operating in a pre-Big Data paradigm, and as a result have not yet adapted their culture and decision-making processes accordingly.
In this post we argue that analytical culture is the most important success factor for analytics in any business. This is because it enables businesses to identify root causes of suboptimal performance, encourages creative thinking, adds rigour to decision making, and forces firms to be dynamic and pre-empt changes in the market and technological environment.
Analytical culture explained
Analytical culture is a soft element of an organisation's makeup consisting of individual traits and behaviours repeated over time. It has three key elements:
- Firstly, the behaviours of a firm with strong analytical culture are underpinned by analytical assumptions; the prioritisation of data over stories, and an unbiased approach to solving problems.
- Secondly, analysis is thorough, granular, valuing both negative and positive results, and with an emphasis on identifying clear patterns in data.
- Thirdly, the findings of this analysis are actually considered and implemented – albeit with a degree of pragmatism surrounding decision-making trade-offs.
Why analytical culture should be on top of your agenda
There are four key reasons why we think analytical culture is key in successful businesses today.
1. Root causes
Firstly, analytical culture helps organisations identify the root causes of problems. In everyday business this can be achieved by leveraging Toyota’s famous Five Why’s, a highly analytical approach to problem solving whereby the question “Why did this happen?” is levelled at a problem until its original cause is discovered. Eric Ries, founder of the Lean Start-up movement, gives an example of how the Five Why’s allowed his organisation to realise that frequent outages of their product were being fundamentally caused by inappropriate engineering training, rather than simply by coding errors. This insight empowered the business to address the root causes of the problem and consequently reduce product downtime.
Secondly, analytical culture can expose organisations to a greater diversity of ideas, improving the likelihood of innovation. Chipmaker Intel is a good example of this; decision-making processes, partially thanks to strong senior management support, are centred around data-supported alternatives to existing solutions, rather than yielding to the traditional hierarchies. In Intel the idea that ultimately wins is more often than not the most rational and data-proven, regardless of its sponsor within the organisation, opening the business up to a whole new spectrum of possibilities. Achieving this obsessive focus on data to channel diversity of ideas is a complex process, but evidence suggests that “leading from the top” – for example by instituting a “Chief Data Officer” – can be an effective catalyst of change, because it provides those in charge of data with the platform they need to engineer wholesale change, and symbolises the importance of effective data use to the organisation as a whole.
3. Rigour of decision making
This data-focused approach has a second benefit aside from greater diversity of ideas: it improves rigorousness of decision making. At Google, an almost obsessive focus on proving arguments with data renders arguments that cannot be supported with hard evidence invalid, and promotes not only rigorous decision-making, but also a data-driven internal attitude towards work. Even on an individual basis, employees begin to ask themselves data-evaluating questions, tightening the relevancy of their work. Granted, data may not always be available to support an argument, but ingraining an attitude of seeking data as a default option is crucial.
4. Proactive not reactive
Lastly, and perhaps most fundamentally, analytical culture promotes proactive business strategies instead of reactive ones. Hotels.com provides a good example of leveraging analytical culture to proactively improve strategy. In the early 2000s, superficially strong performance figures were masking a series of problems on the website. A detailed, granular inspection of the data led to the identification of high drop-off rates on the website. Consequently, a programme to track the specifics of user activity was instituted and a host of problems, from unclear wording to bugs, were identified, which, it turned out, had ultimately been leading to a large proportion of potential customers not completing transactions. These discoveries led to a change in strategy for the business: one which emphasised customer service and loyalty. Cancellation fees were eliminated, a loyalty programme was developed, and, along with a website redesign and appropriate new hires, the business landed upon a successful new strategy – one which wouldn’t have been discovered without strong analytical culture.
Take action now
Cultural change within a business is rarely easy, but it is worth investing significant resources in engineering it – for significant efficiency benefits, large strategic gains, and a more sensible approach to idea generation. Indeed, research by OC&C in 2017 found that among the best performing companies, 80% of meetings included analytics/data elements, suggesting a clear link between performance and analytical culture. Building a business case for something as “soft” as cultural change is not always easy, executing it effectively can be even more problematic. The first step is to enlighten executives as to the potential benefits of a strong analytical culture; the second step is for those leaders to do what they do best, and lead by example to drive their organisations towards more analytical cultures.
James Walker, Partner and Global Head of Analytics
Zaeem Bhanji, Associate Consultant
Artur Reszka, Associate Consultant