But enthusiasm doesn’t translate easily into impact for your organization.
“There's an enormous amount of effort and investment and focus on data analytics right now,” says Tom O’Toole, a senior fellow and clinical professor of marketing at the Kellogg School, who was formerly CMO at United Airlines and CMO and CIO at Hyatt Hotels Corporation. “But the reality is that companies are still having difficulty figuring out how, in practice, to connect analytics to business outcomes.”
One fundamental problem is that companies typically approach the rollout of analytics as a technical challenge: hire data scientists, adopt the right software, then reap business gains. But achieving real business value from analytics, says O’Toole, requires deeper enterprise change.
The key is for companies to create an environment in which employees think in terms of asking business questions that can be answered with data, and they are free and able to ask such questions.
O’Toole agrees with his colleagues’ view that analytics is a leadership problem. “After working with a range of companies, particularly this year, I’ve seen that connecting analytics to business outcomes is at its foundation a cultural problem.”
Here, O’Toole describes four ways leaders can lay that cultural foundation.
Build a Culture of Intellectual Curiosity
First and foremost, gleaning meaningful data insights that result in business value requires a culture of constant questioning.
“It’s about encouraging, expecting, and enabling people to say, ‘Hmm, I wonder how we could use data to predict or improve or optimize that?’” says O’Toole.
Questions should be welcome from all corners of an organization, with no parts of the business deemed off-limits. Although analytics is often discussed in relation to revenue and marketing, its 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 company, when its general counsel wondered aloud how data and predictive analytics could be used to identify likely cases of a certain type of regulatory-compliance problem.
“People didn’t expect the head lawyer to be the one to ask how to use predictive analytics to address an issue,” O’Toole says, “but he did. And, predicting and avoiding the compliance problems that he had in mind would have real business value in avoiding the costs related to lawsuits, customer settlements, and terminations.”
Building a culture of intellectual curiosity begins in the hiring process. And O’Toole says that conversations about a wide range of subjects can offer useful insights into how a job candidate thinks in terms of data.
“For example, if you find out that someone is interested in what’s driving crime rates in a particular geographic area—and that they use data to understand and reveal the patterns—well, that may not directly relate to your business, but it can show how their mind uses data to solve problems.”
Make Curiosity a Criterion for Advancement
Organizations should set 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 basic criterion for advancement.
“This isn’t just ‘how many interesting questions did you ask and answer in the last six months?’” O’Toole says. “This is more the evaluation of a mindset: How do you look at and advance the business in new ways using data?”
“Ultimately, the success and sustainability of the current surge of interest, initiatives, and investment in data analytics will depend on producing business impact.”
He likens the notion to the requirement that employees communicate effectively and work well with others in the organization. While a difficult skill to measure, it is unquestionably a practical and important factor in promotion decisions, particularly as one advances to higher levels.
Companies also need to provide their employees enough leeway to explore the questions that interest them—even if these questions do not present obvious applications or quick revenue prospects.
“You simply can’t hold everything to the metric of immediate, short-term financial relevance,” O’Toole says. “There are business questions that can produce meaningful value but that it’s difficult to put a short-term ROI on, such as certain HR metrics like the effect of employee health and well-being on other business phenomena.”
So, what amount of leeway is the right amount?
There is no clear answer, but O’Toole believes the risk of overfeeding curiosity is better than the cost of stifling it.
Demonstrate Intellectual Honesty
Curiosity paired with data, can generate unexpected insights. But these insights will be worthless if they are disregarded or shut down.
“Don’t reject answers just because they are inconvenient or don’t support your parochial view or functional role or opinion, or because they call into question established practices—in simple terms, because they aren’t what you want to hear,” says O’Toole. “Intellectual honesty is not a term you hear companies talk about when they first jump into analytics, but it’s imperative.”
O’Toole relates a story Eric Anderson tells about when he was a young analyst at a financial services company. Assigned to analyze which branches should be closed to maximize business productivity, Anderson did a thorough, sound job of answering the question, 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 are taking the initiative to ask interesting questions and pursue the answers, then there is nothing worse than to be met with a reflexively negative reaction, with a ‘no, I don’t want to hear about it,’” O’Toole says. Even subtle criticism from senior leaders can sharply curtail people’s willingness to bring forward honest information.
“If you want to torpedo an intellectually curious culture very quickly, that’s a good way to do it.”
Turn Information into Action Promptly
O’Toole says it is imperative to work on how to connect data to the business in practice to increase business effectiveness 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, a company needs to take action based on data-driven insights. Though there is no single road map for this, executing promptly is crucial to success.
“Too often companies initiate a proposal for a multiyear plan subject to funding approval and IT prioritization that will start next year to enable or act on data analytics,” O’Toole says. “Sometimes that’s necessary, but you need to be asking what can be done right now—how can we use data insights tomorrow or today?”
One key to this is openly communicating across functions so that employees tell each other what they have learned from data.
“People with a different perspective will often think of interesting ways to act on information to benefit the business as a whole. So, if in doubt, share information.”