What it means
Organizational culture is a soft science. It consists of belief patterns, attitudes and values built over the course of an organization’s history. And the business practices that result are a set of unwritten rules and expectations that can best be understood as “the way we do things around here.”
So what business practices are found in companies that possess a culture of analytics? The people in these organizations willingly share their data and analysis across organizational silos. They have leadership teams that personally demonstrate the importance of analytics, reflected in both business strategy and an openness to challenge current ideas and practices based on data. Their hiring decisions and training emphasize analytical skills for a broad array of positions. And those behaviors are rewarded and reinforced in both formal and informal ways.
But not every organization has such a culture and associated business practices. Some companies have a legacy of leadership-driven decision-making, in which strong leaders rely on a combination of experience, instinct, and information to steer the organization. And some rely more on a collaborative, consensus-driven approach. In either case, introducing data analysis as a deciding factor can challenge long-held policies and threaten traditional power structures. For these organizations, transforming to embrace a culture of analytics will be difficult.
Cultural change of this nature can be supported by technology, but it requires people and processes to make it real. As more and more companies embrace analytics as a general business practice, they are finding that information alone is not valuable unless people choose to change the way they do business as a result. For this reason, many organizations are looking to the finance function – where many of these business practices can already be found – to lead this cultural transformation. And the CFO, as an executive accustomed to using data to steer strategy, serves as the key role model to demonstrate the change.
Why it’s important
According to a joint study between MIT Sloan Management Review and IBM’s Institute for Business Value, organizations that apply analytics to create a competitive advantage are more than twice as likely to substantially outperform their peers.1 So why isn’t every company incorporating analytics into its daily operations? In a word: culture.
Many companies believe in the power of analytics to facilitate speed, accuracy, and insight in their decision-making. And it turns out the technical and skills challenges are relatively easy to overcome. But cultural resistance to analytics is significant, and far more difficult to resolve. In fact, 44 percent of respondents to a survey on analytics ranked organizational challenges as extremely difficult to overcome when it comes to adopting analytics, while only 24 percent said the same of technology challenges.2
For these reasons, many companies that aspire to let data and facts drive decisions invest in analytic technology and skills, only to find their employees unwilling to adopt the new approach. This disconnect between strategic aspiration and cultural adoption is emblematic of a basic misunderstanding about advanced analytics. Adopting analytics is not at all like a traditional IT project — such as implementing a new customer relationship management or enterprise resource planning system — which is typically undertaken to increase business efficiency. Analytics is more about business effectiveness, about making good decisions.3 Therefore, adopting analytics is transformational by nature, and culture change is a prerequisite.
For example, when Westfield Insurance, a $1.5 billion provider of home and auto insurance, committed to data analytics to help drive its decisions, the company went far beyond simply procuring technology. Its leaders invested in change management and training across the organization. “We’re a 160-year-old company, so there are long-established ways of making decisions, many of which work effectively for us,” commented Beth Riczko, group analytics leader at Westfield Insurance. “The challenge has been to hold on to what works while adopting new tools to improve performance. We have put a huge amount of effort into change management via a wide range of strategies.”
What will change
Cultural transformation is famously difficult to cultivate. Resistance to change can be fierce and the process can take years to complete. But if it is to happen, change must start with business leaders. And in many organizations the obvious choice to model the behavior that defines this new culture will be the CFO. Already familiar with trusting data and ignoring biases, CFOs are in a unique position to help guide their c-suite colleagues who are more accustomed to making decisions based on personal experience and gut instinct. Done right, data will come to be seen as more than just a byproduct of a back-office process, but rather the raw material that builds better customer insight, reduces inefficiency and eliminates risks.
Data will often contradict an accepted business practice, or suggest an unpopular course of action. And it can value one group’s work over another’s. As a result, power will shift, and many of those with power will resist. But when executive leaders defer to data, the culture of analytics takes hold from the top down.
Basing decisions on the analysis of critical data has proven to be a competitive advantage in the market.4 And the data and technology to predict trends, understand consumer behavior and model potential business scenarios exists. The main thing holding many companies back is the willingness of their own leadership and employees to embrace it.
Culture change is hard, and it doesn’t happen quickly. But it is an important part of the evolution of any organization. For those companies that believe analytics and data-driven decision making will play an important role in their success, the process of cultivating a culture of analytics should start right away.
Key questions to ask
- How does culture affect decisions in our organization?
- What role has culture played in some of our past attempts at analytics?
- Do our people readily share data? Do they have the tools and infrastructure to share it?
- Do our leaders show a willingness to challenge current practices based on data and analysis?
- Which unwritten business practices would we most like to change? What practices would we want to have?
1. Analytics: The widening divide. MIT Sloan Management Review and IBM Institute for Business Value, November 2011.
3. “Why IT Fumbles Analytics,” by Donald A. Marchand and Joe Peppard, Harvard Business Review, January 2013.
4. Analytics: The widening divide. MIT Sloan Management Review and IBM Institute for Business Value, November 2011