Executives See BI as Crucial Competitive Advantage

Business intelligencecapabilities and analytic prowess will play crucial roles in the most competitive sectors of the global economy, according to a new study. But an organization’s efforts to develop fact-based decision-making capabilities are likely to fail unless they receive active support from top managers, the survey showed.

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"We have reached a critical juncture in the history of global competition," says Tom Davenport, the director of research for Babson Executive Education at Babson College in Wellesley, Mass. "After years of fitful progress, leading firms have begun basing their competitive strategies on the sophisticated analysis of business data."

Davenport cited progress at organizations such as Capital One, Harrah's Entertainment, Dreyfus, Procter & Gamble, Verizon and the NFL’s New England Patriots as clear signs of an accelerating trend toward greater reliance on analytic processes and technologies.

Facts vs. intuition
"Many companies today use business intelligence for specific applications, but these initiatives are usually too narrow to affect corporate performance," says Davenport, who holds the president’s chair in information technology and management at Babson. "The organizations we surveyed, however, are building broad capabilities for enterprise-level business analytics and intelligence. Their capabilities go well beyond data and technology to address the processes, skills and cultures of their organizations. These strategies are driven by CEOs and senior executives who insist on fact-based decisions throughout their businesses."

The research study, which polled more than 40 C-level executives and directors at 25 globally competitive organizations, was conducted by Davenport’s team over the first quarter of 2005. Each executive was asked 15 to 20 questions during a 45-minute interview.

"We were surprised by the extremely high degree of interest and involvement in this subject area," Davenport said. "The executives we questioned were clearly interested in identifying the best strategies for organizing analytic operations on an enterprise scale. They’re really taking this seriously."

And the survey says ...
Three conclusions emerged from the study data, Davenport said:

1. Leading organizations are focusing more attention on developing fact-based decision-making processes.
2. Initiatives that are narrowly focused on achieving key strategic objectives are the most likely to gain traction.
3. The support and involvement of champions at the C-level are absolutely critical to the success of enterprise business intelligence initiatives.

"Professor Davenport’s new research supports our longstanding belief in the strategic value of business intelligence," says Dr. Jim Goodnight, CEO and co-founder of SAS. "As the future unfolds, competitive organizations will depend increasingly on integrated processes for analyzing data from multiple sources. More business decisions will be made on the basis of facts and evidence, and fewer business decisions will be made on the basis of instinct and guesswork. From our perspective, that’s a positive development."

Davenport said the research study grew from his interest in learning more about how large organizations build analytic capabilities, convert data into knowledge and use business intelligence to create value. He said he was gratified by the level of engagement demonstrated by the executives.

"The net takeaway of the study is this: The ability to make business decisions based on tightly focused, fact-based analysis is emerging as a measurable competitive edge in the global economy," Davenport says. "Organizations that fail to invest in the proper analytic technologies will be unable to compete in a fact-based business environment."