Research reveals secrets of analytics ROI
New research has revealed analytic enterprises boast significant returns with higher spends guaranteeing higher returns.
Nucleus Research examined 60 analytics deployments and identified three important trends in organisations that deploy analytic technologies such as business intelligence (BI), performance management (PM), and predictive analytics.
Firstly, organisations earn significant ROI on even small initial deployments. Secondly, beyond report automation, companies can use analytics to drive continuous improvements to business processes and decision making. And finally, as organisations become more analytic, they earn increasing rates of returns on their investments in analytics.
In its research, Nucleus identified the analytic enterprise as “an organisation that improves its competitiveness and operating results by continuously broadening and improving its use of analytics.”
Additionally, the research revealed that as organisations become more analytic, they pass through a significant evolution resulting in a change in employees work practices and improved decision making and data management.
The four stages that typically occur are:
- Automated: As a result of productivity improvements and the ability to dramatically expand reporting capabilities without new staff, the average ROI for analytics at this stage was 188%.
- Tactical: Organisations have multiple analytics deployments and have begun using these technologies to improve decision making, rather than just increase productivity. Nucleus found the average return on analytics investments for companies at this stage was 389%.
- Strategic: Strategic analytics organisations typically have advanced data governance tools and practices. Organisations at this stage also embed analytics capabilities into non-analytic processes with the average returns on analytics investments found to be 968%.
- Predictive: These deployments achieve higher returns by tapping into Big Data. With an average ROI of 1,209%, Nucleus found organisations at this level achieved higher returns with projects such as web-based customer sentiment tracking and demand forecasting as a result of data integration with distributers.
According to Nucleus, one driver of high investment is the ability to achieve new benefits from sunk costs. With lower costs required to achieve new benefits such as better decision making for a new end-user group, the ROIs of individual follow-on projects and deployments are typically higher than initial deployments, said the firm.
Additionally, acquisitions and mergers can present significant opportunities to extend returns on analytics investment. Other factors include the ability to make employees’ decision making more fact based and proactive, as well as making employees more proactive, said the research firm.
Any enterprise can be analytic and capable of earning high returns on analytics investments and likely to increase the more a company spend on these technologies, concluded Nucleus.