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Enterprise-Wide Analytic Strategies Increase Odds of Greater Financial Growth

Survey finds double-digit growth of more than 15% in revenues and operating margins, as well as improved risk profiles.

A survey of 1,500 global C-level executives found that once an analytics strategy is rolled out at the enterprise level, there is a greater probability of double-digit growth.

The study, Data & Advanced Analytics: High Stakes, High Rewards, prepared by Forbes Insights in conjunction with EY, New York, found that 70% of leading organizations use advanced analytics to overhaul their businesses. It also found that advanced analytics drives double-digit growth of more than 15% in revenues and operating margins, as well as improved risk profiles. In addition, half of the global executives surveyed plan to allocate at least $10 million over the next two years toward analytics strategies. The report fielded responses from more than 1,500 global executives from companies with at least $500 million in annual revenues.

Specifically, the report found that organizations with a well-established and integrated analytics strategy considered their competitive ability in data and analytics “market leading.” Of these organizations, 66% achieved revenue growth greater than 15%, while 63% reported that operating margins increased more than 15% in 2016. In addition, 60% of these companies said they also improved their risk profiles. Given this success, companies said they were going to spend in excess of $10 million on data and analytics over the next two years, the report found.

The top users of analytics also showed major gains in revenue growth, operating margins and reducing their risk profiles. Specifically, 66% of the leaders in analytics improved their revenue growth more than 15%, while 63% grew their operating margins by more than 15%. And 60% said they reduced their risk exposures.

In terms of competitive differentiation among the companies using advanced analytics, the study found that the most proficient were mature companies that used their data analysis and collection efforts company-wide. One of the biggest detriments to achieving data success was a lack of cooperation from the management committee.

Other results of the study found that 70% of the top performers of analytics used the data to overhaul strategy and improve their competitiveness. Of the top performers, 75% used a full array of analytics within a specific framework. Of these, many used artificial intelligence and other predictive methods for scenario modelling.

Where there are demonstrated benefits to advanced analytics, the greatest stumbling block to implementing an advanced analytics program was “around the human element, not the technology,” the study said.

“Collaboration, culture and skills were cited as key hurdles throughout the business lifecycle, creating a wider divergence between organizations that are focusing on the people aspects – and separating winners from losers,” according to Bruce Rogers, Forbes’ chief insights officer. One reason was that data and analytics did not flow smoothly around the company, from department to department.

 Benefits of Advanced Analytics

Relying on predictive financial analysis can help CFOs rely less on transaction data and more on using sophisticated analytics to gauge the impact of different strategic directions. This improves risk management and thus the chances of financial success, according to the company.

The company also said on its website that “sophisticated predictive analytics will allow the CFO to generate value from data insights and change outcomes based on that insight” and that improved analytics “will be the bastion of the successful CFO and their highly-skilled finance team.”

To become an analytics-driven CFO, the firm recommends that the CFO team be able to predict various financial and risk scenarios, and then develop test scenarios to minimize risk or capitalize on opportunities. They also suggest that “micro-insights” be encouraged from all levels of the company, since these can deliver the greatest benefits.

By Chuck Epstein