By Tomasz M. Grzegorczyk, Teranalytics CEO
“My company is managing things just fine right now, so why should I invest in data analytics?” was the topic of a recent discussion with a colleague. It is true that analytics is an investment where sometimes the ROI is not immediately clear. So, is there a rationale to invest or is it a leap of faith? Each decision is obviously context dependent, but some considerations are general enough that they should apply to most cases, hopefully yours as well.
Data analytics is not a goal but a means
First of all, what is the problem that you are trying to solve? Because data analytics is not a goal, it is a means. A means towards something more important: achieving a certain business objective, creating a leaner and more proactive company, introducing transparency and accountability into processes, and many other possibilities. Note that if you do not yet have a specific business metric in mind, the goal could be exploratory: what could we do with our data, what additional data should we gather, etc. The point is: you are not investing in data analytics, you are investing in your company, with likely impacts such as more informed decision making, greater revenue, and improved operational efficiency (see this article from HBR).
Compounded small wins lead to real impact
Second, it is important to set expectations: it is much more realistic to target a few small wins with good ROI at first than to hope for a transformative experience that will suddenly change how you run your company or your department. If you have not yet tried bringing data analytics into existing challenges, there are likely to be low hanging fruits that will produce immediate positive effects, showcase what can be done, and start spreading the appetite for more. So, the first couple of problems to work on have to come from you and have to be well chosen in order to create that positive dynamic. After this, new problems will come from other teams who will be intrigued by your successes and who will want to participate in the new growth strategy (“what are they doing over there?”). So absolutely, data analytics can lead to large scale transformations, but one win at a time.
Data analytics is a journey
Finally, it is all about lessons learned: investment in data analytics is a journey towards a better run company (more efficient, leaner, more reactive, etc). But the journey doesn’t always have to be a straight path. For example, if you decide to invest in forecasting, you expect forecasting improvements — legitimate expectation of course. But there might be “side effects” that are more impactful than the better forecasting accuracies you will get. These “side effects” will drive the next investments, and the next, and suddenly you are slowly transforming your company. Nobody knows what path is the optimum (if there is even such a thing), and whether forecasting was the best first step or not, but in the end you will be a more data-driven company, which usually means a better run company. The problem of course is that you need to make the first step otherwise you will never move. Or also known as the curse of the status quo: do you believe that doing nothing is better?
