The Untapped Value of Analytics A new global benchmarking study reveals that analytics leaders see 60 percent more profits than the laggards.1The growing availability of data combined with expanded connectivity and amplified computational power are creating an unprecedented opportunity for businesses to use analytics to improve their decision-making. As a result, companies around the world are spending billions of dollars a year to build their analytics capabilities, hoping to use smart technologies to tap into the power of data. In an environment marked by tough competition and a data explosion, most C-suite executives are unaware of the best practices and are left wrestling with an array of questions. How does our analytics capability compare with our regional and global peers Which business areas will see the most value Is the organizational structure designed to maximize the impact, and do we have the right talent Is the budget big enough And most importantly, is there a sufficient impact on the bottom line to justify the required investments With this in mind, Melbourne Business School and A.T. Kearney have created the Analytics Impact Index to determine analytics' potential impact on a company's profitability and identify the areas that hold the largest opportunities for improvement. Based on our study of hundreds of companies around the world, the Index pinpoints the impact on the bottom line and the capabilities needed to extract the most value. Our research reveals that analytics leaders--only 8 percent of companies--see 60 percent more profits than laggards do. Although most discussions about analytics are focused on technology and infrastructure, our study shows that leadership and the organizational culture have the potential to extract the most value. The leading organizations typically have a well-defined analytics strategy and a culture of data-driven decision-making that is embedded across the organization. However, companies that invest in data ecosystems without any strategic leadership could actually see a negative impact in the short to medium term. The inaugural Analytics Impact Index provides a framework for measuring both the maturity and the impact of analytics. Forward-thinking companies can use the Index to identify the gaps and the potential opportunities--building the case for change. Over time, the Index can be used to gain a comprehensive view of a company's analytics capability as it evolves. In this paper, we discuss the Analytics Impact Index and take an in-depth look at the stages of maturity, the potential financial impact, and the strategies companies can put in place to move up the maturity curve to become analytics leaders.The Analytics Impact Index Many companies are using analytics to try to uncover meaningful patterns in their data-- applying disciplines such as statistics, optimization, simulation, visualization, and machine learning in an attempt to develop data-driven decision-making. The question is how effective are these initiatives To answer this question, other researchers have focused on analytics maturity. For example, one study shows how marketing analytics can impact performance outcomes, and another resulted in a framework that encompasses all dimensions of a company's analytical maturity.1 A.T. Kearney's first analytics assessment, the Leadership Excellence in Analytic Practices study, was launched in 2014 to evaluate the opportunities and challenges that companies face. However, it focused on a specific area of analytics and did not address the impact of analytics.1Performance Implications of Deploying Marketing Analytics, International Journal of Research in Marketing, volume 30, issue 2, June 2013; A Business Analytics Capability Framework, Australasian Journal of Information Systems, volume 19, 2015 The Untapped Value of Analytics 1Now, for the first time, the Analytics Impact Index gives organizations an understanding of the potential of analytics as well as the capabilities required to capture the most value. To create the Index, Melbourne Business School and A.T. Kearney surveyed more than 400 companies with a median revenue of $1 billion across 34 countries and a dozen industries--benchmarking both the value realized and the analytics capabilities within each organization (see figure 1). We then analyzed the financial impact.2Figure The Analytics Impact Index covers a broad range of companies Analytics Impact IndexAsia Paci ic Americas%%Europe, the Middle East, and Africa%Industry coverage industries Top three: Consumer goods and services: Technology: % Healthcare: % %Executives More than C-suite: % Directors: % Managers: %Company size respondents Median revenue: Revenue range: . million tobillion billionSources: Melbourne Business School; A.T. Kearney analysisThe Analytics Impact Index highlights the difference in a company's profitability based on two factors: maturity in terms of the analytics operating model and the impact of analytics as a proportion of total profits. Our study reveals that only 8 percent of companies are extracting the full potential of analytics after calculating the level of analytics maturity (see figure 2 on page 3).3 Firms across the four stages of maturity have varying analytics capabilities: Laggards. Analytics is limited to descriptive analysis of the data, and generally backward-looking reporting on performance. These companies do not yet have a clearly defined analytics strategy and lack the culture needed to move forward.2 3This research and analysis were carried out between January and July 2018. Because this study is in its first year, these inferences are largely correlational rather than causal. However, as we obtain longitudinal data with periodic surveys, we hope to determine causation from various factors. The Untapped Value of Analytics 2Figure Four stages of analytics maturity Analytics stages of excellence 36% 46% 10% Followers Laggards Sources: Melbourne Business School; A.T. Kearney analysis8%Leaders ExplorersFollowers. Analytics is used to diagnose what drives business outcomes, especially cost and revenue. However, analytics is not used strategically to optimize business decisions, and there is no broad analytics culture driven by top management. Explorers. Analytics is used to optimize business performance by diagnosing and predicting business outcomes. Although there is an analytics strategy, the analytics culture is not well-developed across the organization. Leaders. The biggest difference between leaders and laggards is the C-suite commitment, the strategic alignment between the business and the analytics strategy, and the right culture. Leaders integrate analytics into all decisions to generate foresight about relevant trends and fuel successful business outcomes. Real-time analytics help drive innovation and create a competitive advantage. To assess a firm's analytics maturity, we use a framework of four dimensions (see figure 3).Figure Analytics maturity can be measured in four dimensionsStrategy and leadershipCulture and governanceTalent and skillsData ecosystemSources: Melbourne Business School; A.T. Kearney analysisThe Untapped Value of Analytics3Strategy and leadership. This dimension, which is the domain of the leaders, looks at who within the company is driving analytics and in what direction the company is headed--from understanding the required elements to creating a road map that aligns with the overall business strategy to drive value. Culture and governance. This dimension is about the operating structure and processes and the company's general attitude toward analytics. Are the right organization structure and governing bodies in place Can the company implement change Is the organization analytics-driven Data ecosystem. This dimension, which tends to be the focus for laggards, is about having the right technological infrastructure and data management framework. We define data management a