Why Big Data Doesn't Always Equal Big Insight

Even as companies invest eight- and nine-figure sums to analyze the information streaming in from suppliers and customers, fewer than 40% of employees have the right processes and skills to make good use of the analysis. Think of this as a company's insight deficit. To overcome it, "big data" needs to be complemented by "big judgment."

To assess companies' ability to find and analyze relevant information to make decisions, the Corporate Executive Board created the Insight IQ index. Using this model, CEB surveyed 5,000 employees at 22 global companies and discovered that the overwhelming majority (62%) are making poor decisions when attempting to tease out insights from data. To change this, executives need to develop more "informed skeptics," challenge employees' biases, take ownership of their information, and make information more accessible.

We put employees into three categories based on their reliance on analysis and intuition. "Unquestioning empiricists" (43%) trust analysis over judgment, and "visceral decision-makers" (19%) exclusively go with their gut. Only 38% of employees (and 50% of senior managers) are "informed skeptics," who balance judgment and analysis, possess strong analytic skills, and listen to others' analysis to make sound decisions based on data.

To create more informed skeptics, companies need to make sure analytic capabilities aren't concentrated with too few employees. Second, companies must link key metrics to performance objectives and compensation, to build an insight-driven culture. Third, they need effective training that addresses information sources and analytical techniques, and provides reinforcement. Finally, they must train employees on the limitations of data, so they gain critical-thinking skills to uncover deeper insight, find new avenues for analysis, and spot faulty logic or biases.

But a company can't build an insight-driven culture if people can't access data. Seventy percent of business unit leaders in our survey find IT's information management capabilities inadequate. One reason is that, with the rise of social media and other new channels, it's harder to govern and manage the creation, storage, and dissemination of content. Eighty-five percent of companies' information is unstructured, and much of it is out of reach, such as employees' personal drives or in personal cloud storage.

Also, half of survey respondents indicate that information from corporate sources is in unusable formats; two-thirds spend time on unproductive analysis. IT must better understand how, when, and why information is used, then provide a greater selection of analytic tools aligned to specific business units or functions.

Data reliability also is often questioned: Two-thirds of employees don't trust information from other functions in the company. To overcome this distrust, leaders need to make transparent the information's original source, as well how it has been manipulated over time. Simple tactics such as color-coding data to indicate information quality or labeling missing fields increase trust and often spur action to close data gaps.

How valuable can an analytical culture be? We compared corporate functions across the 22 companies in our data set and found that those with the highest Insight IQ performed better, based on efficiency and effectiveness (such as employee engagement for HR or market share growth for business units). The difference on the index between the highest and lowest quartiles: 24%.

Shvetank Shah is executive director of the Corporate Executive Board. More from CEB on this topic is available at insightdeficit.com. Write to us at [email protected]

InformationWeek: Nov. 7, 2011 Issue

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