You know that feeling you get when you surprisingly find money in a pocket of your clothes?
There’s nothing better. It's free money.
And according to Nucleus Research, a provider of investigative IT research and advisory services, that's exactly what business analytics is for organizations.
In a new report from Nucleus, they found that "Analytics pays back $10.66 for every dollar spent."
Let's put that another way. Let's say you spent $1,000; the return is $10,000. Spending $10,000? That's $100,000 in extra revenue. And so on... (I rounded down for easier math.)
This number was calculated from reviewing all of the Nucleus Research case studies that have been produced and examining the implementations of analytics applications, such as business intelligence (BI), performance management, and predictive analytics.
In fact, the report states that "with such high returns to be earned on the deployment of analytics, management teams should consider these technologies to be one of the most attractive investment opportunities available to the CFO."
In fact, it would bring a smile to any C-suite executive.
In speaking to David O’Connell, the author of the report, he says that it's a matter of black and white when it comes to those who have incorporated analytics into their business.
"We have found that if we lined up 3-4 firms in the same industry and vertical side by side, those using analytics to guide their decisions would win. Analytics provides such a competitive edge and improvement to the bottom line that we could almost start handing out pink slips to those firms not adopting."
The Cincinnati Zoo, an IBM business analytics customer that participated in a ROI case study (download here), was facing tough operating factors with admissions and donations going down.
"They needed to find ways in which they could change their business model that could make them more efficient and profitable," said O'Connell.
By using IBM Cognos business intelligence, they were able to increase admissions by 4.2 percent and on-site merchandise by 18 percent.
For example, the zoo used analytics to learn more about when visitors were most likely to buy ice cream and made small changes to the operating hours of the ice cream kiosks, leading to an increase in food revenues by 20 percent.
For organizations in any industry, O'Connell believes that it only takes a few insights into data with lots of leverage that turns into serious ROI.
That's the power analytics bring to organizations – whether it's better understanding the cost for a customer segment, realizing if a product has high or low margin or determining that phases of the moon were a big indicator when crime would occur.
It's very much like the butterfly effect where small, unrelated happenings can have major effects on results in another area.
As Nucleus proves, deploying analytics creates those few shifts that produce revenues or lower costs.
So why aren't more organizations taking advantage of this technology?
The report talks about skepticism to technologies like analytics, but O'Connell takes it further.
"There is a complete lack of understanding about how much can be learned from analytics,” said O’Connell. “Senior managers – the CXOs – don't realize how blind their decision makers are flying right now. Organizations are relying on faulty reporting, organizational folklore and gut feel."
To be successful, organizations need to communicate and understand where visibility pain points exist.
O’Connell believes that building a business case on cost reductions and revenue increases is the way to go.
“When you use analytics, you become aware of so much granular information. Organizations suddenly realize how much they didn’t know.”
Just like that $10.66 hidden inside your jeans pocket.
For more information:
· Watch a video of Cincinnati Zoo discussing how it increased revenues by half a million dollars in less than one year.
· Read other Nucleus ROI case studies on ConceptOne, Infinity Insurance and XO Communications.