Why don’t more managers embrace the business analytic tools we use in so many aspects of our OM courses? A new 
report by MIT Sloan Management Review (Nov.8, 2011) answers the question with a survey of 4,500 executives regarding the integration of analytics in their enterprises. The report, Analytics: The Widening Divide, concludes that cultural biases, such as the need for new management competencies and organizational resistance to new ideas –more than technological hurdles–are the primary barriers.
First, a definition of business analytics: “the use of statistical, quantitative, predictive, and other models to drive fact-based planning, decisions, execution, management, measurement, and learning. Analytics may be descriptive, predictive. or prescriptive”.
The MIT Sloan report breaks companies down into 3 categories: Transformed (heavy users), Experienced (moderate users), and Aspirational (companies least experienced in the use of business analytics). The good news is that the number of firms in the 1st two categories, who use analytics for competitive advantage, has surged by 57% in the past year. The Aspirational group’s use of analytics actually declined by 5%. Transformed organizations have set the pace in expanding use of analytics and were found to be 2.2 times more likely to substantially outperform industry peers.
The Transformed group keenly appreciates the value of precise and real-time decisions, and is 3 times more likely to focus on speed of decision-making than Aspirational firms. This means managing operations and improving output levels based on real-time supply and demand management. Inventory replenishment processes, for example, are automated and production is optimized in these companies. As a case study, the report follows McKesson, which processes 2 million hospital orders per day. McKesson does so by embedding algorithms into customer orders to manage the inventory process without human intervention.
When students ask you why analytics are important in your OM course, this report provides a ready response.