Business Brains

Data analytics provide modest payback, but payback nonetheless: MIT study

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Researchers observe a bump in output and productivity as a result of analytic technologies. Is this enough to justify the costs?

Everyone talks about the wonders of data analytics, but like all things tied to technology, there's often more wonderment than hard returns for companies.

Now, there's quantifiable evidence that yes, analytics do pay off for organizations when they figure out how to slice and dice their data and make it actionable. That's the conclusion drawn in a new study lead by MIT professor Erik Brynjolfsson, who found that among 179 companies studied, there was a 5%-6% output and productivity bump among those adopting adopted “data-driven decision making.” (a data analysis-intensive PDF of the full paper is also available, downloadable from the landing page.)

The question is: does laying out the funding and committing resources to developing analytic platforms and an analytic business culture justify that 5%-6% bump?  The researchers also conclude that data-driven decision making also positively impacts other areas of corporate performance, including asset utilization, return on equity and market value.

Quoted in The New York Times, Brynjolfsson says a 5% increase in output and productivity "is significant enough to separate winners from losers in most industries." He also refers to the companies now employing analysts in their decision making to be “harbingers of a trend in how managers make decisions.”

Also, while the productivity gains, though evident, may be still on the low end, new technologies historically have taken a while to make a productivity impact. Witness the electric motor, first produced in the 1880s, but didn't begin to make its mark until the 1920s, or the PC, which took more than a decade to really make a dent in corporate operations.

Consider this as well: the fact that Brynjolfsson's study was actually covered in the New York Times, suggesting that data-driven decision making is now definitely hitting the mainstream.

(Photo Credit: US International Trade Administration.)

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Joe McKendrick

Contributing Editor

Joe McKendrick is an independent analyst who tracks the impact of information technology on management and markets. He is a co-author of the SOA Manifesto and has written for Forbes, ZDNet and Database Trends & Applications. He holds a degree from Temple University. He is based in Pennsylvania. Follow him on Twitter. Disclosure