Middle market firms have long been recognized as key to a nation’s economic health. A group that includes companies with annual revenues up to $3 billion, they are a crucial driver of job growth and integral to an economy’s stability. So when middle market executives consider how they can accelerate growth amidst uncertain economic conditions, it’s in everyone’s best interests to help them find an answer.
The answer includes having a strategy that holistically embraces data analytics. Having studied the question of accelerated growth for over 30 years, EY has distilled the results of those studies into the EY 7 Drivers of Growth, a framework designed to help companies align their capabilities with their growth strategy. To help businesses determine their strengths within the drivers, it developed EY Growth Navigator™, an interactive tool that CEOs can use to help create a plan to build those capabilities.
In the course of over 800 EY Growth Navigator™ sessions, a theme began to develop: C-suite leaders recognized that data analytics played a pivotal role in their plans for growth, and yet many of them also reported that their capabilities in that field were far lower than they’d like. Fortunately, it’s a divide that can be bridged—though doing so often requires a new approach. In today’s disruptive economic landscape, the most powerful insights to be gained from data analytics are often not just about getting more out of the current business model, but changing the model itself.
Under the circumstances, it’s no surprise that EY chief analytics officer Chris Mazzei asserts that even the firms that invest a lot of money in data analytics do not always see the return they expect. In a recent EY-Forbes Insights survey, 78% of respondents agreed that big data and analytics were changing the nature of competitive advantage, 66% said their organizations were investing US$5 million or more in analytics—and just 12% termed their analytics functions as “leading.” The EY Growth Navigator™ data showed similar findings for middle market companies. A major cause, Mazzei and his team observed, was how the necessary changes were being implemented.
“We asked, ‘What are the outcomes you’re trying to achieve through data analytics?’” he explains. “One of the interesting things we found was that the organizations that seemed to be doing better and getting more value were those more focused on using analytics to enhance customer value than they were on managing risk, cost, and efficiency.” In their eagerness to employ analytics to aid growth, companies were losing sight of how it could benefit the end user.
Mazzei gives the example of an agricultural firm that for decades has been accustomed to making and selling farming tools and vehicles. But with the onset of data analytics, this same company can become a service provider, employing its advanced technological capabilities to share insights with farmers about best practices in irrigation, or when and how to plant based on data on climate and weather patterns.
Embracing analytics represents a major opportunity for growth, but implementation normally requires aggressive sponsorship by C-suite leaders. Changing the business model can be a difficult task, particularly for well-established organizations that were not “born digital.” “There’s been an underappreciation for the leadership that has to be applied to really make change happen in this area,” says Mazzei. Strong, visionary management that is prepared to embrace the full transformational potential of data analytics will be key to accelerating growth for many middle market firms.
The answer is rarely one-dimensional, instead usually requiring cooperation between multiple capabilities—hence the importance of a growth strategy that stresses the interconnectedness of a business’s various parts and combines insights from analytics with human interpretation at decision time. Just as a weightlifter who focuses on only one set of muscles will ultimately be weaker than competitors who pursue a whole body philosophy, middle market companies with a diversified approach to building their strengths will likely be better placed to capitalize on growth.
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This article was produced on behalf of EY by the Quartz marketing team and not by the Quartz editorial staff.