What’s stopping organisations with data-centric practices from benefiting from their IT-related investments?

One of the advantages of using Google Scholar to check how your (academic) outputs are being used is that, now and then, you bump into really interesting papers that build on your previous work. This is what happened, recently, when I received an alert that the paper “Conceptualising a digital orientation: antecedents supporting SME performance in the digital economy“, which I co-authored, had been cited in a new publication. 

The paper in question is “The illusion of data‐driven decision making – The mediating effect of digital orientation and controllers’ added value in explaining organizational implications of advanced analytics”, authored by Ágnes Szukits.

Szukits investigated the question of whether the use of advanced analytics promoted data-driven decision making, and, why / why not. This arises from the observation that not all organisations manage to realise business benefits (e.g., in terms of financial performance) from their investments in IT. To investigate why this is the case, Szukits unpacked the direct and indirect effects from investing in advanced analytics. Namely, Szukits looked at how the use of this technology [number 3 in the figure below], resulted in the production of information to support decision making [number 5 in the figure below], resulting in better informed (i.e., data-driven) decision making [number 6 in the figure below].

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Szukits also looked at a number of potential enablers of this mechanism. Namely:

  • The role of “controllers” in supporting decision makers to interpret the analytics produced by such systems [number 4 in the figure above]; 
  • The organisation’s commitment to IT investments and development [number 1 in the figure above]; 
  • The organisation’s openness to new ideas and techniques to generate and use information [number 2 in the figure above].

Szukits investigated these relationships via a survey of businesses in Hungary, with the following results:

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The author explains what these findings mean:

“The findings of the structural model supported that the firm’s technology orientation plays a crucial role in the use of advanced analytics. (However a) mere focus on information technology might be scarce, as the effect of technology orientation on analytical practice is mainly explained by the firm’s digital orientation… (D)igital orientation is more than simply focusing on information technology: besides adequate knowledge and financial resources, it implicates attitudes and behaviours of senior management. Top executives’ beliefs on the benefits of digital technology have a domino effect on the attitude of other organizational members and strongly influence technology adoption…

The significant impact of using advanced analytics on decision support reveals that the organizational achievements in developing analytical practice strengthen the perceived value of processed information… Nevertheless, the medium strength of this relationship suggests that improvements in managerial perception are lagging behind the developments in analytics… (E)xceeding basic descriptive analytics is often argued to require specialized knowledge of data analysts or scientists (who) can help disseminate and interpret analytical information and support decision-makers to utilize it in a decision context…

The insignificant path with a close to 0 path coefficient between the decision support and data-driven decision making destroyed the last link in the research model. Even if decision makers consider the available information adequate for decision support, this positive perception does not strengthen the reliance on analytical results during the decision making. Thus, a company with strong digital and technology orientation and outstanding use of advanced analytics might not necessarily exploit the data they have… (T)he available information based on advanced analytics can be outstanding, yet the lack of understanding about the utilization can hinder the use of information in the decision-making process. This justifies the missing link between the ability of information to be used in decision making and the reliance on this information during the decision-making process.”

That is, having a data-centric practice does not necessarily result in firms using data analytics to support decision making. The presence of “technology, data, and human analytical skills are necessary but not sufficient conditions to transform processes such as decision making.” There are other, managerial-related factors that are preventing some organisations from benefiting from their IT-related investments.

Do you have any insights – from your own practice or research – about what’s stopping organisations with data-centric practices from benefiting from their IT-related investments?

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