4 in 5 businesses online are data shy – and missing out

- Putting intuition over analytics may cost UK business, Nesta report warns

- A minority of UK companies - the datavores - reap the online data dividend.

The majority of UK companies operating online may lack the basics for online business, warns UK innovation foundation, Nesta - 18 years after the internet opened for commercial use¹.

The survey findings from Nesta's Rise of the Datavores report show how UK businesses analyse and use online data. The report reveals that four in five companies surveyed² don't predominantly make decisions to aid sales growth based on data and analytics; with 43 per cent of businesses surveyed mostly or exclusively using experience and intuition to make decisions.

Less than a fifth of companies surveyed (18 per cent) said that they are data-driven, meaning that they use data and analysis predominantly when attempting to grow sales figures. These companies, the report shows, are a new breed of online operators - the datavores - devouring online data and innovating by monitoring and acting on the results of analysing their data.

But with Cyber Monday (3 December) just days away³, thousands of businesses could be missing out on the Christmas pound because they aren't translating their online data into good and insightful business decisions. On Cyber Monday, Experian expects the UK will make 115 million visits to online retailers - a 36 per cent increase on last year.

Rise of the Datavores highlights how datavores are a small but significant group of UK companies making sophisticated use of online data to drive business decisions. The report's survey also found that the successes of these companies are not limited by size or sector⁴, with datavores represented fairly across all groups; suggesting that there are lessons for the majority of UK businesses which are yet to get to grips with data.

Hasan Bakhshi, director of policy and research, Nesta explains, "The time is not far away when a business that doesn't analyse its online data will seem as backward as a supermarket without bar-codes or a factory without electricity. Online analytics are transforming how businesses develop new products, set their prices and do their marketing - and they'll increasingly drive their profitability.

"But despite the buzz around big data, analytics and data-driven decision making, online analytics are yet to be recognised as the essential business basic that they are.  There is a large group of companies who have a lot to learn from the small - but mighty - cluster already eating data for breakfast."

Rise of the Datavores sets out the profile of those driven by data: they gather customer data intensively, conduct sophisticated analysis⁵ and use what they learn to improve their business. Nesta's survey found that almost three quarters of datavores have invested in training staff in the past two years and two thirds have invested in their business processes to better gather and use insights from online data - compared with 55 per cent and 44 per cent of all other firms respectively.

The report shows that there is also a data dividend to be reaped, with datavores reporting that they are more innovative than their competitors, with a higher proportion of them saying that they launch new products ahead of their competitors.  They are twice as likely to report significant or very significant contribution of analytics to business performance.

The lack of companies embracing data brings with it a concern that the education system and business training may not have kept up with the internet's ability to help organisations make decisions, innovate and respond to customer trends and demands. The McKinsey Global Institute has estimated that, by 2018, the US economy may need up to 190,000 workers with deep analytical expertise, and an extra 1.5 million managers able to use data to make decisions⁶. In the UK, schools for executive education need to ask themselves if they are adequately covering online analytics in their curricula⁷.

The report has implications for businesses, government and investors and makes the following recommendations for each:

• Businesses: Recognise that making the most of online data will require investing in skills, and even reorganising the workplace, particularly by empowering employees to use online data to make decisions
• Government: A clear, proportionate regulatory framework is needed for how online customer data can be stored; and an education system that allows data skills to flourish is needed
• Investors: Build on the impact that investors are already seeing through some of the hottest businesses which are intense users of analytics⁸

Rise of the Datavores report and infographic are available to download from http://www.nesta.org.uk/areas_of_work/economic_growth/assets/features/rise_of_the_datavores_report from 29 November 2012. In early 2013, Nesta will publish a second report to show the effects of online analytics on business profitability.

- Ends - 

Notes to editor

For media enquiries or interviews please contact Sarah Reardon or Natalie Hodgson 020 7438 2606 / 2614 or email sarah.reardon@nesta.org.uk /natalie.hodgson@nesta.org.uk

• ¹ Between 1991 and 1994 companies began to advertise online and several online banking and shopping services launched: in 1994 Netscape introduced SSL encryption of data transferred online, enabling secure online shopping
• ²Fieldwork carried out by Ipsos MORI between 16^th April and 25^th June 2012.  500 telephone interviews were conducted with senior Marketing personnel in businesses that generate revenue from their own website or advertise on other websites.  Businesses fell into one of nine sectors identified by the ONS E-Commerce Survey as having the highest propensity of firms reporting having transactions over a website.  Financial Institutions were also included.   
• ³ Experian, Hitwise: http://www.experian.com/blogs/hitwise-uk/2012/11/21/whats-the-difference-between-mega-monday-and-cyber-monday/
• ⁴  With the exception of the information and communications firms sample which was 10 per cent higher than the average
• ⁵Sophisticated analysis such as controlled trials and data and text mining
• ⁶ McKinsey Global Institute, 2011, http://www.mckinsey.com/insights/mgi/research/technology_and_innovation/big_data_the_next_frontier_for_innovation
• ⁷No individual data analytic courses identified within a sample of online prospectuses of executive education open programmes offered by UK's top five executive education providers, as ranked by Financial Times: http://rankings.ft.com/businessschoolrankings/executive-education-open-2012
• ⁸Examples include Zoopla and Mind Candy. Venture capital firm Accel Partners has established a $100m global fund to finance big data companies

About Nesta

www.nesta.org.uk

Nesta is the UK's innovation foundation. We help people and organisations bring great ideas to life. We do this by providing investments and grants and mobilising research, networks and skills. We are an independent charity and our work is enabled by an endowment from the National Lottery.

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