The missing link between analytics readiness and service firm performance

Abstract

Although the importance of analytics is a veritable mantra in today’s business environment, little academic research has been devoted to understanding the degree to which firms are ready to incorporate an analytics strategy into their business model and how and when analytics readiness (AR) translates into firm performance. Three studies address this void. In Study 1, we conduct interviews with MBA students from the United States to assess the AR construct. In Study 2, we develop and validate an AR scale using data from Turkish service firms. In Study 3, we test how and when AR translates into firm performance using data from South Korean service firms. The results contribute to the analytics literature in the following ways: First, AR is a higher-order construct comprised of five lower-order dimensions: cultural readiness, leadership commitment, strategic alignment, structural readiness, and talent capacity. Second, an exploratory (exploitative) market learning strategy amplifies (mitigates) the effect of AR on relative emphasis on data- (vs. instinct-) driven decision making. We discuss theoretical and managerial implications along with limitations and directions for further research.