Customers, whether they are consumers in the B2C world or clients in B2B markets are more demanding and better equipped than ever.
Expectations are ever rising and companies increasingly find themselves having to differentiate themselves from the pack and build world class experiences to maintain attachment to their brands.
But many businesses, particularly large incumbent companies find themselves hamstrung by a legacy of disparate information systems and data silos that create disjointed engagements with customers.
Imagine being told by a bank that you have to go to a branch with your fellow directors to sign a paper form in order to change a telephone banking setting. Or trying to buy from a retailer whose web commerce engine is disconnected from its smart phone app.
For many customers this remains an all too familiar experience.
There is a common theme which underlies these problems. Companies still see data as a utility that flows through information pipes, or as a regulatory trip wire threatening risk and reputational damage.
In truth, however, data is the great enabler of the modern business. A sophisticated and strategic approach to the management of data will allow companies to build better relationships with customers than their competitors.
The evidence that data driven decision making, when built upon a world class data framework drives strong bottom line outcomes, is not new.
A study earlier this decade encompassing 330 leading US businesses by the MIT Centre for Digital Business revealed companies that implemented genuine data-driven decision making experienced four per cent higher productivity overall and delivered six per cent higher profits than their peers. In other words, data provided them with a quantifiable, significant edge over the competition.
“The extent to which a company describes itself as being data-driven is strongly associated with performance,” according to Andrew McAfee, the co-author of the research and principal research scientist at the MIT Centre for Digital Business.
In the five years since that study, smart mobility, social networking, big data analytics and the increasing number of digital interactions that brands have with their customers has vastly enhanced the pool of data available to companies, and the potential for even greater customer insight.
Small wonder then that savvy organisations are now rethinking their approach to the data problem and treat their data assets strategically.
Indeed, according to research analysts such as Gartner, so important is data these days to the modern enterprise that it is likely to find a place in company balance sheets as a physical asset in future.
One strong proponent of such a view is Gartner analyst Doug Laney, who told Which-50 “Although it isn’t recognised in traditional accounting standards, “info savvy” organisations enjoy a market to book value that’s nearly two times higher than the market average. Valuation experts and equity analysts are starting to pay attention to company’s data and analytics capabilities.”
Indeed, Gartner predicts that by 2021 the prevalence of equity analysts valuing organisations’ information portfolios in valuing businesses themselves will spark formal internal information valuation and auditing practices.
Speaking at the Gartner symposium on the Gold Coast late last year, Laney said “We talk about information as the new oil but when we look at the economic characteristics of oil versus information, information has some characteristics that make it potentially much more valuable than oil.”
He characterised data is a non-rivalrous asset – in other words, it can be used in multiple ways at the same time. Even better, unlike capital is also a non-depleting asset — it doesn’t disappear once you use it.
“Compare that to a drop of oil. If you use a drop of oil you can only use it one way, at one time and then it goes away,” Laney said.
“When you consume information it doesn’t go away and you can consume it multiple ways simultaneously.”
Laney is a leading proponent of the argument that data and the information derived from it should be an asset on the balance sheet. His book, Infonomics: How to Monetize, Manage, and Measure Information for Competitive Advantage, explores the idea in detail.
Unfortunately, there’s a problem.
“Most companies have a better inventory of their office furniture than their information assets.”
These issues were covered on in a recent senior executive event in Sydney held by Informatica.
According to Informatica Australia managing director Nick Smith, there is a growing understanding that data needs to be considered much more as a core business issue, rather than simply a matter of compliance or information management.
“Data projects that are run simply for the purposes of compliance miss the point, “ Smith told Which-50. “Data needs to be a strategic asset.”
According to Smith, IT departments manage an environment but they have no ownership of the data.
A chief data officer, on the other hand, should act as a “conduit of change” via setting standards, processes and helping each business unit adopt these into their projects to deliver consistency.
“Organisations must avoid “pointy heads” such as data stewards using language that prevents collaboration and makes data seem too hard.”
Business managers typically sees data and its significance through the prism of their own KPIs and that can create the kind of thinking that leads to data silos. But companies need to maintain an enterprise-wide view of the value of data.
“End to end data processes are discrete. What is needed is need context, understanding and ownership. So, for instance, a regulator and credit risk manager might view the same data but each with a very different lens. The CDO can ensure that you can do your role better by providing the structure to drive value.”
Smith also stressed the importance of educating the leadership team of their own responsibilities towards the data asset.
“Key executives need to understand data and stay engaged with the journey of governance. Everyone needs a common language, “ said Smith. “For instance, one of the executives at the recent round table we ran described how he created ‘the 3 Cs’ framework to define every project or initiative.
“Every data project in the organisation was designed either to improve collaboration, improve data quality, correct or add value to a business process via creation of better insights/analytics.”
The objective of the approach is to ensure that with a simple language framework every project is easily categorized and understood.
Smith identifies six characteristics of successful data thinking in organisations.
- Recognise that data is everywhere and you need to understand the landscape.
- Think carefully how to change, manage and integrate data for business value.
- Getting your data to the point where it is a genuine strategic asset is a journey. Stakeholders need to be continually educated and engaged. Use simple language and be consistent and focused.
- You need to operationalise data and make it everybody’s responsibility. Ensure your approach to governance is agile enough to adjust to rapid changes in the way you do business. Focus on pragmatism and delivering value.
- Provide frameworks that allow everyone to understand, align, monitor, define and fix their data.
- Focus on outcomes built around business value, rather than on metrics to justify a business case.
“Get started. Make a difference and drive incremental change through adding value to everything you do,” advises Smith. “Create momentum. Avoid scary business cases and boiling the ocean in your analysis. Instead, be pragmatic, set structures and act.”
Andrew Birmingham is the director of the Which-50 Digital Intelligence Unit of which Infomatica is a member. DIU members provide their insights and expertise for the benefit of our readers. Membership fees apply.