3 steps to becoming a data-driven business

Data-driven companies are more likely generate higher profits than their competitors reporting a low reliance on data.

Organisations attempting to gain competitive advantage through data initiatives are stymied by a disconnect between how CEOs see the current status and benefits of data initiatives and how lower-level managers see them, according to an Economist Intelligence Unit report.

While the data boom has reduced executives’ reliance on gut feel to justify business decisions, the report found only 25 per cent of executives agree that their employees are able to readily extract relevant insights from the data available to them. Financial chiefs indicate they are especially data poor.

Developing a corporate culture where data is embraced is the critical first step toward becoming data-driven, more so than the more common path of focusing initially on technology and tools, according to the report, which revealed three key stages that businesses generally go through as they seek to become data-driven.

First, they tend to focus on technology and tools, then on acquiring the right talent and expertise – and, finally and most crucially, on developing the right corporate culture where data are embraced and applied day-to-day.

However, an earlier focus on leadership and culture would better serve organisations.

“Organisations succeed when the data-driven vision and leadership are shared, and the benefits of data initiatives are consistently tracked, promoted and, most importantly, linked to corporate goals and business results,” said Andrew Blamey, vice president, ANZ, Teradata, which sponsored the Virtuous Circle of Data report.

Riva Richmond, editor of the report, said: “There is no substitute for a CEO with a vision and personal mission to inspire and reinforce a culture that looks to data to understand the business and the world in which it operates – and make decisions based on those facts.

“Our survey supports this clearly: Companies that outperform the competition are more likely to both have strong leadership and democratised data access and use.”

Adding competitive advantage
Furthermore, data-driven companies are more likely to outperform their competitors when it comes to profitability, according to the report.

Companies that outperform the competition are much more likely to have leaders who spearhead data initiatives and lead by example (58 per cent of them agreed vs 49 per cent of average and sub-par performers), and they are less likely to be challenged by a lack of leadership commitment to the data strategy (23 per cent vs 41 per cent).

Yet motivating and engaging employees across all levels of the organisation to use data can be a greater challenge – and a vital one to overcome.

Transformation requires both top-down leadership and bottom-up engagement, and the report found that leaders in the data cultural revolution not only make data easily accessible, they also invest in data visualisation, which allows data to be seen in stark visual terms and strongly improves employee engagement with data tools and initiatives.

4 ways to become a data-driven organisation

  1. Agreement in leadership. Among the most profitable respondents, 63 per cent say data initiatives are launched and driven by their corporate leadership and 41 per cent have a centralised data and analytics group responsible for introducing and implementing data initiatives. Of those who say their companies underperform in profitability, those numbers are 38 per cent and 28 per cent respectively.
  2. Using data to make decisions. There is also a high correlation between a company’s tendency to rely on data when making decisions and its profitability and ability to innovate. Data-driven companies are more likely generate higher profits than their competitors reporting a low reliance on data. They are also twice as likely to report they have a culture of creativity and innovation.
  3. Effective data analysis. Access to data and quantitative tools that convert numbers to insights are two to three times more common in data-centric companies. And, they are much more likely to reap the benefits of data initiatives from increased information sharing to greater collaboration to better quality and speed of execution.
    Companies that outperform their competitors also are much better at extracting the benefits of data. Seven in 10 agree that information and knowledge is shared quickly and freely in their company, compared to one-third of underperformers.
  4. Improved collaboration. Slightly more than half of the superior performers have seen better collaboration across business units and believe quality and speed of execution have improved, compared to three in 10 underperformers who believe quality and speed of execution have improved, and only one in four overall who say quality and speed of execution have improved. 

What’s holding organisations back in the data-driven race?

  1. CEOs have a rosy view of data initiatives. Executives other than the CEO, and especially lower-level managers, see the current status and benefits of data initiatives far differently than the CEO. While 47 per cent of CEOs believe that all employees have access to the data they need, only 27 per cent of all respondents agree that they do.
    Similarly, 43 per cent of CEOs think relevant data are captured and made available in real time, compared to 29 per cent of all respondents. CEOs are also more likely to think that employees extract relevant insights from data: 38 per cent of them hold this belief, as compared to 24 per cent of all respondents and only 19 per cent of senior vice presidents, vice presidents and directors.
  2. Converting data into insights is still a struggle. Many companies have invested significantly in gathering vast amounts of data, yet they still struggle to extract insights, put them to work for the business, and create truly data-driven organisations.
    When it comes to capturing and disseminating important business data, 57 per cent of respondents believe their company does a poor job. The issue is significantly more pronounced among underperforming, less innovative, and less technology-reliant companies. There is little disagreement that access to necessary data and ability to convert it into actionable insights are the greatest obstacles to data adoption and utilisation.
  3. Data are unequally available even within data-driven and top-performing companies. Data are not equally available even within the most data-driven and top-performing companies. Two-thirds of respondents agree that some departments have much better access to data than others. This situation is particularly acute among companies with US$500 million in annual revenue or more.
    While CEOs are less aware of the problem (only half agree it is the case), lower-level managers are very vocal about it. Eight in 10 senior vice presidents, vice presidents and directors agree that data are unequally available.
    At the same time, 42 per cent of respondents find access to data cumbersome and not user-friendly, which further exacerbates the data-availability problem.
  4. There’s an abundance of internal data and eMedia advisory: Respondents reported an abundance of useful internal, daily transaction data. But external data like customer demographics, behavioural patterns and market data are less widely available.

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