Organizations are collecting massive amounts of data, but few are gaining actionable insights from those efforts. Less than half of the data that is organized into searchable databases — known as structured data — is used in decision making, while less than one percent of unstructured data is used at all.1 Today, many organizations focus their data strategies around satisfying daily business needs, dedicating only a small portion of their resources to extracting actionable insights that can inform overall strategy. Better use of data, however, is vital in a competitive landscape where nimble startups and firms in adjacent industries are potential disruptors.
Collecting data is easy: getting the most out of it is not
The ubiquity of personal devices, coupled with the declining cost of sensors and the proliferation of 'the internet of things' has made data gathering simpler and more cost- efficient than ever. Without a deeper understanding of data's potential to shape major decisions and strategies, however, few organizations are realizing its full value.
A panel of finance and technology experts at RBC Investor & Treasury Services' recent Investor Forum, shared their perspectives on data collection and utilization, outlined its potential value, explained why many struggle with it, and provided useful suggestions on how to overcome some of the most common hurdles.2
"In many organizations, and typically in our industry, there is a focus on the defensive aspects, like meeting regulatory requirements, making sure you've got proper management, lineage, metadata," one of the experts explained. "But if you take that and say 'Now I'm going to augment it with external data,' it's like building a data highway where you're starting to collect data in order to make more informed decisions and influence the direction and strategy of your organization."
While more organizations are collecting data today than ever before, the panelists felt that few are leveraging it properly. An interactive audience poll confirmed that hypothesis. A majority of attendees, 60%, confirmed that their organization's data strategy focused on defensive data management, defined as data collected for day-to- day business operations and compliance purposes. Only 36 percent indicated their organization was pursuing offensive data management, which includes predictive analytics, using data to identify new opportunities and business models, and injecting data into core decision-making processes.
Organizations should seek to understand the impact that data-powered predictive analytics and insights could potentially have on core business functions
Latent competitive advantages
The most common and significant opportunity that the panelists observed in evaluating how organizations leverage data is that most have yet to harness data's true potential. Rather than looking for immediate, but relatively small returns on data investment, they believe organizations should seek to understand the impact that data-powered predictive analytics and insights could potentially have on core business functions. They explained that data utilization has the potential to be a significant competitive advantage in an increasingly competitive landscape.
Such strategic advantages arise from a change in thinking that abolishes the traditional separation between management decision-making and data strategy as data strategies should be embedded throughout the organization. The panelists acknowledged that this is often an expensive and complicated undertaking, and emphasized that it should be viewed as a long-term investment.
The importance of data standardization
The panelists explained how driving data standardization across organizations frees up resources. Roles that were previously dedicated to data gathering and preparation, can be reallocated towards initiatives that generate greater value and intelligence. Of note, a majority of attendees revealed they are actively pursuing data standardization. According to the audience poll, 63 percent either agreed or strongly agreed that their organization understands and is actively pursuing the standardization of its data.
Key insights
- Most organizations today are collecting data, yet few are realizing its full potential
- Rather than focusing on the immediate return on investment, organizations must put data analytics at the core of their business strategy
- Data should be collected with specific outcomes in mind
- Organizations can improve data gathering and preparation efficiency by driving standardization in their data collection and storage
- Though legacy systems are relatively inefficient compared to modern data storage technology, they may contain hidden value
Value in legacy systems
Firms may feel bound by legacy systems, giving newer and more nimble competitors a potential edge. While data stored on legacy systems may have quality and ease of use limitations, the panelists explained how they may also hold hidden value. Data collected on storage systems that are considered slow and inefficient by today's standards can often help augment external data and analytics to reveal new insights. Furthermore, with the development of smart technologies like artificial intelligence and quantum computing, there is no limit to what value can be extracted from the data contained on legacy systems in the future.
In order to get the most out of their data, organizations need to resist taking a short- term approach that emphasizes immediate returns on investment. Instead, a strong data strategy considers the impact that data-powered predictive analytics and insights can have on core business functions on an ongoing basis. Data strategies are created to solve the unique needs of an organization, but all begin by reframing the traditional perception of data's purpose.
Sources
- Harvard Business Review (May - June 2017) What's your data strategy?
- RBC Investor & Treasury Services' Investor Forum (May 26, 2017): Leveraging data to maintain a competitive edge