Data Is of Board-Level Importance
[Editor’s note: This is the second of three excerpts from The Billion Dollar Byte by D. Justhy, a new book that equips companies with the tools to leverage Big Data to drive “Good Profit” and adopt a whole new business model, one that is apt for the Digital Age. Global Trade Daily thanks the author and his publisher.]
As large traditional companies wake up to the age of big data, data strategy has become a matter of boardroom-level importance. Today’s boardrooms take data strategy every bit as seriously as business strategy. This was never the case before. Traditional companies are seeing the Digital Native companies racking up massive valuations, ten times that achieved by the most successful traditional companies, and they’re doing it with data.
Traditional companies want in on the action. Increasingly, traditional companies are developing digital business models in the boardroom. They understand data technologies can no longer be ignored, and that means integrating them into the business model. Failure to do so means ultimate failure. Since the 1950s, 88 percent of Fortune 500 companies have disappeared. This is because they fail to remain relevant as the business environment changes. In many cases, these companies thrived in the Industrial Age but failed in the Digital Age. Companies and boards that lack the capability or capacity to make use of big data and analytics are being left behind. More will fail until the last men standing are the Digital Natives and the traditional companies that went digital.
Traditional companies don’t necessarily need to become digital companies, but they should be relevant in the Digital Age. A traditional bank is unlikely to ever look like Twitter, but today, they all offer online banking. Some, such as Capital One, offer fully online services and don’t operate many, if any, physical banks—only ATMs, kiosks, and robust digital offerings.
All of this online activity creates new data trails that are assets. Ignoring data is ignoring assets. Boards wouldn’t dare ignore other assets that can increase shareholder returns—so why keep ignoring data?
The big decisions around company data cannot be made by company techies. There are executive-level decisions to be made about how to allocate resources, build up technology capabilities, and compete in a Digital Age. Traditional companies have to make investments in analytics, and make this part of their business processes. This must be done from the top; it cannot be left to the techies in the IT department. The people who use the emerging technologies are great at their jobs, but the boardroom is where executive-level decisions are made.
Boardrooms need to do at least three things that techies cannot do in order to use data to return greater value to shareholders. First, they need to extend the life cycle of the data value chain. Traditionally, data consumption and reporting were the last stage of the data value chain. Companies would collect data, process it, and only then use it for value-generating reporting and analytics. This paradigm no longer works. Emerging technologies allow companies to derive value from data at every stage of the life cycle. Companies today need to start utilizing and consuming data from the moment it is created to long after it is archived.
For example, companies should now start utilizing social media data the very instant that it is generated. The data can be used in real time to create value by adjusting pricing, giving targeted promotional offers, and even realigning the social media campaign itself. The data can be used as a capability to offer better services. Consider how Uber uses surge pricing to bring more drivers to underserved areas. Traditional companies can do the same type of things with their data without having to go entirely digital.
The second thing boardrooms must do is oversee the use of big-data technologies in auditing. Auditing is complicated and resource intensive. Large companies may spend several months per year struggling to complete internal and external audits. Data technologies can make auditing easier and more efficient, mitigate risk surrounding auditing, and create new value by better utilizing business process data for auditing. This is because new technologies allow companies to better see what’s going on and unlock new insights into the auditing process and the information gleaned from it.
The third responsibility boards have regarding data is to ensure that data is producing maximum value for shareholders. This is literally the role of companies, as board members are required to return value to shareholders above all else. Failure to use data to do so is a failure of their first duty. Data can unlock new capabilities and be leveraged as an asset to create value for shareholders. Many companies already do this, but it can be done to a much greater degree, especially by traditional companies with legacy cultures. The Digital Natives had the advantage of growing up in a digital environment; their processes were adapted to the environment. Traditional companies didn’t have this luxury. They have to be active in creating new rules, culture, and processes that bring their companies into the Digital Age. They were not born adapted to the environment, but they must become so now.
For this to happen, boards must take on a greater role regarding data and be proactive in developing their data strategy. Previously, companies made reactionary decisions about data. They used reports, which might have been months or even years out of date, to make decisions about future actions. This is outmoded and even irresponsible to an extent. New technologies allow data to be used in “real and right” time, and it must be managed as such.
Things move so fast now that boardrooms can start to feel like boiler rooms. It is only by using data as a capability and asset, with the help of emerging technologies, that boards can keep up. There is no other way to assimilate, process, and make sense of data in real time. Traditional companies have never before had to operate in this way. The transition can only be made if boards take an active role. This isn’t a job for the techies; it’s a job for the C-suite.
Justhy Deva Prasad, M.B.A., “D. Justhy,” is the Chief Data Partner at Claritysquare, a global technology firm that helps Fortune 500 clients around the globe transition to the digital age by leveraging data to reduce costs, recapture lost value, and generate new revenue. He is the author of “The Billion Dollar Byte” (Morgan James, January 2018).