Today, we are in a very different position—the amount of data available is overwhelming and only growing in volume. Every business event now has a digital footprint and recent advances in fields such as data science, machine learning and artificial intelligence are providing much more advanced ways of processing such data. It is no longer acceptable to rely solely on human traits to make decisions. Data should inform all decisions. As one CEO commented to me, “Data increasingly informs and refines my gut instinct.”
Key Attributes of a Data-Conscious Culture
Creating a data-conscious culture is fundamental to securing and profiting from the value of data. I use the term, data-conscious, as opposed to the more often used data driven to emphasize that relying on data alone can be just as dangerous as ignoring it completely as we shall see shortly. So, what does a data-conscious culture really mean? Here are some of the key attributes of organization’s that are positioned to make effective use of data:
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The value of data is widely understood across the organization.
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Data integrity, security, and confidentiality is understood not just within an organization but by all members of an organization’s eco-system.
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Data standards and governance processes are embedded in the organization’s standard operating procedures; they are not simply a set of periodic audits, checks or reconciliations.
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The veracity of data is tested and confirmed.
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The balance between availability of data and the timeliness of decision-making is understood.
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Automated tools are used where possible to collect, structure, store, validate and disseminate data to ensure consistency and scalability, and accelerate data availability.
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The relevance of different datasets to different decisions is understood; where possible ‘noise’ in data is minimized.
These attributes work together to create a cohesive and flexible approach to data management that respects the value of the data and its potential use across an organization. However, there is another essential element of a data-conscious culture that is often lacking—that is a healthy respect for the limitations of data.
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CFO’s Need to Understand the Upside and Limitations of Data
It is all too easy to see data as all seeing and all knowing. This can create an aura of confidence that may be misplaced. In addition to the attributes listed above, organizations should also consider the following:
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Data is generated by events or actions that have already happened; decisions based upon that data typically impact future events or actions. Our crystal ball is simply not good enough to predict the future with certainty.
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Match the desire for detail with predictive ability. The further out into the future a projection looks the less accurate it tends to be. One only has to look at weather forecasting to understand the limitations of long-term projections.
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When looking forwards, more detail does not necessarily equal more accuracy, in fact the more detailed a future projection the more inaccurate it is likely to be.
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Using data to make decisions can provide a set of leading indicators or predictive measures that can alert an organization as to when a planned course of action or decision no longer makes sense. The ability of data to flag a wrong decision can often be more important than guiding a correct decision!
As the sheer volume of data available continues to expand exponentially, disciplined governance and a healthy respect for both the value and the risks associated with relying on data will separate those that profit from the effective use of data to those that don’t.
Next Time: Integrating Data Into Management Processes
David Axson has more than 35 years of experience working with CFOs across more than 40 countries. He was a co-founder of The Hackett Group, Head of Corporate Planning at Bank of America and a partner at Accenture Strategy. For more information visit www.davidaxson.com.