The Economist: Fostering a data-driven culture

This report explores the challenges in nurturing data-driven decision making, and what companies can do to meet them. See preview.

The importance of data-driven thinking is not new. Many executives are familiar with the concept. The rise of data-driven companies, from Facebook to Walmart, shows how powerful the approach can be. But what does it mean in practice? And what are the benefi ts of adopting a data-driven culture within an organisation?

Let us start with what a data-driven culture is not. It is not a belief that data are an issue for someone else in the company, a job for a data specialist or perhaps the IT department. There is still a perception that a data specialist, perhaps a recent statistics graduate, should be parachuted in to an organisation to advise on how to work magic with data, much as a computer security expert would be called on to help shore up a company’s IT networks.

This is flawed thinking. IT security is indeed a job for experts, but data are everyone’s business. Forward-looking companies are integrating data into their day-to-day operations. They are placing data at the heart of almost all important decisions. And they are tolerant of questioning—even dissent—about business decisions being made, as long as the questioning is based on data and their analysis. This is what it means to adopt a datadriven culture.

An Economist Intelligence Unit survey of 530 senior executives, sponsored by Tableau Software, together with interviews with four leading industry experts, delves into this trend and highlights best practices. Evidence from these exercises shows that data are gaining a foothold within all parts of organisations, even in areas where they have previously had little impact. The survey and interviews also highlight the tensions involved in democratising data, and some of the methods that can be used to defuse them.

Perhaps most importantly, this report echoes a critical point that data advocates make repeatedly: working with data is good for a company’s bottom line. There is abundant anecdotal evidence in favour of this claim—retailers like Tesco have used data to gain market share and casinos have reaped rewards by turning marketing into a science. Our survey backs this up with evidence that links financial performance and the successful exploitation of data. It is a reminder that a focus on data can transform businesses.

Appreciating the financial power of data

The survey reveals a clear link between financial performance and use of data. Eleven percent of respondents state that, in comparison to peers, their organisation makes “substantially” better use of data. But top-performing companies comprise more than a third of this group, demonstrating the connection between datadriven decision-making and organisational performance. And the reverse is true for underperforming companies. Seventeen percent of executives identified their companies as lagging behind peers in financial performance. Among this group, not a single one claimed that his or her organisation held a substantial advantage over rivals when it comes to use of data.

The benefits of data are being seen in almost all parts of companies. When asked to rate the importance of data to different organisational units, 43% of respondents say that data are “extremely important” to strategic decision making. This figure is higher than that for any other unit, but there are many other areas where respondents say data are yielding benefits. Just under 40% say data are extremely important to marketing and communications, as well as finance and accounting.

Some areas remain relatively untouched by data, but probably not for long. Just 11% of respondents rate data as extremely important to the human resources (HR) function, for example. A new crop of start-ups is trying to change that. At one, TalentBin, engineers have built software that scours LinkedIn and social media, from Twitter to Quora, to build a profile designed for recruiters. It is based on the idea that the best candidates for a position are not necessarily looking for a new job, but might be open to being approached about one. TalentBin uses online data to identify those people, and it seems to be working: since launching in May, the company has signed up clients like eBay and Dolby.

The survey also reveals that data-driven companies have an expansive attitude to data use by employees. Almost a third of respondents at companies that lead peers in data use say that employees across the organisation should be applying data analysis techniques compared with 17% at companies that trail peers in data use.

Share data and prosper

Appreciating the power of data is, of course, only the first step on the road to a data-driven culture. For older companies, especially those that have achieved success with minimal use of data, the transition to a data-driven culture does not
necessarily come naturally. “Many of my clients are clearly aware of the importance of data,” says Jerry O’Dwyer, a principal at Deloitte Consulting. “But they don’t know where to start in terms of where they should focus to get the most value, as well as how to translate the data into actionable insight.” “Becoming data-driven is very difficult for many executives,” agrees William Schmarzo, chief technology officer at EMC, an information technology company. “They are reluctant to turn over decision-making to people who make decisions on the basis of data rather than expertise.”

Our survey provides guidance for executives who want to make the change. Data often exist in silos, for example, sometimes overseen by protective divisional heads. But more than half of respondents from top-performing companies say that promotion of data-sharing has helped generate a data-driven culture in their organisation.

Moving data collection to the centre of a company is another example. Data collection is cited as “very important/essential” to data culture by 76% of executives from top-performing companies compared with 42% from companies that lag their peers.

Increased availability of training is a further factor to consider. Around one in three respondents say it is “very important” to have programmes or partnerships in place to make employees more data-literate. Awareness of this need is even higher among executives at companies that out-perform their peers financially; 50% of respondents from this group rate training as highly important.

The survey also provides some suggestions for what not to do. Issues around sharing data appear to be the biggest challenge. About one-third of respondents say that their company struggles to achieve a data-driven culture in part because of concerns about the privacy and security issues that arise when data are shared. Just over 30% of respondents attribute a reluctance by department heads to share data as a cause for failing to realise a data-driven culture.

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