Author: Patrick McCreesh
Publish Date: April 6th, 2020
When the WHY is clear, the what is easy. Simon Sinek offers a compelling picture of how great businesses are driven by answering their Why, instead of their What. This is the purpose that drives the organization and ultimately makes it more appealing to the market. Sinek concludes that an organization with a compelling purpose will make that purpose felt by customers and stakeholders because customers connect with the purpose of the organization.
So it goes with data and analytics. In board rooms and offsites around the globe, leadership teams agree to make an investment in the use of data. They quickly go to the What. They talk about the possibilities of AI, Natural Language Processing, Data Lakes, and algorithmic thinking. They may not have the useful data (quality and integrated) to support these techniques, but more importantly they may not have the purpose for the investment. Nonetheless, they make the decision to invest in their data. Their reasons may vary, but the real question is – do they have a reason? Do they know why?
Media, business journals, and tech blogs have made it clear that data matters. But each organization must make the decision to engage their data with purpose. In short, an organization must first find its data why before moving forward with, or doubling down on, an investment in data.
What are some of the purpose-driven reasons for investing in data?
Most organizations make significant changes for one of two reasons: 1) they need to adjust to compete in the marketplace or 2) they want to build organizational capability or capacity to strengthen the organization for the long-term. When it comes to data investments, most leaders find themselves aligned to the former. They see the landscape of media with the commercialization of data and feel pressured to invest. But why?
In reality, there are only a handful of reasons to invest in data. Organizations are already collecting data. The question is how to use the data. There are two key questions that help drive the why for an investment in data. First, does the organization have more data on internal factors of production or the customer? Second, does the organization believe data should support maximizing profit or driving growth?
Collectively, the answers to these questions will define why an organization invests in data. There are four clear buckets:
Optimization – Organizations seek to “do more with less” and using their data to sustain their current revenue/or increase the profit margin by looking at internal processes
Customerization – Organizations drive a deeper understanding of their customers in order to retain customers, drive repeat business in the coming years, and increase the total lifetime value of the customer
Productization – Organizations leverage data to understand how to drive more revenue with existing assets, which could lead to new products or enhancements in current products that drive brand value
Monetization – Organizations use their data to drive significantly more value for their business by treating data as a primary asset, which in turn should provide more value and opportunities to customers
It is important for organizations to make a decision about the data why. The organization will align all assets and investments in data around this purpose statement. People, processes, technology, and culture will adjust in order to fulfill the data analytics purpose statement. All assets will point toward this singular focus. In fact, research suggests that having a strategy and an approach for the use of data is the single greatest factor in determining the success of a data program.
The biggest risk for leaders working through their data purpose is a fifth reason for data investments - herding. In this case, the herd mentality drives the organization to invest in data and analytics without its own clear purpose, but rather to keep up with the trend. In this scenario, the insincerity will start at the top and carry its way throughout the organization. Instead of building toward a clear objective, the organization will make unintentional and haphazard investments that will fail to answer the challenges. These organizations with spend on technology they can’t leverage and hire people who are overqualified or misaligned.
We know that the use of data and analytics are changing the world. The power of data will continue to change the way that companies, non-profits, and governments operate. Data-rich companies will succeed, while those without data may fail. These are all important reasons for leaders to think about the use of data in their organizations. Organizations have many different reasons to invest in their data, but before making the investment, leaders should step back and make sure they know why. The purpose for investing in data will determine what solutions you build and how you build them.