Businesses nowadays have more data available than ever before. They are collecting and storing an infinite amount of data every single day. According toEric Schmidt, Google’s CEO, “every two days we create as much information as we did from the dawn of civilization up until 2003.” In fact, Big Data has been an increasingly hot topic since 2010. The way I see it however, is that the use of Big Data in businesses is like teenagers and sex: it’s all talk. Based on the6th Annual Digital IQ Survey, there is a big gap between “knowing and doing” when it comes to the level of concern about potential threats to Canadian organizations’ growth prospects, and how their threats are being addressed in corporate strategies. How do companies need to evolve in order to face this radical change?
Based on Allaire and Firsirotu’s model (2004), organizations need to evolve their culture, structure, and individuals to face this radical change. This will allow them to better use analytics in making smarter decisions, and building competitive strategies around data driven insights.
Being data-driven doesn’t happen by accident. It requires commitment from the top to the bottom of an organization, and should be led by senior executives. Digital native companies like Google, Amazon, and Netflix are perfect examples of firms where their executives have clearly engaged in a data based strategy. Businesses must direct all their employees to test and analyze data as a way to make fact based decisions. Not every executive has the same background as Amazon or Google’s CEOs. Nevertheless, they can succeed through their “willingness to delve into analytical approaches, the ability to engage in discussions with quantitative experts, and the fortitude to push others to think and act analytically.”
In the pyramid chart below, you can see the ‘5 Stages of Analytical Capability’ by Thomas H. Davenport. Commitment from senior executives is crucial, because they are the ones who spread and protect this cultural orientation, and drive investment in the right resources to becoming data-driven.
To build a data driven organization, companies need the right human resources. They need data analysts who are able to analyze data well, identify patterns, validate them, and turn insights into managerial recommendations. It is crucial to have such analytical leaders with an entrepreneurial spirit. Because the leadership culture enables decision making, they will translate recommendations into actions, which will directly enhance business performance. In order for this to happen, the data analysts must be risk-takers and not risk-averse. The main guideline to follow, is to test and learn; fail fast and succeed faster. Trusting relationships, knowledge exchanges, and collaborations are the key foundations to a company’s long term success.
Additionally, there needs to be a multidisciplinary skill set that is shared within the firm. With this data driven transformation, the marketing department must learn to speak different languages such as finance, accounting, statistics, and IT. In order to place these resources in the right department and support their initiatives, the firm must also alter its organization.
Technology plays an essential role in this evolution. It allows the application of this new data driven business model. Depending on the level of analytical maturity, the main goal is to be competitive and perform, based on analytics. To do so, a company needs to implement a business intelligence architecture enterprise-wide. Today’s problem is not data collection, but rather data integration. The question remains: Which systems and applications should be applied within an organization in order to facilitate the use of high quality data to better analyze, predict, and optimize?
To conclude, information technologies have completely transformed the way firms compete. Services, pricing, geography, and politics are no longer a competitive advantage. Businesses must go a step further if they wish to survive in the long-term. What defines successful companies nowadays, are those that use their analytics to build their competitive advantage; they base their decisions on data driven insights to deliver superior business performance. Hence, being data-driven requires a change in the culture, individuals and structure. Are you ready to make the leap to transform your business model?
This post was originally written by Mehdi Fehri.