By Daniel Hunter
A new study by the Economist Intelligence Unit finds a relationship between the growth of corporate earnings and companies’ use of data in strategic planning and decision-making.
A survey of 318 C-level executives finds that while all companies are collecting more data than ever before, those from companies where average EBITDA growth over the past three financial years has exceeded 10% are more likely than their less rapidly growing peers to analyse various data sources they collect (eg 58% vs 43%, with reference to third-party data) and to consider themselves effective at extracting useful insights from this analysis (81% vs 57%).
Furthermore, they are also far more likely to have to have changed the way they handle strategic decisions as a result of having more data (50% vs 36%), and to have seen improved strategic decision-making as a result of better data analysis (60% vs 38%).
These are among the major findings of The data directive: How data is driving corporate strategy–and what still lies ahead, a new report from the Economist Intelligence Unit, commissioned by Wipro. The report seeks to examine the progress that executives have made in using information to transform their businesses. While highlighting some of the striking gains that are being achieved so far, it also uncovers how much work remains to be done in terms of making use of the transformational potential of data for business strategy.
“This research is a reflection of how organizations are leveraging data to sustain its competitive advantage for its products/services and be relevant in future. Leveraging the power of analytics, organizations can from prop up their key performance indicators -drive growth, enhance cost management and strengthen risk management”, said K R Sanjiv, Senior Vice President and Global Head, Analytics and Information Management Services, Wipro Ltd.
Key findings of the main report include:
- Data has proved most valuable so far for marketing leaders. From better ways to segment the customer base, to rethinking the ideal product mix in a retail store, marketing leaders are finding wide-ranging uses for their data to help improve how they market their company’s wares. Already, 50% of chief marketing officers say they have tried and found a clear, positive difference in using data to improve their understanding of customers, as just one of a range of successful applications. This is a markedly higher proportion than their C-suite peers.
- The financial services sector, technology companies, and professional services firms are most prepared for the data age. Three sectors stand out as being most prepared for the data age: the financial services sector (where 22% have a well-defined data management strategy in place); the technology industry (30%); and the professional services sector (40%). By contrast, such data management strategies are least often found amongst manufacturers (16%) and retailers (13%).
- Businesses are stockpiling an ever-growing range of data and expect data gathering to continue to expand rapidly. Whether social media sentiment, machine-generated data via sensors, staff emails, market data or otherwise, firms of all shapes and sizes are now collecting more information than ever before. At least seven in ten companies collect syndicated third-party data, such as weather information (72%), or government data (70%), while many gather anything from internal staff data (66%) to some kind of location-based information (41%), among many other types. Two-thirds of business leaders say the range and types of data have expanded in the past two years, while about three-quarters expect this data stockpiling to expand yet further in the coming two years.
- Working out which data matters most is the top challenge for firms. For companies seeking to gain more strategic insights from their data, many hurdles await. Whether organisational silos, a lack of skills, the usual disconnect between IT and the business, or worries over data quality, few consider the challenges and gaps easy to bridge. But clarity on which data matters most, amidst the data stockpiling now under way, is what tops the list of barriers, according to 40% of respondents. Furthermore, 34% of executives worry that the quality of their decisions are actually being impaired by data overload.
- Many companies are unsure about the extent of data-fuelled strategic transformation within their business. While 68% of respondents think their strategy has improved in the past two years as a result of having more data, only 18% see a significant improvement in strategy, and few have found ways to use data to make a genuinely transformational shift in the business. Some 35% of executives agree that data has been more useful with operational choices and actions, rather than strategic ones. Just 22% disagree, while 41% are unsure.
A supplement to this report, The data directive: Focus on the CFO, is also released today. This paper drills down into the 62 responses to the survey by chief financial officers. The key findings of this supplement include:
- CFOs identify improved scenario planning and forecasting as the key area where having more data has made the biggest positive difference to their role, identified by 40%. Furthermore, 34% have improved financial close management, and 32% have used data to bolster profitability.
- CFOs are more cautious than their C-suite peers about the strategic insights data has delivered: just 24% believe that their company’s strategic planning is highly data-driven compared to 35% of CEOs and 43% of CMOs. Similarly, whereas relatively high proportions of CEOs (48%), CIOs (40%) and CMOs (33%) believe that their company has changed the way they tackle strategic business decisions as a result of having more data, fewer CFOs (24%) believe this is the case.
- CFOs are more likely than their C-suite peers to see themselves as leaders of data initiatives. When asked who currently takes the lead on data-related initiatives within the business, an equal proportion of CFOs (27%) flagged both themselves and their CIO. Their C-suite peers are more likely to cite the CIO as the natural point person on such initiatives, followed by a range of other corporate officers.
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