Refitting organisations to capitalise on data

A report from the Economist Intelligence Unit

Succeeding in the digital age

Refitting organisations to capitalise on data

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Succeeding in the digital age Refitting organisations to capitalise on data

Every business today is becoming a digital business—from pure online entities to traditional companies embracing mobile, social and cloud platforms. But the businesses that will excel and compete most effectively will be those that put the voluminous data that these digital platforms produce to smartest use.

Getting there will require commitment. According to a May 2014 IDC study sponsored by Microsoft, companies that invest in data across four broad categories—new data sources, analytic methods, key performance indicators and users—achieve higher returns than those that invest in some but not all of the categories.

But many companies are not yet there. Despite concerted efforts, companies across all industries struggle to harness the data explosion produced by the pervasive use of digital platforms. And both employees and customers often complain that they cannot get the information they need.

Part of the problem lies in data access. Data must be made available to all areas of the business and can no longer be limited to an elite few. In our current data-dependent age, business success or failure increasingly rests on the right people having easy access to relevant data, whether internal or external, at the right time—even if the data are siloed in disparate systems that make them difficult to reconcile and combine.

Investing in change

For many companies, getting there requires the modernisation or replacement of existing systems. Which one “depends on your appetite for change, the budget for data infrastructure and what type of pain the organisation is going to tolerate when it comes to upgrading their data [infrastructure],” says Michael Lock, vice-president and principal analyst at Aberdeen Group, a US industry research firm.

But most important is business rationale. Kim Darby, chief information officer at Cancer Treatment Centers of America, a national network of cancer hospitals, asks her executives how the business would transform if it had new technology.

“Frequently, what determines the limitations of the systems are configuration issues that are self-inflicted by organisations,” Ms Darby says. “When there are technology limitations and there is [return on investment] that justifies the replacement—and the new platform would be more reactive to your changing business climate—then that’s the business case where your decision swings over to replacement of technologies.”

Nevertheless, organisations may favour legacy modernisation because they have spent large sums on their systems already. Past investments should not dictate future investments, however; rather,

Organisational update: leveraging data for the digital age

Despite concerted efforts, companies across all industries struggle to harness the data explosion produced by the pervasive use of digital platforms.



companies must weigh whether their current technology can be adapted to enable their business strategy or not.

“Sometimes we see a ‘sunk-cost bias’. They’ve sunk $100m into [a] legacy system and trained people how to use it, but, in a rational framework, it’s all sunk,” said Charles Noon, head of the department of business analytics and statistics at the University of Tennessee. “The real question is: Do you stay with that or do you go to something else that has an additional investment and the pay off will be much greater?”

Digital on the inside, digital on the outsideThe availability of data must be coupled with intuitive and dynamic visual presentations of data that facilitate insights and action. This is especially true when it comes to engaging customers; the most competitive organisations deliver superior experiences that keep their customers engaged across all channels. They also ensure that products and services are personalised to meet the needs of individual customers. (Please see the second article in this series.)

Kroger, a grocery store chain that works with the University of Tennessee, targets consumers based on their buying habits and sends them customised coupons and newsletters. This personalisation of offers has helped the company achieve same-store growth for 43 consecutive quarters.

Kroger “has figured out how to build customer loyalty by personalising [its] marketing strategies,” says Ken Gilbert, professor emeritus of

the department of statistics, operations and management at the University of Tennessee and a development team member of the incubator Cherokee Farms Innovation Campus. “Customers are impatient and spoiled, so you’ve got to make yourself easy to do business with.”

Measuring the return on investments like these can be tricky. A traditional cost-benefit analysis is inadequate for businesses that are embracing mobile, social and big data, experts say, because the technologies are new and changing rapidly, thus making ROI difficult to forecast.

“The danger in making a decision in an environment of uncertainty is that you can make bad assumptions,” says Mr Noon. “What we would envision today might be very different from a year or two or three from now, so [the ability to embrace change is] something that has to be built into the DNA of an organisation.”

Digital leaders are hypothesis-driven, focused on continuous improvement and willing to take risks. They break initiatives down into smaller parts to accelerate progress, gather quick market feedback and, if necessary, fail fast. This more “agile” approach lets companies avoid making large, multi-year investments only to discover that business or market requirements have changed and the investments are wasted.

The fail-fast mindset combined with the need to respond to disruptive innovations, which are invading with increased frequency, is changing how companies must approach both risk management and data analysis. To be able to adapt quickly, digital enterprises need to take measured risks, often based on data-driven insights, to

❛❛ The real question is: Do you stay with [legacy systems] or do you go to something else that has an additional investment and the pay off will be much greater? ❜❜Charles Noon, head of the department of business analytics and statistics at the University of Tennessee



Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd. nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper.

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innovate and to move with their markets, even as they guard against major losses.

“How do I make sure my systems are adapting in a way that allows me to react quickly to new inventions or things that are fundamentally going to change the way we do business?” Ms Darby asks. “If I’m not prepared for those things, I won’t have time to react.”

Compete with data, thrive on changeBeing prepared to react—not to mention anticipate and act on expected market developments—requires company-wide access to data and real-time measurement of success or failure.

Creating this sort of digital, data-driven enterprise may demand significant operational changes. None are easy, but they are necessary to stay competitive in a rapidly changing global economy in which fortunes can be won or lost in a flash.

Digital leaders recognise that they must constantly look for new ways to capitalise on market and industry changes and shifts in customer preferences.

They also know that leaning on data will make their vision sharper, that embracing change will make their reflexes quicker—and that quick moves to woo and win today’s digitally empowered customers are the ticket to business growth.

Refitting organisations to capitalise on data

Technology

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