Dataskeptical? Study: companies that effectively use data are more successful
“Is investing in data really worth it?”
We are skeptical by nature. As long as we do not see, we do not believe, and as long as we are not in srious trouble, we do not strive to find a solution.
And so, even though there is now a very big buzz around the concept of “Big Data” – word that can no longer be missing in every marketing conference or ebook – there are just few companies that are really exploiting big data and that are moving to actively use their internal and external data.
But for those who effectively do it, the results are there.
And to prove it to the so called “Dataskepticals”, Microsoft and Keystone Strategy have carried out a huge study last year that involved more than 300 medium-sized companies in the US, covering multiple industries.
After having submitted hundreds of questions to senior managers, the result was clear: companies are divided between “Digital Leader”, ie companies who exploit the digital and the data in every business process, and “Digital Laggards”, that are just beginning to move in this direction.
- 1 Well, Digital Leaders have much better results than Laggards, quantifiable in + 18% gross margin and + 4% net profit compared to Digital Laggards.
- 2 1. Collecting, organizing, and processing data.
- 3 2. Giving access to data to people inside the company.
- 4 3. Generating forecasts on the collected data and acting on the basis of the models they create.
- 5 “What data do you NOT have now, but could make the difference for your business?”
Well, Digital Leaders have much better results than Laggards, quantifiable in + 18% gross margin and + 4% net profit compared to Digital Laggards.
All this with an increase in IT investment of just 0.3% of the total sales for the Leaders compared to the Laggards.
Just 0,3%! What to say, don’t you think that the return of the investment is slightly positive? Here is the table with the results:
But besides giving us these figures, which show evidence of the importance of the data but do not help us so much… the study allows us to see HOW these companies exploit the data.
What are the most important aspects?
1. Collecting, organizing, and processing data.
If you do not collect the data, what are you analyzing? Companies must have a functioning system that can continuously pump in new data from within and from without the company.
As an example, the study mentions the insurance companies Allstate, Progressive and StateFarm, which wanted to collect the information of their clients to improve their prices and risk statistics.
The solution? They launched programs to install connected devices into their clients cars, offering in exchange discounts and a better service in case of crash.
A smart idea to get data that otherwise would have been impossible to obtain!
Then, collecting data is not enough: you should have the infrastructure to structure and process them, so you can turn them from raw data into precious insights.
Not for nothing, Data Leaders claimed to do this with a satisfaction of 7/10 … while the Data Laggards only with an average of 4.6/10!
2. Giving access to data to people inside the company.
What’s the purpouse of having a good infrastructure, collecting all the data in the world… and do not letting anyone seeing them? Keeping them hidden in a safe such as they were nuclear codes, which only top management can see under oath and only on fullmoon days.
Obviously it is a provocation, but unfortunately sometimes it happens!
And in those cases, the Dataskepticals are really right: data is useless!
Looking at the success cases, however, Keystone Strategy has identified how the data helped to nurture a real new business and operating model.
For the Digital Leaders, in fact, the data has caused a real revolution in how the company produces, organizes and offers its products and services to the customer.
See the example of Ecolab, a global leader in water treatment who helps refineries, petrochemical companies and manufactures to save water.
By installing network-connected sensors in their equipment, Ecolab delivers real-time data to its technicians and customer service, ensuring rapid action and continuous improvement of its technology.
3. Generating forecasts on the collected data and acting on the basis of the models they create.
Raise your hands if you do this in your company at 100%.
Of course, generating forecasts could be hard, especially when you have to predict something outside of you, such as the trend of your market (which in any case is feasible, as you can discover in this article about trend hunter).
But this should not be an excuse to prevent you from doing it! Otherwise, we will end up being like the Data Laggards, who say they have a satisfaction at this point of 3.9/10.
The data you collect, in addition to making you act in real time, must be the basis for predicting how your company results will evolve in the future, helping you make more informed decisions.
Here’s how different companies feel their effectiveness in the different points:
Now, stop a second to think and try to answer this question:
“What data do you NOT have now, but could make the difference for your business?”
Well, I would conclude with Keystone Strategy’s words (so you will believe me more, I’m not inventing anything! 😜): “The time for investing in digital transformation is now.”
And the “digital transformation” – that means the act of taking the digital in all our processes – is passing through data and the digitalization of data.
Nowadays there are infinite ways to collect the data we need and to turn them into value, just pick your own and go ahead with the confidence that the results will come (and the evidence is there!).
Are you still dataskeptical? Here you can find the complete Keystone and Microsoft study. In the meantime write me your questions and objections in the comments below, or if you want help to start, click the following link:
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