Data is underperforming
That’s bad enough, but it gets worse when you consider that the typical company is investing 5-7% of annual revenues in trying to improve the state of its data; in high-tech and highly regulated industries such as financial services, that figure routinely rises to 10%.
These are shocking numbers. For a multinational with revenues of $50bn, that’s $2.5bn lost every year. And while the cash figure at smaller businesses may be less dramatic, no CFO can tolerate such wastage.
How can CFOs drive better data performance?
With data promising so much and delivering so little, perhaps it’s time the CFO gets more involved. This doesn’t mean you have to become a data specialist – but you do need to understand how data relates to value, what makes data investment effective, and how to set your chief data officer (CDO) up to succeed.
That starts with recognising the importance of intangible assets to 21st century companies. CFOs are acutely aware of their duty to steward the company’s resources in a way that minimises risk and maximises value for stakeholders, but that has traditionally meant prioritising the management of tangible assets such as inventory, real estate, equipment and stocks. Modern CFOs must pay just as much attention to increasingly valuable intangible assets — including data.
Maybe more attention. Depending on which study you consult, intangible assets account for as much as 90% of the value of the typical US stock market-listed company, with data topping the list of its most valuable intangible assets. In some situations, a company’s data is worth more than the business itself, as United and American Airlines recently discovered.
In other words, CFOs need to recognise data is a valuable asset that requires the same focused attention and rigorous management as every other corporate asset. It’s not an input cost for the IT department or a “nice to have” for the marketing team – or even something you can hand off to the CDO and forget about. Quite the opposite. Data is a critical resource for your business, with the potential to drive enormous value for your stakeholders.
Understanding your data’s value – and overseeing strategic investment to maximise its potential – is one of your core responsibilities as a 21st-century CFO. Once you embrace that responsibility and start managing data as an asset, you’ll unlock value across the organisation.
Take one of our clients. Its data team was initially focused on understanding and improving data in order to make product maintenance more efficient and reduce costs. It was a worthy goal, but limited in scope, so we helped them shift their focus from improving a single data set to understanding the role of data in creating value across their organisation.
As a result, they rapidly realised how the smart use of data could achieve more than just cost savings from efficient product maintenance. Thanks to its work with the right data assets, the team was able to prevent product failures, practice preventive maintenance, minimise waste, and drastically improve the customer experience.
Practical steps for driving better data performance
Getting these basics right will help CFOs improve the efficiency of spending on data – reducing waste, and driving better data performance.
You can learn more about the concepts from step one: Data Asset Management and Data Valuation.
This is the first blog in a 3-part series, focussed on helping CFOs drive better results from data. Check out the other blogs:
- How CFOs can help CDOs succeed.
- How CFOs can maximise returns on data investment.