The goal of data investment
What is the goal when your business invests in data? There are several responses you might give: maybe you want to improve data quality, to enable better analytics, or to support better decision-making. But there is only one truly correct answer: the goal of every data investment should be to support and improve specific business outcomes.
It’s an answer that should resonate with CFOs in particular. Charged with managing the business’s resources to minimise risk and maximise value for shareholders, they are always searching for meaningful returns on investment.
This is why every single data project should connect to a strategic business objective – and all involved should understand that connection.
It sounds obvious, but most organisations have not recognised this imperative.
The rise of (in)effective data investment
Data investment has been rising for the last decade, with companies committing ever-more enormous sums of capital to transform their data capabilities. Today, however, a majority of CEOs report they have just 20% of the data they need to execute their vision and strategy.
What’s going on here? Where has all that money gone?
The problem is that many organisations haven’t got to grips with what makes data investment effective. Too many data investments aren’t tied to a specific business outcome or objective; while investment is often lacking in data that directly supports strategic business initiatives.
To put it another way, many businesses have wasted money on data assets or capabilities they don’t need right now. And they’ve neglected the areas where they should have been investing.
We see this all the time.
One of our clients’ CFOs was recently asked to commit more than £20 million to fund more than 10 different technology projects that would supposedly improve customer experience.
The investment strategy had a high risk of failure, until the CFO asked three critical questions:
- What are we trying to achieve with the money you’ve asked for?
- Do we have the data we need to meet our goals?
- Which of these projects is most critical for delivering the data we need?
The team had no answers, so the CFO insisted they do more work. Specifically, she wanted to know how the projects they were proposing would support the organisation’s customer strategy.
Once the work was complete, the CFO had the answers she needed to make smart investment decisions and drive meaningful business results.
It’s a story that illustrates a critical point:
Strategic, outcome-focused data investment leads to exponentially better results – and it is up to CFOs to establish and enforce a framework for allocating capital and prioritising projects.
Green-light the data initiatives with a clear link to your business’s objectives and be cautious of the projects lacking that link.
Steps for more effective data investment
Allocating resources for maximum return on investment is what CFOs do, day-in and day-out, across every area of the business. And when it comes to investing in data, the same principle applies.
These practical tips will help you maximise the value of your data investments:
This is the second 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 drive better data performance.