The New Gold
Crafting the business case for an Insight Driven Organisation
As data is increasingly recognized as the distinctive asset in our digital age, more and more organisations are aspiring to capitalize on this new gold and define the business case.
Ron Bergers & Jasper Meijerink - 16 november 2017
As the Economist points out, the most valuable companies are no longer oil companies but the data focused organisations like Alphabet, Amazon, Apple, Facebook and Microsoft (Economist, 2017). However, getting a clearly defined business case on the use of data is often a struggle and an obstacle for coordinated transitions towards an insight driven organisation (IDO). The potential of becoming more insight driven is recognized, but the specific added value is often hard to get into clear focus.
Identification of tangible benefits
One of the main challenges in creating a business case for an IDO transition (and sometimes the argument for not getting involved at all) lies in the identification of tangible benefits. To succeed, however, one needs to transcend the platitudes of ‘better ability to manage the organisation’ and ‘improved decision making through use of data’. A complicating factor here is the difficulty in defining a clear counterfactual situation. In other words: how can we measure our benefits when we cannot see what would have happened had we not taken this course of action? There is no valid ‘ceteris paribus’ principle, from which the benefits of an investment can be distinguished.
The result of this struggle is that many alternative drivers for the development that the organisation aspires to, are brought to the forefront. These can be problem driven instead of opportunity driven, for instance the lacking performance or end of lifecycle of current IT systems. Although valid in itself, from a business perspective these are often spurious reasons for changing an organisation to become insight driven, which leads to diminished support from budget holders for the investment. This outcome is unnecessary when the benefits side of the business case is crafted properly.
Data as an asset
The challenge of getting focus and clarity in your business case is not only reserved for IDO related initiatives, but is common for most organisational transformations. As soon as the benefits do not directly flow from the change itself, there is a mediation that contains assumptions on the degree to which the effects are actually realized. The best way to make the business case as solid as possible in terms of actually realizable benefits, is to explicitly ask for buy-in from top management and a commitment to the results from all layers of the organisation.
Yet there is a distinction that sets IDO initiatives apart from other transformations. And that is the treatment of data as an asset that can be capitalized upon. The value of data only shows itself, however, when there is a number of conditions that are met:
- A sufficient level of skill in collecting, processing and transforming data;
- The presence of a proper technical infrastructure;
- The presence of a good governance structure, guiding quality, timeliness and compliance with security and privacy regulations.
These conditions show why it is essential to work on increasing maturity levels along the full spectrum of the Deloitte IDO framework, within the five pillars of Strategy, People, Processes, Technology and the Data itself. These investments are not all directly linked to data analytics results, but together they do enable them. And research does show that organisations that are data driven are more successful (Forrester, 2016). The movement to increasingly consider data as an asset, has led to discussions about listing data on the balance sheet and the different ways to value data (Gartner, 2016).
Investments to be made
Looking in more detail at the business case for becoming an IDO, the main costs are related to these domains:
- Designing & preparing the organisation in line with the analytics strategy;
- Developing your people. This entails more than just recruiting some data scientists, it might include training the rest of the organisation to become more ‘data-savvy’;
- Designing & running processes that enable smooth execution. These include ideation, prioritization processes, Agile development, and maintenance and support processes;
- Acquiring and running the systems and technologies that support the activities. Think of licensing costs, but also development costs that support the organisation in becoming insight driven;
- Optimizing your current data sets and obtaining new valuable data, for example by buying sets from a data vendor.
These investments run across a rather broad scope of domains. But in the end the investment is all about the readiness to innovate and change strategically. And these investments are always accompanied with some uncertain factors. One should recognize that there will be no results without the courage to believe that not everything will succeed at the first go, that the results will not always be clear up front, and that it is all about encouraging the organisation to experiment and learn.
Don't forget the soft benefits
Looking at the benefits side of the scale, we see that traditionally a business case is aimed at one or more of these three objectives:
- Increasing effectiveness in operating within the market;
- Increasing efficiency in the organisation;
- Mitigation of risks foreseen in operating within the market.
These three objectives can be broken down into several individual initiatives that support these objectives. For example effectiveness in the market can be achieved by using data to better understand and target your customer and optimize sales or optimize your pricing strategy. For efficiency in operating in the market, process mining can help to better understand and optimize processes. Predictive maintenance or optimizing working capital are also great examples of how to optimize an organisation’s efficiency and in general have a very positive business case. Examples of risk related initiatives will usually be focused on using data for scenario planning or predictive analytics.
There is an inherent tension in the three objectives, in the sense that any reckless pursuit of one will lead to a deterioration of the others. The challenge for getting a tangible business case for an IDO initiative lies in bridging the gap between the potential that data brings and these three objectives. For example, how can an organisation translate the goal to ‘make better decisions’ into a quantitative difference in efficiency or effectivity? In order to do this, they should zoom in on the type of decisions that are made based on the data used. By connecting business outcomes to analytic output and then data input, the value chain for using data as an asset becomes a lot clearer (See Gartner, How to make the Business Case for Analytics, 2016, for a good example using an Analytics Traceability Map). The crucial step is to make the soft benefits tangible. This may seem obvious, but this step is often neglected when it comes to business cases on data analytics.
It requires experience and knowledge of the subject to really be able to value the potential of data, now and in the future. With the Deloitte IDO framework, we bring this experience and knowledge into your organisation, spanning all pillars of strategy, people, process, data and technology, making sure your organisation grows evenly in its maturity on dealing with data.
Do you want to know more about IDO? Please contact Ron Bergers via +31 (0)88 288 8740