It is widely understood that big data can reduce risks and costs and improve operational efficiencies in business, but are Australian boards using this knowledge to their advantage?
At the Australian Institute of Company Directors’ (AICD’s) recent conference Australian Business and ASEAN: Beyond 2020 held in Kuala Lumpur in May, Tim Trumper MAICD, board adviser at Quantium and director at NRMA, led the forum on Harnessing Big Data in which he revealed the true consequences of big data for boards.
Discussing his presentation after the event, Trumper said to truly understand how huge big data actually is, it is imperative that we think about all the devices that collect data. This includes Google searches, Facebook posts, Twitter tweets, credit and debit card transactions, road tolls, airline bookings, travel card use, business orders and sales, medical services, and government transactions.
Bearing in mind that this is only scratching the surface, he said directors are going to need to understand how to use this data to remain effective and ensure the best possible results for the businesses they serve. Most simplistically, big data is transformed into key strategic insights, Trumper said. This, in turn provides boards and management with the opportunity to make much better decisions. “Data use and data strategy, are the new governance issues,” he said.
Due to the sheer volume of big data, the key objective for boards is to move from focusing on the amount of data there actually is, into what this data can do for decision-making and what material value can be extracted from it. For organisations where data is not yet their key asset, boards must ensure that this will become the new norm as data-thinking strategy and applications grow at exponential rates, he said.
While Trumper stated that many directors would counter that their organisation does not generate enough data for it to be thought of as “big” data, he explained that big data is “about data that is available from many other sources”. This means that big data will be available to all organisations. “And therein lies another challenge – your competitors, big and small, will be thinking about this also,” Trumper said.
Trumper said that although directors understand that business is increasingly being led by IP, data, strategy and culture, disruptors who are capital-light and information and insight-heavy, are using data to powerful effect to understand their customers, their inventory, their competitors and their marketplace more deeply and effectively than the companies they are disrupting and replacing.
“These innovators are using data to refocus and cement customer-centricity into the boardroom and inculcate it deeply within the culture and fabric of the entire organisation,” he said. As a result, new data allows for new questions to be posed, promotes new thinking and ignites innovation.
Therefore, boards must ask themselves: “What questions can we ask that we are not asking?” “What information can we access, that we’ve never had before?” As an example, Trumper highlighted three questions that though not new, provide new answers when new data is applied to them:
- How price-sensitive are our customers?
- What are the primary drivers of defection for my customers?
- What is the most profitable use of incremental capital?
“A high-performing board understands that its key charter is to ask the questions that matter most. Many Australian boards were slow to become highly internet literate. How long will it be before directors are big data literate?” he asked.
Trumper concluded by reminding directors that data is a governance issue and boards who ignore it, do so at their peril. “Best-practice directors excel at asking the questions which help to understand and shape the future of their organisations,” he said.
Big Data: what directors need to know
Every business will need a data strategy for attack and defence.
Innovation and competitive advantage can be achieved with the rapid adoption of large-scale data sets.
Great data will beat great analysis alone. Diverse sets of data will trump a single view.
Insight is of no commercial value without action.
Data and analytics is a complex discipline where new skills and partners will be needed.
Not every company can be a great data company. Directors need to know when to encourage partnerships or collaboration.
Data is too important to be left to the data department. It needs a seat at the board table.
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