Businesses have always run on data, from 5,000 year old Sumerian trade on clay tablets to today’s silicon-driven artificial intelligence algorithms, data is at the heart of practically every business decision.
Data is used everywhere in your business and in every team. Successful businesses use data to:
- Deliver marketing strategy by creating market segments
- Help sales predict which customers will buy what products and when
- Monitor customer satisfaction in customer services
Better data leads to better decisions which creates competitive advantage. Here I’ll explain why you need a data strategy and how to get started.
Just as a good business strategy is a roadmap to creating competitive advantage, a data strategy is roadmap to how your business will get, store, use and protect data to meet its goals.
An effective data strategy is both defensive (protect, update and keep data accurate) and offensive (use data to compete, be productive and make a profit).
In some businesses, data strategy is part of the IT plan. This is business risk. Positioning data as part of technology misses the value of data as a strategic asset. Data brings both risks (and the need for a defensive data strategy) and benefits (which needs an offensive data strategy).
Without an effective defensive data strategy, your business risks:
- Fines for noncompliance: If your business collects, uses or manages information about people, it may also need to comply with regulations like the General Data Protection Regulation (GDPR) or the Health Insurance Portability and Accountability Act (HIPAA). GDPR fines are intentionally painful for businesses, large and small. Fines are up to €10 million, or up to 2% of the worldwide revenue for the previous financial year.
- Poor decision-making: Flawed or incomplete data can lead to employees making decisions that hurt a business, like accounting errors because customer data is duplicated, or over-spending because stock levels are wrong.
- Hidden costs: Poor data leads to expensive mistakes which cause partners, suppliers and customers to lose trust in a business. Employees that have to workaround poor data are less productive, customers are impacted when orders are sent to the wrong address and suppliers become irate when invoices are paid late.
- Negative media coverage: There’s also a risk of unwanted media attention when serious mistakes are made, like sending correspondence to a deceased person, or mistakes in the companies financial reports.
With an effective offensive data strategy, your business can compete with:
- A central view of information: It’s likely your business uses a mix of products to manage accounting and customers, customer communication channels like social media and mailing lists. Each of these products stores information about customers, suppliers, sales, and more. With a good data strategy, you can have a central view of customers, suppliers and other important information. This central view becomes your business’s single source of truth.
- Business-wide buy-in: Making a data strategy a purely IT effort can lead to a lack of buy-in from other areas of your business. In IT, data becomes a technology problem. In the boardroom, data becomes everyone’s responsibility.
- Business strategy support: Your data strategy supports your business strategy with data (facts, statistics, numbers) to test your vision, understand your networks, refine your mission and deliver your goals.
A data strategy is a business-wide plan for competing, with data. A data strategy belongs in the board room.
To get started with a data strategy:
- Treat data as an asset aligned with your business strategy
- Bring ownership of business data to the boardroom
- Balance defensive and offensive data strategy
In my next article, I share why data strategy fails and how you can get it right.
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