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The value of data [Financial Management (London, England)](Financial Management (London, England) Via Acquire Media NewsEdge) Big data is now one of businesses' most important assets. Peter Bartram sets out how technology can analyse your data to drive strategies for growth and - more importantly - measure its financial return... When the UK arm of the global bank Citi set out to investigate the return on investment (ROI) from its credit card sales campaigns, it improved future marketing ROI by 15 per cent. With the help of market research company Acxiom, it divided its database of prospective customers into 52 clusters, defined by their characteristics. Next, it analysed the kind of TV, radio, newspapers and magazines each cluster was most likely to see. It then pulled together every marketing message it sent out through each media channel. So when new credit card customers signed up, Citi matched each one against the media that would have encouraged their application. It helped it to gain an insight into which media were working best and found that local radio ads, which it previously thought were a poor investment, were actually showing good results. The Citi experience is one of dozens of stories coming out of companies that are finding ways to use data to win more business value. But there are also many companies that don't value their data - and that have no plans to harness the opportunity that "big data" - the latest buzzword - provides. When information management company Iron Mountain surveyed 760 European information managers, it found that half had no idea how to make the most of big data, while one in five said they weren't even going to try. That defeatist attitude won't enable companies to harvest true value from their information assets, believes Steve O'Neill, CFO of EMEA North at EMC, which provides enterprise information software and services. "I think more companies should try to put a financial value on their data," O'Neill says. "I envisage the concept of return on data becoming a key performance indicator in the same way ROI is," he says. "It's about people understanding the value of the data and, more importantly, the information they can glean from it and the impact that can have on their business." Some companies are already moving in that direction. Research by Dynamic Markets discovered that 20 per cent of large companies already quantify data as an asset on their balance sheet. For companies with more than 10,000 employees, the figure rises to 30 per cent. "Companies that quantify data on the balance sheet appear to have a better grasp and understanding of it, its potential to improve their company's performance and how to manage it well," says Keith Valder, CFO at SAS UK & Ireland, the business analytics software and services company that commissioned the research. "They are also more confident about the quality of their company's data." Four out of five CFOs in the companies that put a data value on the balance sheet monitor regular KPIs on data quality. That compares to fewer than three out of five in the companies that don't give data a financial value. Similarly, the companies that value data are much more likely to have a dedicated data management division than those that don't. What's driving the data issue up corporate agendas is the growth of big data. But CFOs need to understand that big data is not just about having more of it. It's about looking at data in a completely new way. The key to the new concept are the three "Vs" - volume, velocity and variety - originally defined by Gartner research vice president Doug Laney. The problem the three Vs pose for CFOs is that it's not just the volume of data that's growing so fast - by 59 per cent a year according to one estimate - but that it comes at ever faster speeds (the velocity) from a new range of different sources (the variety). Much of the value from big data comes from a company's ability to identify what was previously unavailable, such as social media content, and harvest value from it before it becomes outdated. Consider, for example, a CFO monitoring movements in the company's own share price and those of its rivals. Until now, that would have meant keeping an eye on market movements as they happened in real time. But in January, DCM Capital launched a trading platform that incorporates a "social media sentiment" feed. It enables traders to see what Twitter and Facebook users feel about shares, indices, foreign exchange and commodities. The new platform draws on research from the US, which shows that opinions about shares expressed on Twitter precede a price movement on the Dow Jones by three days. Paul Hawtin, founder and chief executive of DCM Capital, explains: "Our sentiment signal is derived from real-time social media data. "We search through billions of messages for key words that are relevant to the asset we are tracking - some key words have more weighting than others and their weighting diminishes over time. All of the scores are then compiled to create an average score of between zero and 100. The higher the score, the more positive the sentiment." The problem CFOs face as they try to find ways of winning more value and business advantage from big data is what to do first. In the burgeoning databases that exist within an organisation there is likely to be information that could deliver answers to a bewildering array of business problems. The difficulty is formulating the right questions. One way to get ideas about how to use big data is to look at what some of the pioneers are doing. Teseo, for example, processes information from two-thirds of the transactions at its tills to learn more about its customers' buying patterns in different stores and at different times of the day. It wasn't always the case when Sir Terry Leahy, who pioneered the use of big data in large-scale retail during his 14-year tenure as CEO of Teseo, arrived at the group. He found little in the way of sophisticated research. His introduction of the Clubcard - a reward card for customers - gave Teseo a high level of information on its customers and saw the group grow from being the third biggest retailer in the UK to the third biggest in the world. "I was a little surprised when I came into the business how subjective it was - how people would make decisions on the basis of no information whatsoever," says Sir Terry. "The bar code came along in the 1980s and that revolutionised a lot of things. You were getting the beginnings of a database then on products, and then the big breakthrough was when you had enough computing power to gather customer information as well as product. It really did make a difference. The year the Clubcard was launched was the year we overtook Sainsbury's to second place in the UK." Other retailers, such as online fashion house ASOS.com, which has quickly grown to a market cap of £1.4bn, are reaping the rewards from using big data. "I've had every scrap of information about my customers since day one," says ASOS. com chief executive Nick Robertson. "There was no bigger evidence of that than when we got caught up in the Buncefield fire at an oil depot in 200S. I had the names and addresses of every single customer who had placed orders so we were able to contact them to explain the situation. Once we were back I emailed all the same customers again to say we had a bit of stock we needed to clear now because it's a fire sale, come and shop. We got back on our growth trajectory as a result of having all that data." Eurostar International, which has 10,000 suppliers, is collecting information about energy use all the way along its supply chain so that it can improve its environmental credentials and cut costs. "Sustainability data will ultimately develop into a new currency, whereby businesses can measure their worth through how well they are managing their energy and carbon emissions," says Peter Bragg, head of environment and energy at the company. Man Trucks uses data collected from the driving cabs of the trucks it sells to glean information about how those vehicles can be driven more safely and efficiently. "Trucknology" has provided it with a competitive customer proposition that puts it ahead of its rivals. The way to harness more value from data, says Bernard Marr, chief executive of the Advanced Performance Institute, is to look closely at your business objectives and decide what big questions you need to answer in order to achieve them. "Start with a hypothesis and then use the data to see whether it is validated," he advises. He suggests this is better than looking for random trends in the data in the hope that something interesting will turn up. Marr points out that there is already a wealth of open-source software for a company that wants to experiment with big data applications without incurring heavy costs. The software includes Google Trends, which provides data on commonly used search terms; Social Mention, a search engine that explores social media such as blogs, comments, news and videos; and Hadoop, open-source software that supports data-intensive distributed applications. "It is a myth that big data is only for big companies with big IT budgets," says Marr. O'Neill believes that the CFO has an important role to play in delivering big data business benefits in a company. But it will mean CFOs adopting a new role. "For me, the big thing that the CFO can do to help the big data agenda in their company is become the disruptive enabler rather than the traditional naysayer. "CFOs are traditionally guardians of the budget and of the data in the company's ERP system so they understand the levers that drive the business. We're ideally placed to break down silo mentalities and challenge the status quo by asking outsidein questions rather than inside-out questions." And it is worth keeping JM Keynes' aphorism in mind - it is better to be roughly right than precisely wrong. "Everything is changing so rapidly that trying to find the perfect solution that addresses every eventuality will prove impossible," warns Patrick Keddy, a senior vice president at Iron Mountain. "Decide on the information of the greatest potential or risk to your business and focus your time and resources on harnessing that." 'Companies that quantify data on the balance sheet appear to have a better grasp and understanding of it' 'Much of the value from big data comes from a company's ability to identify what was previously unavailable' THUMBS UP... Jim Manzi believes big data is an idea whose time has come "Financial directors and CFOs could be using big data to make better decisions. That's because the value of big data lies not in the size of a database or its contents, but in the way a company can use the insights hidden in the raw figures to make smarter decisions and increase profits. "The companies that invest in the technologies and skills to tease those new insights out of the data will be the ones that drive sustained competitive advantage. "Big data is definitely an idea whose time has come. It exists because data storage costs are now falling faster than processing costs. Storage productivity doubles every year, while processing productivity doubles every 18 months. The cumulative effect of this difference creates huge pools of data that companies don't use because they can't work out how to process and analyse it at a feasible cost. "So CFOs must find ways to speed up the time it takes to put the new pools of data to work. If they can do this, they will drive better decisions, de-risk innovation and convert big data into shareholder value. "And one of the best ways to use big data is to answer questions about how business decisions change customer behaviour. For example, if we change the price of a product, will customers Tweet about it and encourage more people to buy "To understand cause-and-effect relationships such as this CFOs should try new ideas in a small part of the business. They can make predictions based on the results they get from the tests. Experimenting like this reduces the pool of data not being used to build profits. It converts big data into manageable and analysable data. "And the robust decisions that result quickly create a competitive advantage and build lasting shareholder value." Jim Manzi is founder and chairman of Applied Predictive Technologies. He is the author of Uncontrolled: The Surprising Payoff of Trlal-and-Error for Business, Politics and Society. 'I was a little surprised when I came into the business how subjective it was' 'Tesco processes information from twothirds of the transactions at its tills to learn more about its customers' THUMBS DOWN... Davin Yap says it's better to understand small data "Insteadofbigdata, companies shouldfocusonusingbig context to understand small data. That's because big data describes the Svhat' of a business situation, but big context describes the 'how' and 'why'. "Big data is not new, yet many companies seem to be using it as a prediction tool. But the ability to predict behaviour doesn't necessarily lead to better business decisions because big data cannot tell you why something is happening, just that it is and will. Businesses should not be looking to track patterns, but to see the wider context around those patterns. "The brilliance about having access to so much information is using it to understand why something is happening, how it is happening and what it means for the business. Ultimately, every business only succeeds by serving the needs of its end customer, but many companies are losing sight of this by pushing all their resources into big data warehousing. Unfortunately, big data often neglects individuals. "Massive volumes of information are pulled together to create "trends" that then drive a company's business strategy. At a time when customers are demanding more personalised services, this approach gives them the exact opposite - grouping them into a "type" rather than treating them as an individual. "One chief executive called the big data explosion "crippling" - sometimes when you have too much information you're unable to make a decision. The problem is that you need a PhD in mathematics to "read the entrails" of big data. In many instances, more data rarely results in a more focused and proactive business strategy because people get too bogged down in the analysis. "So what is the solution Start small and work up. By focusing on a specific challenge and the associated small data set, you can capture the most important bits of knowledge available - the "know-how" - and disregard unnecessary pieces of information that do not add value for the company or end-user." Dr Davin Yap is chief executive of Transversal, a company that provides knowledge management solutions. He has a PhD in engineering from Cambridge University. 'The big thing the CFO can do is become the disruptive enabler rather than the traditional naysayer' 'Start with a hypothesis and then use the data to see if it is validated' Peter Bartram is the author of The Perfect Project Manager (Random House Business Books) (c) 2013 Chartered Institute of Management Accountants |