The Outliers: Who's ahead on the data game?

There is a clear relationship between high-growth companies and use of data. Undoubtedly key to their success is the fact they have done more to reorganise their structures and leadership around data and to introduce data-management strategies.

As many experts would insist, building a datacentric business is hardly a new phenomenon. The poster company of the data era, Google, will celebrate its 15th birthday this year. Even so, those companies that have used data to strategically transform their businesses remain a relative minority today. But as investment grows into the realm of data, it is inevitable that various companies have moved further, and faster, to turn data into a genuine competitive advantage.

To try to unpick this, we have looked for distinctions between those companies that have outperformed the market over the past-where average EBITDA growth, over the past three financial years, has exceeded 10% (high-growth firms)-against those who've experienced zero EBITDA growth, or have declined (no-growth firms). Of course, such relationships cannot suggest causality, but it is nonetheless instructive to compare how high-performing firms differ. From this analysis, five key points emerge:

• High-growth firms make better use of their data. All firms collect data, but high-growth firms are far more successful at turning this information into something useful to drive new strategies, or changes in strategy. In fact, across several areas of data, such as machine-generated data or location-based information, no-growth firms collect easily as much data as high-growth firms do. But the latter are far more likely to actually analyse the data being collected. For example, while 55% of no-growth firms collect their contact centre data and 66% of high-growth firms do the same, only about half of the former that collect data actually analyse it, versus three-quarters of the latter. Nearly twice as many no-growth firms admit to collecting lots of data but not consistently maximising it (38% versus 20%). Furthermore, among high-growth firms, 15% consider themselves highly effective at extracting useful insights from this analysis, about twice the rate of their no-growth rivals (7%). And while 17% of no-growth firms rate themselves as ineffective at this, just 4% of high-growth firms say the same(Figure 11) (Figure 12).
• No-growth firms are more likely to run into data paralysis. While executives at both sets of companies consider their decision-making to be based on data, rather than purely instinct, high-growth firms are far more likely to believe that key characteristics of their strategic change initiatives have improved as a result of data. Twice as many (62% versus 31%) believe the speed of change has improved, while many more also think the quality or effectiveness of change is higher (about 58% versus 38%; Figure 13). Crucially, while many more high-growth firms see improved decision-making on the back of being more data-driven (60% versus 38%), no-growth companies are far more likely to be worried about the quality of decisions being impaired by information overload (45% versus 31%).
• While no-growth firms worry about the unknown, high-growth firms worry about how to resource their data plans. When considering the barriers ahead on data issues, there are many commonalities between weaker and stronger firms. Both worry about the challenge of assessing which data are truly useful, data quality issues, and the related technology problems. But while high-growth firms are far more likely to raise concerns about a lack of necessary skills and expertise, no-growth firms are in turn far more likely to express a concern about a fear of the unknown (Figure 14).
• High-growth firms have done more to reform their structure and leadership around data. High-growth firms are more likely to have changed the way they handle strategic decisions, as a result of data. For example, twice as many (46% versus 23%) no-growth firms say they've not changed, and don't even plan to change in the coming year or two, the way they tackle such decisions. Meanwhile, far more executives at high-growth firms see a need to radically transform their management techniques to keep pace with what technology is making possible (62% versus 33%). And while half of high-growth firms are rethinking their approaches to strategy and decision-making to make it more data driven, just 36% of no-growth firms are doing the same.(Figure 15)
• High-growth firms more often have a solid data management strategy in place. A robust data platform often appears to be the foundation upon which more strategic use of data is made. As such, high-growth firms are 2.5 times more likely to have a well-defined data management strategy that focuses on collecting and analysing the most useful data. Looking specifically at the sample of executives who say their firm has a strong data strategy, these companies are typically at least twice as likely to be more data-driven in their decision-making, and are about three times as likely to think their strategy has improved as a result of data. And they are about four times as likely to have converted information into insights (Figure 16).
  
  This relationship is observed elsewhere, including within research conducted by Bain & Company. "We've seen a strong relationship between decision-making effectiveness and financial results," explains Mr Puryear. "Making decisions requires insights you can count on, so there's a strong relationship between really being able to leverage the data assets and ultimate performance from that."

Characteristics of the data insight masters
A further set of comparative findings shows even more striking insights. In many conversations with C-suite executives, a central issue was how to use data to find the proverbial needles in the haystack—uncovering the valuable insights that no one else had spotted.

To this end, this research cross-analysed the results of the small cluster of executives who professed to have been highly effective at generating insight from data and compared it with a far larger grouping that admitted to being weakest at this. Again, while such relationship cannot claim causality, the contrasts between these groupings are stark.

Overall, those that are highly effective at garnering insights are:

• Nearly eight times as likely to have a well-defined data management strategy in place.
• More than four times as likely to have changed the way they tackle strategic decisions, as a result of the data they have, despite most other attributes of their strategic decision-making process being the same.
• Almost universally providing their senior executives with new data and information to support their roles and decisions (92% are, versus just 35% of ineffective firms).
• Twelve times more likely to consider their strategic planning and decision-making to be data-driven.
• Unique among all clusters of respondents in having most often put their CEO in charge on data-related initiatives within the business, ahead of the CIO, which is the stock answer for nearly all other sets of respondents, including the high-growth companies outlined above.