Welcome to the Digital Economy.
We are in the midst of a global revolution – one that will re-engineer our workforce and redefine our core industries. There has been an explosion in the availability of data, from social networks, to mobile apps, to the internet of things. Almost every action now leaves a digital footprint and generates data – data that can be used to automate processes, to build new products, to design new experiences.
Data that can be used to make better decisions.
It’s hardly surprising, then, that data-driven decision making is all the rage these days. As technology has advanced exponentially, data-driven decision making is becoming more prevalent in a whole host of industries, including financial services, health care, retail, and manufacturing. Businesses are investing heavily in a wide range of enterprise tools designed to generate big data, add meaning to it through advanced analytics and AI, and put it in the hands of the right decision-makers. In principle, this differs greatly from the olden days, when decisions were made on the basis of experience, informed guesswork, or “gut feel.”
But the reality is, while organizations have been quick to ramp up their spend on big data and AI solutions, they’ve been slow to actually change the way they make decisions. Old habits are hard to break:
- “What should we set our marketing budget at for next year? Let’s go with this year’s spend, plus 5%.”
- “What should our risk cut-off be for unsecured lending? We’re starting to see signs of a downturn approaching, so we’d better raise our minimum FICO from 660 to 680.”
- “What is the right product design for our flagship rewards card? Let’s go with whatever the competition is doing, but make it slightly richer.”
In all of these cases, a data-driven approach can lead to much more optimal decisions and generate huge value – but only if you can design and execute a system that effectively integrates data insights into your decision-making process.
Easier said then done. What I’m finding is that most organizations are struggling to unlock the power of their own data. This is especially true for companies that were born before the digital age, who have to deal with legacy systems, disparate data sources, and functional siloes that impede decision-making.
As I’ve been working to help organizations cross this chasm, I’ve developed a rubric for assessing where your company is on this journey. It’s designed for financial services, but also has broad applicability across many sectors:
Don’t worry if you’re not quite at the Wedding Cake state yet – what I’ve found is that the vast majority of banks in North America are somewhere between the Cupcake and the Birthday Cake:
- They are experimenting with open source, but are still predominantly SAS-driven shops;
- They have built a data lake for analytic purposes but are still using legacy datasets for the majority of their production models;
- They use data to optimize their programmatic advertising and micro-decisions, but still make million-dollar decisions in a host of other areas based on shockingly little data
Where is your company today? I’d love to hear from you in the Comments about your current state and what investments you’re making to become more data-driven.
It is a difficult journey, but one well worth the investment. I’ve seen first-hand how much a data-driven decision making system can create a competitive advantage and generate millions in value for your business.