We see the impact of technology in our daily lives. We make decisions with information that is literally at our fingertips. Our cell phones and tablets have enabled us to have timely, somewhat accurate and actionable information within reach. This shift in paradigm has changed the way we live our lives and make decisions. Retail business and in general all businesses face challenges not only overcoming competitors defined by a geographical area but by a search engine capability. We live in a world where data is abundant; technology has enabled businesses to capture and store more data than ever before. In the same manner consumers are becoming more comfortable about providing some level of demographical information. According to the Arizona State University website the volume of business data worldwide doubles every 1.2 years. Most statistics about the so called “Big Data” phenomenon are measured in Terabytes. There is no question in today’s business environment large amounts of data s being collected and is available. The big challenge for today’s finance leaders is how to derive actionable business strategies from hat is the big challenge.
Propelled by this abundance of data is the rapid change of the finance role in today’s corporate environment. Beyond the mechanical role of journal entries, fiscal control, treasury and financial statement publishing, lies the biggest challenge and opportunity. It is when today’s CFO and finance leaders become strategic partners to an organization providing timely and just enough knowledge to make savvy and hopefully profitable business decisions. How to undergo this process of transforming data into knowledge is a challenge that many companies face today. It is a change that involves upgrades to infrastructure both from the technology and human capital perspective. This process is not very different than that of distilling a fine spirit. It takes tons of grains and other raw materials to distill just the necessary amount of liquor. In the same manner finance leaders undergo a process of transforming large volumes of information into refine knowledge that can be used in the short lived board and executive meetings. It is this balance of providing the right and timely amount of actionable data that leads the data revolution. Without it, data is just data. Unprocessed, unrefined and of no use.
Understanding these requirements and making the right investments in technology and human capital is absolutely critical for companies to maintain competitiveness. One must say that companies that fail to perform at this level will not be able to perform at all. Understanding drivers and variables in this volatile environment is vital. Conquering the data transformation process is becoming a strategic differentiator between companies.
The challenges to achieve this conversion are as plentiful as the opportunities that new developments in technology bring about. I have personally taken a survey of peers and finance professionals during recent summits. In this survey three basic questions are asked: 1) what is the current data availability situation in your organization 2) how reliable is the data in your organization 3) how often is the knowledge derived from this data used to make business decisions. Understanding that this survey had a sample that included anywhere from large fortune 500 companies to small business, the results were enlightening. Most people, about 75 percent of respondents felt that they have data available to them or that it exists somewhere in their organizations. In the same manner, 91 percent felt that the data was somewhat reliable and it required a reasonable amount of validation; however, only 39 percent felt that the knowledge or analysis derived from this data was used to make business decisions.
Albeit of much concern, the figures reflected on the survey are not surprising. Even as humans we struggle to clearly convey the massive amounts of data in our brains into words. That is actionable, succinct and eloquent words that have just the enough information to formulate a strategy. Any modern interpersonal relationship can attest to this. In a corporate environment we should follow a path of transformation that starts with raw data. This raw data is transformed into information. This takes the form of reports and dashboards.
“It is the balance of providing the right and timely amount of actionable data that leads the data revolution. Without it, data is just data”
The amount of reports and dashboards should be limited to the ones that suffice the need for knowledge. One must avoid information and report overload. This second stage in the process of data transformation needs to be accompanied by a process of educating and understanding the audience and the company business needs. The good news is that the proper use of information throughout the organization will eventually lead to the development of knowledge. If done correctly the third stage will transform the organization into one that seeks the right pieces of information to drive the business. In turn, operators and critical stakeholders will have an understanding of how to measure performance appropriately. The final stage mainly takes place in the boardroom. This is where the role of financial leaders is so critical. This is where the organization as a whole is able to make strategic decisions based on the knowledge it has derived from data. It is able to do that because the knowledge is clear and decision makers are able to process it with ease (timely, accurate and actionable).
Many companies have achieved this transformation and most likely are the leaders in their industry. Other companies are undergoing this process; some others will choose to ignore it. What is certain is the finance leaders along with technology leaders hold most of the pieces of the puzzle. CFOs and CIOs control the keys to the technology and human capital expenditure to lead this transformation. This is only achieved with the right talent within the organization. Data Transformation Analysts should be the liaisons between IT, finance and operators and companies that achieve this level of sophistication will be leading their industries in the long term.