To take their place at the high table of business and have strategic influence, data leaders need to understand a valuable lesson Julius Caesar proved millennia ago.
Data is an asset like no other. It is critical to the success of the business, say 91% of business leaders. It is behind the meteoric rise of Google, Ali Baba, Netflix, and Amazon. The latter is a place where managers have signs outside their offices saying, ‘In God we trust. The rest, bring me data’. Yet, despite this sentiment, when Anmut surveyed Chief Data Officers (CDOs) at companies with combined revenues of $1 trillion, it found that actions do not match the words.
91% of business leaders say data is critical for success. 76% are committed to large scale transformation on data. 67% of Boards say data is material. Yet, just 34% of businesses consistently manage data to the same professional standards as other tangible assets— thereby bringing 91% down to 34%.
Data Asset Mismanagement is Painful
Anmut’s study found that those who do not manage data to the same standards as other assets typically spend four times more fixing data – nearly half their data budget. Those that manage data well get to spend double on creating value from their data.
The time and costs related to data teams finding and fixing data run far wider. McKinsey estimates data-related activities account for 4-7% of operating expenses. If those activities are underpinned by poorly managed data, there will be a lot of efficiency savings on offer.
The Business Doesn’t Understand Data
Data is a different kind of asset. Like other assets, the value lies in use, not in the cost. Therefore, the more fit for purpose data is, the more valuable it can become. This is true of physical assets like oil too. Data differs from oil, as it does not deplete with use. Used wisely in conjunction with other assets, the value multiplies exponentially. The truth is, all the talk about exponential organizations is predicated on one thing, the ability to use data.
But only a small percentage of people and organizations understand this. It is not news that businesses do not understand data, but the answer most are reaching for is sometimes wrong.
The Answer is not Data Literacy; it is Data Asset Valuation
Data literacy says everyone in a business needs to take some time to learn about data so they understand it. Good luck with that; it hasn’t worked over the past 20 years, so why would it now? Instead of changing everyone in the business to work for the data, data asset management should be about changing the data, so it works for everyone in the business.
When you simplify it, a business makes decisions about where to invest capital across different assets to drive activities that create value. Assets have values, are bought, sold, and invested in. Valuing data as an asset makes it speak the language of business.
The COO at one of Anmut’s clients, a major infrastructure provider with a £6bn annual spend, said, “For every £2 of physical asset, we now know we have £1 of the data asset. It’s given people in the business the language to manage data as a strategic asset. For the first time, I can compare investments in concrete with data.”
Caesar Knew Valuation is More Than a Number
Value is a signal. At 25, when Julius Caesar was kidnapped, he laughed at the pirate’s ransom demands. He told them to increase it. When the people of Rome heard the sum, they were amazed, thinking he must be very important for such a vast sum, which transformed Caesar’s standing overnight.
How Valuation Happens is Critical
There are many different methods of valuation. Basic cost-based methods just measure data cost, which is far below the benefits, so inaccurate. Market-based methods set the price on what someone is willing to pay, but there isn’t a trusted and efficient data market yet. Utility-based methods seek to use economic measures of the benefits to value data. Typically, short term changes in costs or revenue as a result of data use, but they miss most of the benefits data brings, which are over the longer term.
What Needs to be Done
Managing data as a strategic asset starts with valuation, follows the principles of asset management, albeit with different approaches that suit the nature of the data asset.
Many think valuation is a route to getting data on the balance sheet. That’s possible in a shadow capacity, but getting the necessary accounting standards agreed internationally is many, many years off.
Should that stop forward-thinking CDOs get the benefits of managing data as an asset for their organization and their careers? Certainly not.