Strategic success = external data
Whilst browsing through my usual newsfeeds, I was intrigued by the perspective presented by both McKinsey and MIT that organisations need to harness Digital differently in Board-level decisions if they want to gain a competitive edge and deliver on their strategic goals.
Digital capability and data insight have transformed colleagues’ and customers’ expectations and capability in recent years. What is more surprising, given the wealth of data available is businesses over-reliance on internal data, often resulting in a restricted perspective, and their reluctance to apply more data to perhaps the most critical aspect of corporate futures – business strategy.
While corporate strategy will always benefit from the creative vision and critical thinking of executives, when it comes to creating bold and brave aspirations for the future, analytics tools can give businesses a real edge. A critical aspect of applying data in areas like strategy is to take a broader view by supplementing internal data with the breadth and context huge swathes of external data sources can offer.
So how does applying digital data, internal and external, improve organisations’ strategic capability and results? According to McKinsey, applying advanced analytics to your strategy can accomplish the following:
- Reduce bias in decisions by calibrating the likelihood of your strategy succeeding before you allocate resources.
- Unearth new growth opportunities by complementing traditional brainstorming methods to reveal hidden pockets of growth.
- Identify early-stage trends by painting a real-time picture of how your business context is unfolding so that you can trigger big moves before your competitors do.
- Anticipate complex market dynamics by generating proprietary insights about the combined impact of myriad forces.
The reality is that in most organisations the increased volume of internal data they are collecting and analysing means they fail to look up and look out at the wider influences impacting their business. According to a 2019 Deloitte survey, 92% of data analytics professionals said their companies needed to increase their use of external data sources, meaning that most of us are failing to capitalise on the insight and perspective an external data source can bring.
The McKinsey article went on to cite an example from Strategy Beyond the Hockey Stick (Wiley, February 2018), where they introduced the idea of using data analytics to bring an outside view to strategy: “By embracing the outside view, you can estimate your strategy’s odds of success before you allocate resources to that strategy. For example, if your target is to grow economic profit by $100 million per year in the next decade, would it not be helpful to know that only 35 percent of large companies managed to achieve that over a decade? And if we told you that companies which implemented programmatic – M&A strategies and reached the top quintile in productivity improvements were 1.5 times more likely to achieve that profit target, would you not consider prioritizing those two areas in your strategic efforts?”
So, what external data is right for you?
With the vast array of free and paid for data out there, understanding its credibility, relevance and scope is the first step to understanding the value the right external data can offer. Data can come from more ‘traditional’ or familiar sources, but there are also any number of new sources of data in our endlessly connected world. According to Stephanie Woerner, a research scientist with the MIT Centre for Information Systems Research, new sources include social media data, information from Internet of Things-enabled sensors, and even fingerprint data.
Each company has an opportunity to supplement its own data with external data, from traditional or innovative sources, to bring greater value and insight to the business models they rely on. One such example that Woerner identified was fintech company Kabbage, which uses data from social media, sales, shipping records, and more to help determine the creditworthiness of small businesses.
One of the starting points is allocating the resource to understand the range of potentially relevant external data available. A 2018 MIT Sloan Management Review data and analytics report found that “the most analytically mature organizations use more data sources, including data from customers, vendors, regulators, and competitors. “Analytical innovators,” or companies that incorporate analytics into most aspects of decision-making, are four times more likely than less mature organizations to use all four data sources and are more likely to use a variety of data types, including mobile, social, and public data.”
The value of using external data is now so great that new companies and competitive propositions are being built around gathering external data, consolidating it, cleaning it, and packaging it up for use by other companies. According to Angie King, an analytics innovation senior principal with End-to-End Analytics, which is part of Accenture: “Accenture engages with more 300 external data providers and uses relevant external data to enhance clients’ own internal data when building analytical models for them.”
As with all aspects of digital capability there is bound to be an element of trial and error in establishing which external data points offer the greatest insight for your organisation. What is clear is that without external data sources as part of the decision-making process, Boards, Leadership Teams, and businesses are missing opportunities for more robust and achievable strategic growth.
At Norman Broadbent, the Digital practice has been integral in sourcing the right Digital talent across multiple sectors. As a result, we have learnt Data is something all industries need to embrace. Those who take ownership and incorporate its capability and capacity now will succeed in pushing the boundaries of growth and innovation.
Norman Broadbent’s agile approach and commercial structure offers clients the ability to create a bespoke solution which suits their needs without any dilution of quality. In addition, our expertise and experience help Boards identify and fulfil their business-critical requirements.
If you would like to discuss this piece in more detail, the wider market, and/or your growth plans or challenges, please do not hesitate to contact Richard Jones, Managing Director Digital Practice at Richard.email@example.com