Many business leaders understand and evangelise about the potential of data, but it’s less clear that they are actually bringing in the capabilities to analyse and make decisions using data into the organisation to maximise its value.
The challenge arises from both the scarcity of data skills and many companies’ inability to leverage them for data-driven decision making. To combat this, management needs to evolve their firm into a data-oriented business, which is no mean feat given it can require significant changes to employee skill sets, departmental structures and decision-making approaches.
It’s always been difficult to prove the connection between data strategy and the tangible financial benchmarks on which they are judged. However, the two are inextricably linked. The Data Literacy Index, a study conducted by Wharton School and IHS Markit, has identified a set of data-related practices (which we term "Corporate Data Literacy") that are associated with greater performance. In particular, we find that firms scoring in the upper third of this measure have a 3-5% higher enterprise value, and these practices are also positively related to other corporate performance metrics, including productivity and gross margin.
What does data literacy look like?
Corporate data literacy doesn’t begin and end with individuals’ skills. Businesses that are serious about reaping the benefits of a data-driven culture must introduce training and adapt processes to empower every employee to make decisions using data. Data becomes even more valuable when distributed throughout the organisation, rather than concentrated in certain areas, as technology teams have been historically organised. Data literate employees also need tools that can help them digest complex information, giving them the confidence to make informed decisions based on their interpretations of it.
Practise what you preach
Firms enabling employees to make data-informed decisions reap the benefits to corporate performance. Achieving this requires some investment, but improving individuals’ data literacy need not cost the earth. Some organisations integrate this into existing skills initiatives, while others purchase learning software and even books about data to aid workforce development. There are also free resources available at the Data Literacy Project, including an adoptive framework to help businesses get started. No matter what route is taken, implementing company-wide initiatives will always incur some costs, if only to release employees’ time for training. However, in an open source world, these costs amount to less than investing in a significant business intelligence project.
But, as discussed, the challenge goes beyond the availability of skills: data is not always universally available and sometimes existing processes impede optimal use. These changes can’t be achieved by grassroots initiatives alone, but require top-down support to ensure data literate employees are deployed in all departments and functions.
Keeping data access and skills siloed in specific roles won’t result in the same benefits, so companies must give all employees the authority to use data in their decisions. Hiring a Chief Data Officer who doesn’t reside within IT teams can also help drive such change and ensure data initiatives are not centralised.
Of course, very large organisations with thousands of employees will not become data literate overnight. In this instance, leadership can scale the initiative gradually to make it easier to manage, by bringing additional groups into the fold every 3-6 months. Simultaneously, management should communicate the importance of using data in decision-making, advise on the technical and human resources available to encourage this, and co-ordinate the access and use of data across the organisation. Most importantly, it should stress that every individual has an important role in sharing data-driven knowledge and techniques with their peers.
Look in the mirror
Although there is hunger from grassroots employees to upskill, it is important that the mandate comes from the top, to champion improved access to data. This empowers employees to use data to make decisions that may have previously been made solely by management.
Many attempts to improve corporate data literacy are constrained because leadership itself lacks the necessary data skills to kick-start analytics initiatives. To introduce a data-driven culture, management must first improve their own understanding of how data can be used throughout the organisation.
That said, even the most data-savvy leaders may struggle to initiate such a widespread cultural change, particularly those in companies that are not traditionally ‘data-ready.’ However, the tangible benefits to corporate performance cannot be ignored, nor its importance to ultimately succeed in the Fourth Industrial Revolution.
Lorin Hitt is professor at the University of Pennsylvania’s Wharton School. Jordan Morrow is global head of data literacy at Qlik.
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