Given that most companies are doubling the amount of data stored every two years, the expense and risk of tapping that data to uncover actionable business insights can be daunting to some firms.
But, those companies that successfully adopt data-smart cultures can reap returns to the bottom line that trump the initial investments to embrace the role of data to drive decisions, according to Jeanne Ross, director and principal research scientist at MIT’s Center for Information Systems Research.
“Think about every single person who takes action in your company. In other words, pretty much everyone. The big opportunity is at the operational level,” Ross says in an article in MIT Sloan Management Review.
Ross notes that Seven-Eleven Japan has pushed decision-making down to the store level where clerks decide based on data what items will be stocked on shelves. As a result, 70 percent of the products on shelves are new to stores each year yet the firm has been the most profitable Japanese retailer for the past 30 years.
Ross explains that there are typically three cultures that companies adopt around data:
- A culture of heroics: In this type of culture, individuals respond to requests and take on extra tasks, like finding an item a customer wants when it is out of stock. This culture can work in some small businesses where employees have visibility into all challenges.
- A disciplined culture: This culture uses a template approach to data with common processes and employees following standardized procedures. While this approach eliminates the culture of heroics, it can mean employees feel that they have lost personal authority. This culture is difficult to maintain.
- A data-smart culture: This culture handles data in an intelligent way, and while it has disciplined processes, these are pushed out to the front-line workers.
According to Ross, there are four ways companies can embrace data-smart cultures:
- Build a single source of the truth: Ross notes that a year after Aetna lost money, all business unit heads created spreadsheets showing that their parts of the business made money.
- Embrace scorecards: In the Aetna case, a new president asked his IT department to develop a scorecard that showed daily performance.
- Assign ownership of business rules – and who may modify them – based on new insights uncovered with data: One of Allstate’s rules required a 30-day waiting period after a car was stolen to pay out on a policy – a rule that irritated customers and cost the company a lot of money for rental cars. However, Allstate uncovered data that indicated that cars stolen in some parts of the country were never recovered. So the company changed the rule for customers in those parts of the country. Now an automated process enables a customer to be reimbursed within 24 hours after he reports his car stolen.
- Coach employees: Company execs must encourage employees to work with data and give them regular feedback.
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