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Why more data does not guarantee better business decisions


By Neil Amato

About six years ago, if Jim Blake wanted to gauge the popularity of rides at the amusement parks he operates, his employees would bag paper tickets collected at the attractions and put them on a scale.

“It was so unsophisticated,” said Blake, CPA, CGMA, the CFO of Morey’s Piers in Wildwood, N.J.

Today, Morey’s, which operates three piers in a 17-block span on the Jersey Shore, collects ride popularity data using electronic scanners at its 80 attractions. The numbers might make them consider a relocation or replacement of some attractions in the off-season.

That’s one example of how companies can use their ever-expanding amount of data.

But, for many companies, having more data doesn’t necessarily make it easier to make better, faster decisions. The technology helps, but the human element remains critical in making the data useful.

“As much as you like to see computers doing the work, it still takes someone to interpret the data,” Blake said.

Two shifts in technology – the “scale paradox” and the re-engineering of business intelligence – are highlighted in a recent Deloitte report outlining trends expected to drive strategy for business globally.

The scale paradox refers to the power of analytics helping smaller businesses think bigger while helping large businesses become more nimble. The re-engineering of business intelligence focuses on the push toward real-time decision-making by blending internal and external data to anticipate risk and opportunity.

“The growth of open-source platforms, cloud computing, social media, and analytics technologies has eroded much of the large-enterprise scale advantage,” the report said. For bigger companies, better access to better data has helped reverse the silo effect that sometimes prevents large entities from agile decision-making.

The ability of companies of all sizes to get “insight on demand” – think of a restaurant chain’s inventory manager having an item-by-item breakdown of the lunch rush sent to a mobile device each day at 3pm – has changed business decision-making for the better.

Despite the power of technology that does much of this work, human expertise is important in business intelligence; it takes expertise to know what data is important and how that information should be packaged. Recruiting and developing talent, a common concern amongst finance executives, can determine whether a company’s data analysis efforts are grounded or allowed to flourish.

Large businesses are more likely to have employed data analysts longer. But that is changing, according to the Deloitte report. Tom Davenport, an independent senior adviser to Deloitte Analytics, says in the report that, for owners of start-ups, “their greatest analytical limitation is their own imaginations.”

A 2012 survey by Oracle shows that 93% of executives thought their companies were losing revenue opportunities by not fully tapping into the data they collect.

Morey’s Piers collects data from customers who buy attraction packages online. While it doesn’t collect credit-card data, Blake said, the company captures information such as postal code, e-mail, and other demographics such as family size. The attraction choices of customers – a one-day or a three-day pass, unlimited rides or a set number of tickets – are used to measure the effectiveness of ride packages.

Blake said the company employs an outside firm to assist in analysing the data. “My view is more in terms of strategy, where we’re going,” he said. “It’s not reacting week to week. My emphasis is on what’s going to happen three, four, five years from now.”

Morey’s Piers is in the midst of finding the best ways to use its data, Blake said. That’s why the human analysis is so important.

“We’re not at the leading edge, but we absolutely recognise the importance of it,” he said.

The other six business trends for 2013, according to Deloitte are:

  • The rewired customer: Consumers’ “neuroplasticity”, the capacity of the brain to rewire itself in the face of new circumstances, means buyers are capable of adapting quickly and that businesses must adapt with them.
  • Partnerships for the future: Social and economic shifts are guiding businesses and governments to collaborate for mutual benefits. For example, as governments swamped by debt look to cut costs, opportunities exist for businesses to take over services, the report says.
  • The responsible enterprise: Companies are paying more attention to environmental, social and governance issues, turning what once was a tangential concern into a core value with the potential for financial gains.
  • Manufacturing beyond China: While China remains a top choice for outsourcing amongst US technology CFOs, according to a recent survey, rising wages and more competition mean that companies are exploring locations beyond China and even beyond Asia.
  • Emerging-market talent strategies: As the manufacturing shift continues to other markets, the availability of talent is shifting as well. The Deloitte report says that companies “recognise the changes afoot and sense the need to modify their existing global talent frameworks.”
  • Building on the BRICs: While Brazil, Russia, India and China have plenty of economic oomph, their growth has cooled. The Deloitte report suggests seven nations that multinational companies should consider for new opportunities: Indonesia, Malaysia, Philippines, South Africa, Thailand, Turkey and Vietnam. Colombia and Egypt, which make up part of the CIVETS group of nations, have also been mentioned as important emerging markets.

Related CGMA Magazine content

Business Shifts Require Refreshing of Risk Management Techniques”: Companies are undertaking major transformations to respond to global market shifts, and risk-management techniques need to keep pace with the changes. Some of the strategic responses include monitoring technology and the use of sophisticated analytics.

Sound Governance Needed to Get the Most Out of Big Data”: The increase in volume, velocity and availability of big data can create growth and efficiencies for organisations, but it also presents risks. Strong corporate governance is needed to capitalise on the opportunities and minimise the chances of unintended consequences arising from big data use.

Neil Amato (namato@aicpa.org) is a CGMA Magazine senior editor.

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