By Betsy Atkins, published on The Wall Street Journal Blog.
Betsy Atkins is an entrepreneur, three-time CEO and a director at Darden, HD Supply and Schneider Electric.
Business operations today collect enormous amounts of data, but the idea of using technology to gather, crunch, and analyze this data in new ways for strategic advantage is fairly new. In a world where every business is a technology business, corporate boards have a duty to bring into the boardroom fresh ideas, outside concepts and perspectives, and early warnings of coming change. And when it comes to Big Data simply asking, “So what are we doing with it?” at the next board meeting is not enough. That’s the sort of thing directors do just to let everyone know they’re familiar with the latest buzzword (and awake).
Instead, I suggest that smart directors ask both strategic and tactical questions that tie in with the board’s oversight duties:
How have we budgeted for the use of Big Data analytics, and what are future budget plans?
Effective commitment to data analytics requires investment deep enough to make it a strategic imperative, and also long term enough to stay relevant. This is a field with fast-moving technology, standards and goals. Ask about strategic plans over the next few years.
How does our use of Big Data tie in with overall strategic plans?
Is the data used to drive decisions, or just to back up someone’s intuition? To improve efficiency, and if so, in what area — marketing, manufacturing, logistics? To lessen risk (and if so which ones, and how)? Even an investment as something as valuable as Big Data analytics is wasteful if it doesn’t deliver solid benefits.
Innovative boards will use data analytics not just to draw conclusions based on past results, but also to derive good insights for future decision making. The role of data analytics is to deliver insights to back up intuition, and also empower the board to ask bold questions. The great mathematician John Tukey observed: “It’s more important to get an approximate answer to the right question, than to get a precise answer to the wrong question.”
There are many new examples of companies using Big Data to ask “the right questions.” A well-known e-commerce firm uses its Big Data teams to predict within one percent the chargebacks that will result from fraud on their website. Targeted use of data analytics not only helps this company protect their merchants from fraud, but also helps it manage costs and allocate their budgets wisely for the future.
Another area that Big Data Analytics can be used is in the area of finding the right mix of budgeting on customer acquisition versus customer retention. According to Gartner, 80% of a company’s future revenue will come from 20% of existing customers. Bain and Company research shows that a mere 5% increase in customer retention boosts profitability by 75%. It’s generally accepted that it’s five times more expensive to acquire a new customer than to retain an existing one.
An innovative organization will apply new technologies such as Big Data analytics comprehensively and cohesively across all customer facing channels (mobile, Web, email, or physical store), and up and down the supply chain. Innovative boards will set up dashboards to show precisely where strategy meets tactics. Comprehensive, innovative dashboards can ensure that the board’s mandated strategy is instantly applied, market conditions and demands are appropriately reflected, and customer needs are best served, all with smart board oversight of execution.
We are entering a brave new world where technological tools are now available for boards to deliver optimal value to shareholders — and Big Data should be high on any board’s agenda.