Five Ways Finance Pros Can Use Data to Unlock Business Opportunities
More than 90 percent of finance professionals agree that finance has an essential role to play in helping their organizations benefit from data-related projects. However, organizations looking to use data to its full potential could face a steep learning curve. In the CGMA report, From Insight to Impact – Unlocking Opportunities in Big Data, the AICPA and CIMA asked more than 2,000 finance professionals around the world about the role of finance in turning data into insights to maximize commercial opportunities. While 87 percent said big data and better analytics will change the way business is done over the next 10 years, 86 percent said their businesses are struggling to get valuable insight from data.
A few months back, I had the opportunity to listen in on a roundtable discussion with CEOs from some major multinationals about the need to make their organizations more data-centric—and the role of the CFO in this endeavor.
The group discussed the variety and volume of data available for analysis, and the need to look beyond traditional metrics to recognize the potential of embracing a wider set of data. In addition to the essentials, finance professionals need to review other, non-traditional sources of data in order to gain a more thorough understanding of business performance.
All agree that taking advantage of these opportunities is challenging for individuals, firms and corporations, creating the need for new skills, tools and ways of thinking. As a result, increasingly powerful technologies have emerged to enable more sophisticated data management and analytics.
- Executives at Netflix knew they had a hit on their hands before production even started on “House of Cards.” Netflix tracks every action of its 33 million customers and their 30 million plays a day, including what they search for, what they watch and who they watch. The service knew that Kevin Spacey was popular with its users, and they noticed that a significant number of their subscribers were watching the British version of “House of Cards.” Netflix bet on the Spacey version of the series and it paid off: The series is the most streamed piece of content in the U.S. and 40 other countries.
- Point Defiance Zoo & Aquarium in Tacoma, WA, was facing a very particular problem: On rainy days, it saw significantly less customers than on sunny days. So the business combined real-time weather information from NOAA with ticket sales, mobile check-ins and past attendance data. Using software solutions, they connected the data to their point of sale and admissions control systems. They can now accurately predict how many visitors they will get each day—and how many employees they need to have on hand, reducing unnecessary payroll expenditures. Additionally, the zoo was able to use the data to boost membership by 13% by targeting discount campaigns—a $60,000 return on an investment of less than $4,000.
Accountants in business have access to a wealth of data sources--from call center recordings to customers’ social media posts and everything in between. The question is this: How does one look beyond traditional business metrics and recognize the commercial potential of embracing this wider set of data? Here are five suggestions to help your company gain a competitive advantage by becoming a data-centric organization:
- Understand what data, including new data, is relevant by: identifying the organization’s business model and intangible assets; segmenting sources of income and costs attributable to each; and considering what is needed to improve business performance.
- Access what data initiatives are already in place, by: checking what data platforms and data already exist; and assessing the speed and degree to which you can provide driver-based forecasting. Then explore what external sources of data are available for consideration.
- Get “quick wins” by starting small scale-scale and prove concept by: assembling a diverse team with the appropriate skills; and working with a small sub-set of data to demonstrate how insights could be derived and what value they are to the business.
- Formalize a project and develop the data strategy by: setting out a full-scale data project; identifying the technology, skills and structure required to make it happen; and building a business case.
- Deepen the organization’s data culture by: ensuring data is an asset to the business; questioning internal assumptions; encouraging innovation and tolerating failure; and ensuring ethics and governance in the way data is handled.
According to the CGMA report, “To truly unlock the opportunities in big data, management accountants will need to partner more closely with three sets of key stakeholders: their colleagues in IT who capture much of the data; the data scientists who can perform advanced types of analysis on that data; and finally business leaders who can ensure new ideas are turned into concrete action.” Finance teams need to lead the charge in breaking down the traditional silos that have, in the past, inhibited this type of collaboration and partnering across the functions of the business.
The bottom line is: When it comes to big data, the competitive advantage goes to those who harness disparate systems to generate pragmatic insights and deliver increased profitability.
What has been your experience with harnessing the power of big data?
Ash Noah, CPA, FCMA, CGMA, Vice President - External Relations and Management Accounting, American Institute of CPAs.
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