Board Matters Quarterly, January 2014
The board’s role in addressing data and analytics
In just the last few years, the term “big data” has become a hot topic in boardrooms and companies around the world.
For many organizations, big data is critical to keeping the company nimble, competitive and profitable. Board members need to understand the complexities and have a grasp of the issues surrounding big data. Equally important, they should be prepared to ask the right questions moving forward.
What exactly is big data and how are companies using it?
Big data is the enormous amount of electronic information being produced every minute through a variety of channels. Sources include bank transactions, financial and market reports, orders and invoicing, surveys, online activities and even weather or traffic reports.
Three important attributes of big data:
- Volume: It consists of very large data sets.
- Velocity: It is being produced at a tremendous speed by the growing digitization of society.
- Variety: It contains data from many possible sources, including structured and unstructured.
According to a report from the National Association of Corporate Directors, “the data that now flood the Internet every second is equivalent to the data stored on the entire Internet 20 years ago.” This means that analytics on the scale we are now experiencing is profoundly new to the world of business.
A game changer for business and boards
The sheer volume, variety and velocity at which data becomes available present technological challenges in securing, storing and tracking it. But companies that can effectively do so in an efficient manner stand to uncover valuable relationships between seemingly unrelated, large and complex data sources.
Analyzing data to produce actionable information is a key challenge and opportunity for companies. Properly utilizing this information will be a differentiator for forward-leaning companies.
Meaningful operational change comes from the top. Board members and C-suite executives need to embrace this change, identify the best talent and empower other senior executives and the rest of the organization to adopt the best systems, technologies and analytics for their businesses.
Board members should have an understanding of how the company is using big data and how the data and analytics can drive the business.
Topics to consider as a board or to discuss in more detail with management might include:
- Decide what you want to achieve with the data.
- Determine what is relevant.
- Focus on what will drive value.
Big data, big costs
Companies can gain a competitive advantage if they get the right information to the right people in the right format at the right time. However, there are potential pitfalls, not the least of which is spending too much time and money analyzing too much data for too little return.
CIOs are being asked to store more data, yet control the costs of storage and help derive greater business value from the information they store. A solution to address this challenge is to increase resources — both human and technical.
Consolidating the analysis and presentation format of big data is crucial. Many companies develop multiple business intelligence dashboards, sometimes to satisfy a handful of executives. However, companies will get a greater return on their investment in data analytics if they consolidate the number of these dashboards being used and develop just one.
The board’s role
Boards cannot be involved in the day-to-day activities of managing big data and big data costs. But in discussions with the CEO and other C-level executives, board members should insist on clarity of vision and collaboration across all disciplines to maximize the return on any investment in big data.
First and foremost, board members should gain a better understanding of how the company is using big data and how the data and analytics can drive the business.
Boards also need to ask management about the resources being deployed to capitalize on big data and whether the company has the right talent to effectively develop a quality big data management program.
Moving forward in a changing world
Data analytics must be viewed as a vehicle for transforming organizational performance — one that can add value in repeating increments over time as the world constantly changes, often with little warning. Board members are ideally suited to be the champions of this perspective.
Questions for the board or audit committee to consider
- Does the company know which data is relevant and can help drive value? What is the plan for collecting and analyzing this data?
- What is the company’s strategy for capturing the appropriate data and what is the methodology for identifying meaningful data?
- What human, technical and other resources are being devoted to the effort? What additional resources might be appropriate?
- How much is the organization spending on big data initiatives and how will the success of those expenditures be measured?
- How is the organization preparing to manage future costs related to big data?
- What are the expected outcomes and how will such outcomes drive value for the organization?