With the value recovery approach, we can start with the leading question: what value debt occurs in your organization due to bad data management? Here you can either choose a data-centric (e.g., customer, supplier domains) or process-centric approach (e.g., purchase-to-pay, order-to-cash). The analysis in each case leads you to the lost value. In other words, how you recover value by reducing the leakage due to bad data management. Three guiding questions can be used as a starting point to select the business processes in scope:
- Do they drive your key financial incomes such as sales, profit and working capital?
- Are they responsible for money in/out of your company, placing them at the center of audit scrutiny?
- Are they data-intensive and do they offer the right level of detail for traceability of root causes?
After aligning the business processes in scope, the theory of constraints can be applied to identify and scope the main pain areas. Examples include inappropriate use of master data while pricing; duplicate invoices; and an abundance of credit memos due to incorrect use of master data. The aim is to end up with different buckets with an assigned monetary value, enabling a focused approach to address the biggest losses. The advantage of this approach is quantifying the negative impact of bad data on your business. However, it comes at a price; this approach can become very cost-intensive depending on an organization maturity with regard to data analytics.
The value creation approach, on the other hand, is concerned with the organization’s ability to fully derive value from its data assets. This is about asking: how can I unlock value from my data assets? Companies need to implement the right data governance and management behaviors. This means that they are measurable, consistent in approach and supported by the right technological and people capabilities.
This can be achieved by breaking down different data governance dimensions (e.g., data quality, data accessibility, data representativity, data security) into leading metrics, work processes and capabilities.
The chart below shows how an organization can quantitively analyze the value of data quality in the customer domain. The process can equally be applied to other domains and governance pillars.