Many executives get excited about the huge potential the new digital world offers to their organizations. Yet despite the billions of profits assumed to be accessible through digitalization, only a fraction of this new wealth is realized. Our project, fashionably entitled “From Big Data to Big Business”, reveals the challenges executives face on their journal from data to profit:
- the variety of capabilities needed; and
- the organizational dispersion of these capabilities.
1) We identified a total of nine capabilities necessary for utilizing the potentials of data-driven growth. As basics, one needs data, analysis and permissions. Data is obvious, if an organization has no data, or has its data in different, non-compatible systems or lives with a fragile IT infrastructure, no data-driven growth is possible. As data in itself is not insight nor intelligence, organizations also need analytical skills to strive towards success. As the amount of data is exponentially growing, analytical skills need to go much beyond a pivot-table in Excel. An finally permissions – firms have to manage their data activities within the legal framework, within contractual setups with their customers and suppliers, as well as within the societal norms.
Once the basics are in place, great ideas for data-driven growth need an organizational context to blossom in. We frame the organizational context in terms of strategy (is data part of it?), in terms of business development (does the firm have processes to analyse and to support data-driven initiatives?), and in terms of autonomy (is there space for mavericks and independent employee experimentation?) – the next big thing for your organization may as well start in the corners and not in the board room.
Finally, three areas of application need to be mastered: Data can be used to optimize the existing business – typically providing profits from cost cutting and efficiency gains. Alternatively, growth is related to cross-selling data-enabled value propositions to existing customers. And finally, “data waste” may turn out to be valuable in upcycling, i.e. when firms find totally new processes and application where their data creates value. The below figure gives on overview over the nine capabilities.
Understanding this variety, mapping the current state of capabilities and developing roadmaps for increasing capabilities are the way forward to data-driven growth.
2) The nine capabilities reside at very different places in the organization. Thus, coordination of these capabilities is hindered by their dispersion. The best discussions of data-driven growth occur when all the capabilities are at the table. Yet this demands huge efforts – or, as one executive said: we need to build a new organization. Our current set-up is great for making amazing products – but is a total failure for the data-driven future.
The data-driven transformation is not only a challenge to the capability base of the firm but evenly so to the way organizations are structured. Thus, there is lots of efforts and investments needed – but when the rewards are correctly estimated, there is a good reason why to face the challenge and get it solved.
Background: The DataProfit tool is a result of the “From Big Data to Big Business” project of the Copenhagen Business School. The DataProfit team consists of Thomas Ritter (professor, CBS), Carsten Lund Pedersen (post-doc, CBS), Hans Eibe Sørensen (hybrid in business development, CBS & Eibe Mgt) and Christina Merolli Poulsen (project executive). The project is supported by the Danish Industry Foundation. For more information about the project, visit The CBS Competitiveness Platform website and check out a webinar with Dr. Thomas Ritter: From Data to Profits: Ingredients for Successful Data-Driven Business Development.
Thomas Ritter will be leading a session on Leveraging the Digital Transformation of Service at Strategic Service Institute on September 11-13, 2017 at W. P. Carey School of Business, ASU.