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Data-driven transformation to tomorrow's digital world

Michiel Krol and Ernst Brand


16 March 2015

This article first appeared in Pensioenadvies

It’s unsurprising that there has been a huge increase in data traffic in recent years – and this is set to continue. Currently, around 60% of the data comes from the Western world, but by 2019 Asia is expected to be the biggest data provider. In addition, the rise of the Internet of Things will lead to a significant increase in data traffic and an increasing amount of smart technology is being created to connect ‘things’ over the internet.

There are already 9 billion connected devices in the world and we expect this number to grow to 32 billion in the next five years. It is unsurprising then that the traffic between all of these devices is growing exponentially and offering opportunities. For example, our technology centre in Cambridge has developed a patch that can monitor the health of a patient; and through the patch, the medication of the patient can be adjusted to personal circumstances. This is not a future vision but a hard fact. In the future, these type of devices will change all aspects of our lives.

The increasing data traffic is leading to more interaction between consumers, customers and even the government. Direct personal contact will decrease and consumers will also expect companies to offer increasingly digital (but personal) service. As a result, companies have to respond to this change. There is no insurance company or bank that hasn't started up a change programme to develop its digital transformation and there is a growing awareness that data is the accelerator to speed up this transformation.

Data is also relevant in the context of the digital transformation for the pension sector. It is an important factor in getting to know the end client better, providing them with better service and helping them to carry out their duty of care. There is often an awareness of the usefulness and necessity of data, but the implementation shows differences between companies that are penalised by the market because they cannot sufficiently meet consumer expectations when it comes to digitisation.

There are a number of challenges hindering companies to properly organise data in the digital era. These include:

  1. Logistics – required to provide information at the right time to the decision maker

  2. Organisation – necessary in helping data workers break through the silos of the different business units

  3. Leadership – essential in establishing a clear vision around data and data governance and to create a uniform policy

  4. Data capabilities – vital for integration and ensuring there is room for technology and people

  5. Compliance – key in providing a balanced management of privacy risks and market opportunities, and to respond to current and future laws, regulations and customer perceptions.

To find out how companies view the above challenges, PA has carried out an investigation of over 100 supervisory board members, executive board members and directors in the financial industry. This reveals people are aware of the importance of innovation involving data in the digital era and that there is a budget for it, but often struggle to address this properly.

39% of the managers in the financial industry are dissatisfied about the extent to which facts are input for decision making

Our investigation shows that 39% think that the organisation's own decision making is still insufficiently based on facts. In a rapidly changing world, yesterday's truth is bad advice for the future. Decision makers often have many years of experience in the industry, allowing them to form an image and make assumptions, but the question is whether changes and breaks in trends will be noticed in time and whether the assumptions are then adjusted in time.

[ Zoom ]
Figure 1: investigation into organisational maturity data among 100+ financial leaders
Figure 1: investigation into organisational maturity data among 100+ financial leaders

34% indicate that, in the processing and use of data, the organisation insufficiently breaks through the organisational silos

Data is stored, processed and used throughout all layers of the organisation and over various function areas. The quality of data workers differs between silos, and the extent to which knowledge and data is exchanged ensures the quality is not uniform and predictable, and that there is still plenty of potential for reuse and synergy effects. Even though 65% of the respondents indicate that the processing and use of data is business-driven, 39% believe that business and IT alignment are still a problem, even when it comes to intelligence. It is suggested that this is because , among other reasons, IT does not understand the data requirements of the business.

There is sufficient budget for data-driven innovations, but it is not always clear what this is spent on

Surprisingly, leaders in the financial world believe there is sufficient budget for data-driven innovations (77%) and that the business case for such projects is positive (81%). Examples of data-driven innovations include ‘next best’ action analyses, natural language processing and social influencing. 40% are dissatisfied with the transparency of the spending and 41% indicate that the vision for data is insufficiently represented by the project portfolio.

The data capability is not sufficiently developed in an integrated manner

60% of the respondents are dissatisfied with the maturity of the integrated data capability. The data capability is the ability to collect, store, process, find, present and translate data into actionable insights taking into account the security, currency and privacy of the data through an agile data governance. The development of the data capability is more than just the purchase of technology. The current state of technology enables us to store large amounts of data relatively easily and to process these rapidly to form usable insights. Log files that were previously deleted can be recorded and analysed in order to get to know the client better, analyse (virtual) client movements, make processes more effective and identify fraud. But collecting organisation-wide data that is truly valuable for the business involves much more than technical possibilities. Aspects such as leadership, culture, governance and the ‘human factor’ are crucial. The data scientist is sparse but desperately needed to cheaply and effectively capitalise on the technical possibilities. It can apply advanced (big) data analytics and is familiar with the technical possibilities that are offered these days.

40% indicate that there is no clear vision in the area of privacy and compliance

Working with data offers new opportunities for the business, the consumer and the company, but the exploitation of that data can conflict with the privacy of the client-related data. It is incredibly important to create a balance between giving the proper attention to privacy on the one hand and to the advantages on the other. The introduction of the new European laws and regulations will likely result in the more stringent monitoring of compliant storage, processing and use of personal information in particular. In addition, the social pressure to use data will increase, even if only due to demographic changes. We expect that the laws and regulations will have a pendulum effect from having an impact on privacy regulations to the abuse of information prior to finding a balance between risk and benefits. The question is how companies can strategically set their course to maintain the client's confidence on the one hand and to develop capability to meet consumer expectations on the other.

The digital transformation is irreversible and the organisation of data in the digital era brings new challenges along with it for which organisations must meet the relevant requirements. Organisations that fail to do this (in good time) will be the next examples of companies that start to lose the client's confidence. Organisations that form a good image of what their own organisation stands for and that purposefully meet the right requirements will be able to take the right steps to become the digital organisation of the future.

Michiel Krol and Ernst Brand are financial services experts at PA Consulting Group

For our thinking and insights on financial services, click hereor contact us now.

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