By Michiel Krol and Ernst Brand financial services experts at PA Consulting Group
It’s unsurprising 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.
The traffic between devices is growing exponentially and offering opportunities. The increasing data traffic is leading to more interaction between consumers, customers and even the government. 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.
There are a number of challenges hindering companies to properly organise data in the digital era. These include:
- Logistics – required to provide information at the right time to the decision maker
- Organisation – necessary in helping data workers break through the silos of the different business units
- Leadership – essential in establishing a clear vision around data and data governance and to create a uniform policy
- Data capabilities – vital for integration and ensuring there is room for technology and people
- 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, we have 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.
Managers are dissatisfied about the extent to which facts are used for decision making
39% of respondents think their organisation's own decision making is still insufficiently based on facts. 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.
34% indicate that, in the processing and use of data, businesses insufficiently break through the organisational silos to process and use data
Even though 65% of respondents indicate the processing and use of data is business-driven, 39% believe business and IT alignment are still a problem, even when it comes to intelligence. It is suggested this is because 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, respondents believe there is sufficient budget for data-driven innovations (77%) and 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 the vision for data is insufficiently represented by the project portfolio.
Data capability is not sufficiently developed in an integrated manner
60% 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. Collecting organisation-wide data that is truly valuable for the business involves more than technical possibilities. Aspects such as leadership, culture, governance and the ‘human factor’ are crucial.
There is no clear vision in the area of privacy and compliance
Working with data offers new opportunities for businesses, consumers and companies, 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 more stringent monitoring of compliant storage, processing and use of personal information and the social pressure to use data will increase, even if only due to demographic changes. 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.
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 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.
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