High-growth firms make better use of their data

by Darinia Khongwir    Jun 28, 2013

Data Analytics

There is a clear relationship between high-growth companies and use of data. Undoubtedly the key to their success is the fact they have done more to reorganise their structures and leadership around data and to introduce data-management strategies.

As many experts would insist, building a data-centric business is hardly a new phenomenon. The poster company of the data era, Google, will celebrate its 15th birthday this year. Even so, those companies that have used data to strategically transform their businesses remain a relative minority today. But as investment grows into the realm of data, it is inevitable that various companies have moved further, and faster, to turn data into a genuine competitive advantage.

To try to unpick this, Wipro looked for distinctions between those companies that have outperformed the market over the past-where average Earnings Before Interests Taxes Depreciation and Amortization (EBITDA) growth, over the past three financial years, has exceeded 10 percent (high-growth firms)-against those who’ve experienced zero EBITDA growth, or have declined (no-growth firms). Of course, such relationships cannot suggest causality, but it is nonetheless instructive to compare how high-performing firms differ. Here are five ways high growth firms make use of their data.

High-growth firms make better use of their data

All firms collect data, but high-growth firms are far more successful at turning this information into something useful to drive new strategies, or changes in strategy. In fact, across several areas of data, such as machine-generated data or location-based information, no-growth firms collect easily as much data as high-growth firms do. But the latter are far more likely to actually analyse the data being collected. The Wipro report showed that while 55 percent of no-growth firms collect their contact centre data and 66 percent of high-growth firms do the same, only about half of the former that collect data actually analyse it, versus three-quarters of the latter. Nearly twice as many no-growth firms admit to collecting lots of data but not consistently maximising it (38 percent versus 20 percent). Furthermore, among high-growth firms, 15 percent consider themselves highly effective at extracting useful insights from this analysis, about twice the rate of their no-growth rivals (7 percent). And while 17 percent of no-growth firms rate themselves as ineffective at this, just 4 percent of high-growth firms say the same.

No-growth firms are more likely to run into data paralysis

While executives at both sets of companies consider their decision-making to be based on data, rather than purely instinct, high-growth firms are far more likely to believe that key characteristics of their strategic change initiatives have improved as a result of data. Twice as many (62 percent versus 31 percent) believe the speed of change has improved, while many more also think the quality or effectiveness of change is higher (about 58 percent versus 38 percent). Crucially, while many more high-growth firms see improved decision-making on the back of being more data-driven (60 percent versus 38 percent), no-growth companies are far more likely to be worried about the quality of decisions being impaired by information overload (45 percent versus 31 percent).

While no-growth firms worry about the unknown, high-growth firms worry about how to resource their data plans. Both worry about the challenge of assessing which data are truly useful, data quality issues, and the related technology problems. But while high-growth firms are far more likely to raise concerns about a lack of necessary skills and expertise, no-growth firms are in turn far more likely to express a concern about a fear of the unknown.

High-growth firms have done more to reform their structure and leadership around data

High-growth firms are more likely to have changed the way they handle strategic decisions, as a result of data. Twice as many no-growth firms don’t even plan to change in the coming year or two, the way they tackle such decisions. Meanwhile, far more executives at high-growth firms see a need to radically transform their management techniques to keep pace with what technology is making possible. And while half of high-growth firms are rethinking their approaches to strategy and decision-making to make it more data driven, just 36 percent of no-growth firms are doing the same.

High-growth firms more often have a solid data management strategy in place

A robust data platform often appears to be the foundation upon which more strategic use of data is made. As such, high-growth firms are 2.5 times more likely to have a well-defined data management strategy that focuses on collecting and analysing the most useful data. Looking specifically at the sample of executives who say their firm has a strong data strategy, these companies are typically at least twice as likely to be more data-driven in their decision-making, and are about three times as likely to think their strategy has improved as a result of data. And they are about four times as likely to have converted information into insights.