Poor Corporate Data Literacy Is Costing Your Business, Says Study
While the majority of business decision makers recognize the importance of a data literate workforce, less than 20% are encouraging their employees to become more confident with data, according to The Data Literacy Index, commissioned by Qlik and produced by Wharton School of academics and IHS Markit. On the other hand, the study revealed organizations with a strong corporate data literacy exhibit up to 5% higher enterprise value.
Corporate data literacy is the ability of a company workforce to read, analyze, utilize for decisions and communicate data throughout the organization. Beyond having a data literate workforce, organizations must ensure these skills are used for decision making across the business to compete in the fourth industrial revolution.
The new study shows that enterprises that have higher corporate data literacy experience $320-$534 million in higher enterprise value (the total market value of the business). [Read the full report here]
Despite a clear correlation between enterprise value and data literacy, there is a gap between how companies perceive the importance and relevance of data, and how they are actively increasing workforce data literacy. While 92% of business decisions makers believe it is important for employees to be data literate, just 17% report that their business significantly encourages employees to become more confident with data.
Corporate Data Literacy Can Improve Financial Performance
The Data Literacy Index is a rigorous model that scores companies based on the extent to which firms have the necessary data and the capabilities to use data for decision making. When correlated to measures of corporate performance, organizations that rank in the top third of the Data Literacy Index have 3 to 5% higher enterprise value. In addition, improved data literacy appears to have a positive correlation with other measures of corporate performance, including gross margin, return-on-assets, return-on-equity and return-on-sales.
Arun Balasubramanian, Managing Director at Qlik India, said, “The world today is inundated with data, and yet organizations are struggling to utilize it to drive better decision-making. Despite India having the most data literate workforce globally, these skills could be underutilized – this could be due to a lack of adequate processes or training within the organization to use data.”
“The study merely highlights why business leaders across industries need to take charge of the data evolution of their organizations and the significant value that data literacy brings to the organization. Only by empowering their employees with data literacy can they realize greater business value and continue to thrive in a fast-changing, hyper-competitive business landscape,” said Balasubramanian.
To inform the Data Literacy Index, 604 global enterprise business decision makers in 10 geographies were surveyed on their companies’ use of data and approach to data literacy. The research study was defined by Wharton academics and conducted by PSB Research. Other key findings include:
Businesses Not Ready to Pay for Widespread Data Expertise
The majority of business decision makers feel it is vital for employees to be data literate, but just 24% of the global workforce reports being fully confident in their ability to read, work with, analyze and communicate with data.
Further aggravating this skills gap, while two-thirds of companies (63%) are planning on hiring more data literate employees, the onus is on the individual. Business leaders have been unwilling to commit resources to improve the data literacy of their workforce, with only 34% of firms currently providing data literacy training, and only 36% willing to pay higher salaries to employees who are data literate.
Data Skills Are Not Leading to More Data-Driven Decision Making
Nearly all business leaders acknowledge that data is important to their industry (93%) and in how their company currently makes decisions (98%). Shockingly, just eight percent of firms have made major changes in the way the data is used over the past five years.
In fact, data-driven decision making has the lowest score of the three dimensions of corporate data literacy measured. Even companies that have data-literate employees across every business unit are likely not turning data into useable information as effectively as possible.
European Companies Show the Highest Data Maturity
Europe holds the highest data literacy score of any region, with the UK, Germany and France among the most mature nations for corporate data literacy. Slightly lower, the US and APAC regions were not statistically different from one another, although Singapore is the most data literate nation globally.
This reflects a greater recognition that European business decision makers have for the value of data, with 72% affirming that it is “very important,” compared with just 60% in Asia Pacific and 52% in the US.
Asia Pacific, a Mixed Bag
Asia Pacific recorded the highest increase in the importance of data in the last 5 years – moving faster than the US and EMEA. Despite that, only one in ten (10%) companies have made changes in the way they use data and only 20% are willing to pay higher salaries to employees who are data literate – revealing a severe disconnect between the state of affairs and how enterprises are dealing with it.
Singapore emerged as the most data literate nation globally, with the highest Corporate Data Literacy (CDL) score of 84.1 compared to 81.3 in the United Kingdom and 72.6 in the US. Within Asia Pacific, India had a score of 76.2; Australia had a score of 72.4; while Japan had a score of 54.9. The banking and finance industry led the way in terms of achieving the highest average CDL score in Asia Pacific.
Industries with Higher Data Literacy
There are far greater differences in corporate data literacy between industries than between regions. The healthcare, retail and real estate industries underperformed on data literacy (with respective data literacy scores of 67.1, 69.2 and 70.7), while the administrative, technical services and finance industries performed more consistently (81.1, 80.2 and 77.4 respectively).
Commenting on the findings,Jordan Morrow, Global Head of Data Literacy at Qliksaid, “With the greater presence of automation, robotics and artificial intelligence, the fourth industrial revolution is looming. Data will be its universal language and those companies that master it will reap the rewards.”
“Yet, while companies pay strong lip service to the relevance and importance of data literacy to their business, their willingness to commit resources for data literate employees and evoke change to allow for data-driven decision making is lacking.”
“Within just five years, the winners of the data revolution will be clear. The Data Literacy Index is not merely an eye opener. It is a call to arms for business leaders to defend their market share.”
Lorin Hitt, Professor at Wharton School of the University of Pennsylvania believes the study conducted at an enterprise level suggests that a broader concept of corporate data literacy represents a mutually reinforcing set of business practices that are associated with higher financial performance.