Chris Knerr, a former Syniti customer and founder and CEO of Mareana, an AI and ML start-up based in Princeton NJ, has just joined Syniti as its Chief Digital Officer. In this blog, Chris shares his perspective on the need for a holistic data strategy and some how-to tips.
I got confused about Digital Transformation and Digital Strategy.
I was confused—even mystified—because every executive I spoke to “had one,” but when I asked them to describe what it was and what it meant to them, their answers were wildly divergent.
Digital Transformation, it seemed, was all over the map, and it occurred to me that if I was confused, a lot of other people were probably confused as well.
Over the past several years, I’ve developed a thought process, based on Michael Porter’s Five Forces, that’s helped my customers and me make better sense of this idea of a Digital Transformation. Brief reminder: Porter’s Five Forces is a seminal core strategy framework that frames strategy, sustainable competitive advantage, market power, and ability to differentiate as a function of Buyer Power, Supplier Power, the Threat of New Entrants, Substitute Products, and Industry Competitive Jockeying[i].
So, let’s think about Digital Transformation through an industry dynamics lens, rather than just the “magic” of Digital.
The publishing and content industries were radically impacted by low cost or free digital substitute products
AirBnB was a surprise new entrant to the Hospitality industry
Retailers have had their revenues and margins challenged by Amazon, not only as a competitor, but by increasing consumer’s buyer power by providing real time price comparisons when shopping
Conversely, industries like pharma with high margins and regulatory firewalls have—so far—been less broadly impacted as an industry by digital. We need to stay attuned to changes, though; for example, real world evidence and simulated trials are likely to greatly accelerate new drug time to market in the coming years
What’s all this got to do with Data Strategy? Well, as I started thinking about and helping customers with Digital, I realized that the industry tailored Digital Strategies enterprises are establishing to enhance their competitive advantage, or defend against new dark horse digital entrants or substitute products, are all heavily dependent on and mediated by data.
But when it came to Data Strategy, there was even less clarity in the market, every company with a purported Data Strategy meant something completely different by it… and worse, many companies didn’t understand at the executive or managerial levels why it’s important to have a Data Strategy at all.
To motivate why there’s no Digital Strategy without Data Strategy, consider how Rolls Royce brings jet engines to market. In the old days, an airline simply bought an engine, paid for it, and maintained it…or they bought a separate OEM or third-party maintenance contract. Instead, customers buy jet engine hours through the TotalCare® program, based on a contracted price with a built-in service level uptime agreement and bundled full maintenance. Rolls is selling the outcome, not just the physical product. This is a measurable and sustainable competitive advantage: it improves product differentiation and reduces buyer power by increasing stickiness and switching costs. This as-a-service model is a physical-digital hybrid product. It depends, in execution, on sourcing terabytes of real time sensor (or IoT) data, hosting it, analyzing it, translating it both into customer-facing uptime metrics and internal operational and financial metrics around planning, maintenance ops, the cost effectiveness and failure rates of key components, triangulating this data with sales data, weather data, and a range of other capabilities.
This didn’t happen by accident; it’s a terrific example of data harmoniously supporting the execution of a complex digital strategy. To unpack this, Rolls Royce undertook a business strategy—a digital strategy—to improve its competitive differentiation in the market. And the fuel to enable this outcome was their data: the organization, the data-related business processes, and the technology stack needed to enable the strategy. Their digital strategy can’t be effective without their data strategy.
It’s a truism—but a valid one, in my view—that many strategies fail, not because they’re bad or stupid strategies, but because of lackluster execution. A typical enterprise ‘Capital S’ strategy waterfalls into a discrete set of strat plans, typically brokered at a business unit and/or functional level, which in turn are supported by operational goals, plans and metrics. Companies govern and measure Board-level strategic outcomes through these plans and ultimately through metrics.
Yet my observation, both as an industry exec and as an executive strategy consultant and trusted advisor, is that data, the fuel to fire these Board-level metrics, is almost always fragmented across multiple organizations, processes, and technology platforms. This is terrible, exactly because the most valuable outcomes driven by data are holistic and cross-functional. Back to Rolls Royce: their data strategy weaves together outcomes and data from product engineering, planning, supply chain, maintenance operations, sales and marketing, regulatory, finance, external weather and geolocation data, etc., etc.
Now layer on the rapid evolution of cloud, external data, unstructured data, the increasing complexity of the technology ecosystem, and there’s more data than ever, being created, stored, changed, replicated in more locations than ever before. This trend will inexorably continue in the 2020s and beyond.
There’s compelling longitudinal evidence[ii] of this problem across large enterprises:
69% report that they have not created a data-driven organization
53% state that they are not yet treating data as a business asset
77% of organizations lack a comprehensive information platform
Anecdotally, how often have you heard your board say they don’t trust their metrics, or the metrics take too long to gather? Are you sick of hearing, when you’re trying to drive innovation or efficiency, that “We don’t have the data?”
Most large organizations, whether thriving or struggling in their competitive matrix, have well-defined outcomes they’re driving to, outcomes which derive from their strategies to compete successfully in their industry. Below the Board level, business unit and functional leaders drive execution of these outcomes with discrete metrics and operational plans. It’s based on these outcomes that our data strategy needs to galvanize the organizational and technological capabilities to ensure that our well-thought-out strategies don’t fail on execution.
Importantly, a true Data Strategy explicitly isn’t just old-school MDM or Master Data Management, or Data Quality, or Data Compliance. These and related projects, organizations, and capabilities remain critical, but they need to be framed as constituents of a holistic Data Strategy Program to drive reliable execution against a digital strategy.
Digital and IT platforms aren’t just plumbing, and data isn’t just water. It’s the lifeblood and the fuel of the metrics that provide air traffic control for your core business drivers. Data is the key to breathing life into digital business strategies—into any business strategy, for that matter—and getting traction on them. That’s why you need a Data Strategy.
[i] It’s amazing this 1979 article remains totally on point. It’s not so bound up in technology, which is refreshing, given how much we talk about tech today. Indeed, that’s part of why it’s helpful in demystifying what underlies digital disruptions.
[ii] Thanks to SAP for compiling this data. Sources: 1. McKinsey & Company; 2. NewVantage Partners’ 2019 Big Data and AI Executive Survey, Feb. 2019; 3) IDC MaturityScape: “Information, Digital Transformation”
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