A Data Strategy Story

Why does any organisation need a Data Strategy and how does it complement the Business Strategy? Does it have a demonstrable value?

I’m going to describe the journey of a small company and how it evolves over time. Of course, this story will be told from the data perspective.

Warning! the elements are simplistic. I've hidden complexity and detail to allow the key points to breathe.

Background

I’m going to invent a company, Wigetco, that sells widgets. It buys them wholesale from the manufacturer and it sells them from a small physical shop and an on-line shop on its website. It’s got a simple business model that is similar to many small businesses.

• Widgetco is small, it employs 5 people and is making a reasonable profit. Its business is steady and is growing, by selling more of the same widgets.
• The physical shop deals with customers coming into the shop and buying widgets. No data is collected here and again for the purposes of this story, no credit card data is being considered.
• It processes data on employees through payroll. Its system takes and fulfils on-line orders recording the transaction details and then dispatching each one individually. ?
• It holds supplier details within its financial system. (We are not going to spend a lot of time on the intricacies of its financial management.)

We’ll also assume at this point that the operational mechanics are working smoothly. Its not unlike many small companies that run efficiently and make a reasonable profit.

So their minimum data footprint looks like:

• They have information on their employees that they use to pay them and to pay the appropriate tax.
• ?They have information on their orders that is coming in via their on-line shop so that they can fulfil the orders.
• They have an accurate stock control system and know how many widgets they have and revenue that they are making from them.

Change 1 - We need to do some CRM!

Widgetco decides that they want to do some direct marketing. (They will have probably done some advertising to grow the business, but we will assume that it didn’t involve any data). They decide that they are going to email all their customers to let them know that they have a special widget promotion on.

Given their capability, they don’t have a single customer database. All the orders are coming in individually from the website and so they have a choice.

1.????? They can create a one-off campaign by extracting a list of all the orders from, say, the last year, and they can deduplicate that list and then execute their mailing campaign.

2.????? They can invest in some form of CRM system incorporating a customer database and keep it up to date.

There is nothing wrong with doing a single one-off campaign. There is no shame in building a one off list in Excel or Google sheets or whatever. But is this the only time it is going to happen?

An investment in a CRM system requires an upfront cost and despite any of the sales promises, technology on its own won’t solve the problem. To keep that information up to date requires some training for the team and creation of process and controls to ensure that the information being put into the system is accurate and “up to date”.

“Up to date” are the key words here. It will require some regular and on-going checks to make sure that the data is being maintained correctly.

At this point, the natural choice is typically the one-off list. It is low cost and it deals with the immediate requirement. If it is necessary to do another mailing then it is “simple” to repeat the process. A CRM system has a lot of up-front cost that is difficult to justify.

There will be many of you already spotting some of the red flags here, but a one-off is a one-off.

(Just for starters, there are the obvious GDPR points. What to do if someone asks to be removed from the mailing list? What happens if the original mailing list is not retained?).

Of course, there is an option to outsource the direct mailing process. The same data issues will exist and will still need to be dealt with. (It doesn’t affect the story, it just transfers responsibility.)

Enter the Data Strategy

This is an excellent moment to make sure that a Data Strategy is in place. It should complement the Business Strategy and given that the business has now dipped into Direct Marketing, a strategy is being executed, even if Widgetco are not aware of it.

Widgetco clearly has some plans to grow and it is essential that hand in hand with the Business Strategy, a Data Strategy is produced.?

Typically, the owner will not be interested in data strategies. It sounds very technical and very complicated and expensive.

But a Data Strategy is just a mirror on the business plan and it helps to inform the journey. It needs to operate within the same timeframe as the Business Strategy, possibly looking a little further over the horizon. It should complement the IT strategy and it should be easy to read and understand.

In this instance, the Data Strategy would inform on when the right time is to build a customer database and would engage in the operational work-arounds in the interim. (Not forgetting all those GDPR commitments as well.)

At this point we either have a business that is investing in a CRM system with an appropriate database and processes, or a one-off process, extracting information directly from the on-line system.

Ideally, the choice has been made based on future plans.

Change 2 - Expanding the Product Line

Let’s say that the Widgetco decides to sell a second widget that is being produced by a second independent supplier who works on different terms to the original supplier.

• How are they going to manage their stock now?
• Are they going to have to put in a stock management system and retrofit to the original supplier too??
• Many would think that it would make sense to link this to the on-line ordering system as well, so that the on-line shop can see stock levels and ordering timescales.

As before, this is a simplistic scenario, hiding a lot of complexity and again, there are plenty of technological solutions. Equally, it could be as easy as “just duplicate the existing process and run it separately".

However, the Data Strategy comes to the fore again and allows the choices to be considered in partnership with the Business Strategy. For example, the Data Strategy could have a view on how many times the process can be duplicated before it becomes operationally untenable. (3, 10, 100?)

It comes down to the same fundamental principles as Change 1.

These are the principles that will be set out in the Business/Data Strategy partnership, showing how the data supports the business initiatives and where there may be additional cost, complexity or risk.

In many instances, it is a simple cost/benefit analysis, but it is important to consider the situation from a data perspective.

Change 3 - Growing the Business

Finally for this story, let’s say that Widgetco is thriving and decides to acquire one of its competitors.

At this point, there will be a due diligence undertaken to ensure the purchased business is functioning as it claims and that there are no hidden risks within the business. This is standard practice and will involve both parties and their legal teams.

One of the aspects that needs to be measured is the state of their data estate. There are two parts.

• How mature are their systems and their data processes?
• How compatible are their systems and processes with the purchaser's own ones?

The results of this due diligence process may affect the value of the sale or identify inherent risks.

Here are some of the CRM considerations:

• If the purchaser had never evolved beyond one-off lists and the seller had a full and compatible CRM system, then that system has its own value.
• If it is the other way round, then the lack of a CRM system may remove value from the sale.
• And of course, if they both have CRM systems but they are incompatible then there is a cost of integration to be considered.

There is an inherent value to a clear and well maintained Data Strategy. It should be part of any Business Plan/Business Strategy as it demonstrates how a business values its data assets and the risks/actions it needs to take protect them.

Even just the existence of a Data Strategy demonstrates good practice and can add confidence to the process.

Conclusion

As I said at the start, this is a very simplistic story with just three scenarios, but they will be familiar scenarios to many. I have direct experience in each of them.

We haven’t touched on SEO nor social media and Widgetco hasn’t even started to consider how Data Analytics can help understand its customers behaviour. The Data Strategy would help identify when and how these become appropriate.

Additionally;

• Many Data Strategies will be in the process of being updated to incorporate AI.
• A Data Strategy is not just about technology.? It demonstrates the investment in the people and any processes as well.

There are a lot of options as to how Widgetco could develop. If we assume that it is well managed and operating in a competitive environment then much of its success will come down to the quality of its products, its margins and how well marketed it is. This is described by the Business Strategy.

Regardless of any of that, I emphasise again that the Data Strategy need to mirror the Business Strategy. It will evolve but it needs to reflect the reality of the business and how it operates.

It is perfectly acceptable for the Data Strategy to say that there is no data strategy, but I’d suggest that no one really believes that. I believe the debate over the value of data to an organisation ended a long time ago.

A Data Strategy helps demonstrate the value of data and how it can grow with the business. It operates in partnership with any Business Strategy.

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