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Looking behind the curtain: What really drives value

from data | Digital McKinsey

5-6 minutes

July 20, 2018 – by Holger Harreis, Harald Kube, Henning Soller, and Asin
Tavakoli

Data brings big promises for businesses: advanced analytics for

customer-churn prevention in banking, self-learning algorithms for
automated insurance claims management, artificial intelligence for
autonomous driving, an Internet of Things for more efficient
manufacturing, optical pattern recognition for earlier and more reliable
disease detection, smart machines to relieve workers of repetitive and
dangerous tasks, and augmented reality for next-generation capability
building.

In real life, driving value with data isn’t always quite as straightforward
as such killer applications suggest. How do you size the economic
potential of data transformations? How do you identify the biggest
value pools, from efficiency gains to new revenue sources? How you
get the organization to rally around these opportunities? What data
architecture and governance do you need to reap the benefits, and how
do you avoid running into trouble with the authorities as regulators
tighten the screws on privacy protection?

To get answers, more than 100 top executives and leading experts
from all over Europe and a wide spectrum of sectors gathered in
London in June for McKinsey’s European Data Summit.

Here are some of the success factors they mentioned in these

conversations:

Be clear about the value

Put impact before data. “Five years ago, we created a data lake
with an off-the-shelf interface, assuming the organization would
figure out what to use it for. We failed miserably. Very few people
 used it at all, and everybody else tried to prove the output wrong.
Now, we work with our most experienced people to size the impact
potential and build our data regime one use case at a time. To get
people to want to work with data, they need to see how it can
make their lives easier and their businesses more successful,.”
—Insurance executive
Be prepared to reinvent your business model. “For us, it will depend
on data whether our products become a commodity or an integral
part of sought-after solutions. If we just keep doing what we do,
we will become suppliers to more data-savvy companies that
provide bigger value to customers, and our cost structure is such
that we can’t win that game. So for us, mastering data is a
question of survival. That’s why we’re pursuing multiple disruptive
use cases in parallel, from R&D to marketing and after-sales
service.” —Automotive executive

Know the power of process and governance

Invest in end-to-end governance. “Data is a value driver. We need to

keep track of where it comes from, who touches it, and how it’s
used. We will have to establish clear and consistent processes and
protocols around the way we work with data across business units
and functions. Because much of our data comes from external
sources, we will also bring our partners into the circle of trust.
Everybody will benefit from reliable standards, especially in a
sector as sensitive as healthcare.” —Healthcare executive
Beware of the swamp. “Some companies have tried to solve all
their data issues simply by filling the data lake with copies of data
from the source systems, without any governance. But this just
replicates the issues that exist in the sources. We believe that,
before importing data into the lake, it is essential to establish at
least a basic level of governance, like appointing data stewards,
populating business metadata, choosing the golden sources, and
implementing data-quality controls. This will result in a clean lake
rather than a muddy swamp and will enable successful business
applications.” —Banking executive

Develop a data culture

Assemble a team with a broad set of skills. “Of course you need
data engineers and scientists to create the architecture and
 wrangle the data, but it’s just as important to bring business
owners on board to get traction. And it doesn’t stop there. We
found that you also need to involve strategy experts, designers,
change managers, and privacy lawyers to build robust use cases.
It’s all about the right team.” —Advanced-analytics expert
Lead by example. “To me and my team, pulling data directly from
the data lake with my tablet is second nature. But our salesforce is
still working with makeshift spreadsheets and rolls of paper
churned out by dot-matrix printers. We are years away from having
a data culture across the entire organization. My job is to lead by
example and make everybody see the value data can bring.”
—Basic-materials executive

Many companies are still in the early days of managing their data. By
understanding what makes data really work, companies can get a jump
on their competitors.

Holger Harreis is a senior partner in McKinsey’s Düsseldorf office,

where Asin Tavakoli is a consultant; Harald Kube is a partner and
Henning Soller is an associate partner in the Frankfurt office.