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GOING BEYOND THE DATA TURNING DATA FROM INSIGHTS INTO VALUE kpmg.com/data 2 GOING BEYOND THE DATA: TURNING DATA FROM INSIGHTS INTO VALUE FOREWORD It was only in the last few years that Big Data became
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GOING BEYOND THE DATA TURNING DATA FROM INSIGHTS INTO VALUE kpmg.com/data 2 GOING BEYOND THE DATA: TURNING DATA FROM INSIGHTS INTO VALUE FOREWORD It was only in the last few years that Big Data became the buzz phrase that confused many and overwhelmed many more. Two years ago, most executives and IT departments were still struggling to understand what the data revolution meant for them and their business; many were just fighting to keep their heads above water as the data deluge surrounded them. Today, data and analytics (D&A) has clearly entered the mainstream; our survey shows that adoption is up and many are now coming to terms with their initial data challenges. But much continues to change. The internet of things (IoT), for example, is becoming a reality for many industries and, as such, more data is being generated than ever before, creating new opportunities for businesses. At the same time, business itself is becoming increasingly demanding as D&A discussions become a part of the increasingly digitally savvy boardroom. And, as a result, competition around D&A is rising, with most organizations now investing time, resources and capital into improving their D&A capabilities. In early 2014, we published a report that covered how organizations were struggling to turn their data into insights. At the time, we noted that there would be two steps to real D&A success the first would be turning data to insights, but the second (and likely more difficult) would be turning insights into value. This report suggests that organizations are now starting to think about that second step. Indeed, as D&A becomes mainstream, executives and their boards are increasingly starting to question whether their organizations are truly realizing the full value of the insights they are getting from their data. Some are concerned that they may not be sophisticated enough in their approach to D&A to drive actionable insights. Others are struggling to align their D&A initiatives to address critical business issues and needs. And, as a result, many are now missing out on new areas of opportunity and competitive advantage. Going beyond the data: turning data from insights into value delves into the challenges and opportunities today s organizations face as they strive to create value through D&A. In this summary report, we explore the topline results of KPMG International s recent survey of more than 800 senior executives to identify key themes influencing D&A s value proposition around the world. With contributions from some of the world s leading D&A analysts, insights from data-driven companies and practical advice from KPMG International s network of D&A professionals, this summary report kicks off a series of articles that over the coming months will take a deeper look at these themes and opportunities from the viewpoint of different industry sectors, functions and company perspectives. On behalf of KPMG International, I would like to thank those organizations that participated in our survey. We hope this series helps executives and business leaders improve their understanding of D&A and, in doing so, will help their organization to enhance their cost structure, drive sustainable growth and better manage risk. Christian Rast Global Head of Data & Analytics GOING BEYOND THE DATA: TURNING DATA FROM INSIGHTS INTO VALUE 3 GOING BEYOND THE Data: TURNING Data FROM INSIGHTS INTO value CONTENTS 5 About this research 6 Key findings 7 D&A enters the mainstream 13 Delivering actionable insights 21 Turning insights into value 26 Are companies really going beyond the data? 27 Eight key take-aways 28 About D&A at KPMG 30 Biographies and contacts 4 GOING BEYOND THE DATA: TURNING DATA FROM INSIGHTS INTO VALUE val ue / valyoo/ Noun: The achievement of an outcome that has importance, worth or usefulness to an organization. At KPMG, we help to deliver value from D&A by helping clients create solutions to their business problems in a way that allows them to achieve measurable improvements across the three key areas of cost, growth and risk. Christian Rast Global Head of Data & Analytics GOING BEYOND THE DATA: TURNING DATA FROM INSIGHTS INTO VALUE 5 ABOUT THIS RESEARCH This report is based on survey data collected from 830 senior business executives across more than 15 countries. The survey was conducted on behalf of KPMG International by an independent research partner between August 2014 and January 2015, and was augmented by one-on-one interviews with sector leaders and KPMG subject matter experts conducted in May The survey represents a wide variety of the following: Job titles, including Chief Financial Officers, Chief Marketing Officers, Chief Human Resources Officers, Chief Information Officers, Chief Analytics Officers and Chief Executive Officers Industries, including Telecommunications, Healthcare & Life Sciences, Retail, Insurance, Banking and Industrials & Chemicals Markets, including Australia, Brazil, Canada, China, France, Germany, India, Japan, Mexico, the Netherlands, Singapore, Spain, Switzerland, the UK and the US Viewpoints, including comments, analysis and insights from global organizations, international services organizations and KPMG s own network of experienced professionals around the world Thanks to our contributors: Nova Spivack, CEO and Co-founder of Bottlenose. Mr. Spivack is a serial technology industry entrepreneur and recognized thought leader on search, Big Data, cognitive computing and the future of the internet. Dr. Mark Kennedy, Director of the KPMG Centre for Advanced Business Analytics and Associate Professor in the Department of Management, Imperial College Business School, London. Dr. Kennedy s research focuses on the emergence of new markets and industries and the more basic building blocks of organizing categories, identities, forms, strategies, practices and reputation. For information on the KPMG contributors, please see page 30. 6 GOING BEYOND THE DATA: TURNING DATA FROM INSIGHTS INTO VALUE KEY Findings FROM Data TO INSIGHTS TO value STARTING THE JOURNEY: TURNING DATA INTO INSIGHTS D&A HAS ENTERED THE MAINSTREAM STRIDING TOWARDS MATURITY: MOVING FROM INSIGHTS TO VALUE GETTING INSIGHTS, MISSING VALUE FAST ADOPTION 97% MISSING THE MARK ONLY of organizations say they are already using D&A in some area of the business 19% say they are already very satisfied with the insights their D&A tools provide THE US MOVES D&A INTO THE BOARDROOM US respondents were almost twice as likely as the global sample to say they use D&A in decision making at least once a week EARLY ADVANTAGES ARE ALREADY BEING ENJOYED OPPORTUNITY LOST of respondents have improved their understanding of customers but only have created more tailored offers to prospective customers 86% 67% 80% of respondents say they are already making faster decisions of respondents say they are already reducing business risk of respondents say they are already making more accurate decisions GROWING GAPS BETWEEN GOOD AND GREAT KEY AREAS OF OPPORTUNITY REMAIN UNEXPLORED Less than a quarter say they currently use D&A to identify new revenue streams BUT BIG CHALLENGES STILL REMAIN DOUBTING THE DATA 58% 14% of organizations have difficulties evaluating data quality and reliability STRUGGLING FOR SUFFICIENT SKILLS ONLY think they have all the talent and capabilities they need to fully leverage D&A While it is understandable that data quality and skills are top challenges, the apparent lack of desire to address the enterprise cost of D&A or to invest in improving the data (at the very least, understanding which data is critical to the business and why) is a deeply concerning trend. ONLY 31% ONLY 16% of respondents say they have used D&A to drive individualized marketing say they use D&A to predict future trends As maturity increases, we have seen a corresponding increase in the complexity of the analytics being undertaken. Recurring themes are emerging, such as the increasing use of multiple data sources, breaking down silos within the organization, the growing use of more sophisticated techniques in innovative areas of the business, and an improvement in the quality and repeatability of the solutions being implemented. Anthony Coops, KPMG in Australia Dr. Thomas Erwin, KPMG in Germany GOING BEYOND THE DATA: TURNING DATA FROM INSIGHTS INTO VALUE 7 D&A enters the mainstream Back in 2013, almost seven out of every ten senior executives agreed that they needed to do something about D&A. But a staggering 96 percent also admitted they were not using D&A effectively. 1 Today, evidence points to the fact that D&A is enjoying widespread adoption across the enterprise and around the world. And while certain markets and sectors may seem further ahead, it is clear that industry sectors now understand that D&A will be a game changer. Ask business leaders if their organization uses D&A and you will hear a resounding yes. According to our survey, 97 percent of business leaders say they already use D&A to manage risk (two of the remaining three percent say they will adopt D&A for risk within the next two years). More than nine out of ten say they already use D&A for sales and marketing purposes. 1 INSIGHTS TO VALUE: KEY TAKE-AWay Address the issues you are facing. Most clients do not ask for a D&A solution, they ask for a solution to a specific business problem. Understanding your biggest issues will direct you to where you can best focus D&A to address them. CURRENT AND PLANNED USES OF D&A CURRENTLY USING PLANNING TO USE (W/I MONTHS) RISK 97% 2% SALES AND MARKETING 92% 4% FINANCIAL MANAGEMENT 87% 9% RESEARCH AND DEVELOPMENT 80% 3% FINANCIAL STATEMENT AUDIT 77% 14% SUPPLY CHAIN 77% 5% TAX MANAGEMENT 75% 8% HUMAN RESOURCES 75% 14% CAPITAL ALLOCATION 74% 13% 1 Source: KPMG International survey: Going beyond the data: turning data from insights into value 2015. 8 GOING BEYOND THE DATA: TURNING DATA FROM INSIGHTS INTO VALUE Our data also shows that D&A adoption is starting to spread across the organization. In fact, more than three-quarters of respondents said they already use D&A in areas such as Research & Development, Supply Chain, Human Resources and Finance. Most of the rest say they plan to adopt D&A in these areas within the next two years. At the same time, the motivation and drivers for adopting D&A are also starting to shift towards value creation. Almost half (47 percent) of respondents said that improving productivity is the primary driver of their D&A activities, while 37 percent said that sales growth drives D&A activity. Only one in six cited cost reduction as their prime motivation. Finding areas of potential cost reduction is about looking at historical data and benchmarking your cost structure to find savings and anomalies, whereas identifying new growth opportunities and productivity improvements requires organizations to be more predictive in the way they use and interpret their data, notes Christian Rast, Global Head of Data & Analytics at KPMG. At the end of the day, growth and productivity are about adding value to the organization, something that D&A excels at. At the end of the day, growth and productivity are about adding value to the organization, something that D&A excels at. Christian Rast Global Head of Data & Analytics 2 INSIGHTS TO VALUE: KEY TAKE-AWay UNDERstanD THAT THE INSIGHTS DO NOT COME FROM Data alone. They come from analyzing the data and working across silos to map this back to the issues and challenges the business is addressing. GOING BEYOND THE DATA: TURNING DATA FROM INSIGHTS INTO VALUE 9 GREATEST MOTIVation FOR D&A Reducing costs Generating sales growth Improving productivity GLOBAL CHINA UK 16% 15% 17% 47% 37% 58% 27% 41% 42% AUSTRALIA U.S. GERMANY 54% 16% 30% 50% 15% 35% 38% 39% 23% Source: KPMG International survey: Going beyond the data: turning data from insights into value 2015. 10 GOING BEYOND THE DATA: TURNING DATA FROM INSIGHTS INTO VALUE D&A implementation varies by region Interestingly, respondents from Germany seem more focused on reducing costs than their peers, while those from China were most focused on improving productivity. However, looking across markets it seems that most are focused primarily on either improving productivity or generating sales growth. Similarly, retailers were the least likely to say their D&A initiatives were focused on cost reductions and were most likely to cite sales growth as the top motivator. Respondents from the Telecommunications, Insurance and Banking sectors all suggested that improved productivity was the top driver behind D&A. As Torsten Duwenhorst, Lead Partner of Data & Analytics for KPMG in China, says, We have seen rapid take-up of D&A strategy in the China market, where homegrown platforms underpinning the rise of online transactions are of particular interest, as well as the increasingly important roles of social media and mobile devices. These trends are fundamentally reshaping the way consumers in China purchase goods and services, and how businesses operate online. We have therefore seen a significant increase in the volume of customer data through transactions and social media in China, as well as new mobile and targeting technologies that enable companies to understand and predict customer preferences. However, while reported adoption rates seem very high, questions remain as to how advanced these capabilities are. Many organizations are certainly using D&A-type solutions to generate insights from their enterprise data; the real question is to what extent this is really advanced analytics or just marginally more sophisticated management reporting, notes Nadia Zahawi, Director, Global Data & Analytics. D&A increasingly means combining the right tools, capabilities, algorithms and technology to analyze multiple sources of information in near-real-time. Without that, organizations may never be able to reach a stage of maturity where they can conduct more advanced activities such as predictive analytics, pattern recognition, anomaly detection and so on. D&A is poised to revolutionize the business environment in China. 3 Torsten Duwenhorst Lead Partner D&A KPMG China INSIGHTS TO VALUE: KEY TAKE-AWay Go beyond point solutions. Transcend individual projects towards an overarching enterprise-wide D&A strategy that underpins investment decisions. GOING BEYOND THE DATA: TURNING DATA FROM INSIGHTS INTO VALUE 11 MOST IMPORTANT DRIVERS OF D&A Reducing costs Generating sales growth Improving productivity TELECOMMUNICATIONS RETAIL INSURANCE 23% 20% 7% 15% 60% 17% 73% 60% 25% HEALTHCARE & LIFE SCIENCES BANKING 14% 15% 36% 50% 58% 27% Source: KPMG International survey: Going beyond the data: turning data from insights into value 2015. 12 GOING BEYOND THE DATA: TURNING DATA FROM INSIGHTS INTO VALUE FOCUS ON CUSTOMERS 92% 72% 81% 41% 50% use D&A for marketing purposes said they are regular or heavy users of social media data to improve customer relationships said D&A has improved their understanding of customers said D&A has helped them create more targeted offerings to prospective customers of US firms report increased sales from D&A In most organizations, data about the customer is often fragmented across almost every function in the organization from finance and risk through to sales and customer service and this data needs to be brought together to achieve a richer understanding of the customer, notes Anthony Coops, Partner, KPMG in Australia. But organizations can t just see this as a data or technology issue driving real value from customer data requires multiple stakeholders to come together to agree on what they want to achieve together and, therefore, what questions to ask the data. GOING BEYOND THE DATA: TURNING DATA FROM INSIGHTS INTO VALUE 13 DELIVERING ACTIONABLE INSIGHTS As organizations improve the sophistication of their D&A capabilities and activities, many are starting to find that their greatest challenge lies not in uncovering insights from their data, but rather in creating actionable, business-driven insights that ultimately lead to tangible and sustainable value for the business. As Gartner wisely noted when they first published the Hype Cycle Model 2, most organizations tend to set out on a technology journey with somewhat inflated expectations, which is often followed by what Gartner termed the Trough of Disillusionment as expectations are missed and value is questioned. KPMG in the US. While some sectors are clearly more mature than others, many US organizations are now trying to move beyond pilot projects and siloed capabilities to instead embed D&A into the entire organization as a business as usual tool. Our data indicates that, while adoption may be widespread, most organizations continue to struggle with some of the fundamental building blocks required to move from data to insights, such as improving the reliability and accessibility of data. Indeed, more than half of all respondents said they are still experiencing difficulties evaluating the quality and reliability of their data. Our data suggests that the more sophisticated organizations are now entering the trough. The US, for example, demonstrates signs of growing sophistication: US respondents were almost twice as likely as the global sample to say they use D&A in decision making at least once a week. More than a third of US respondents also said they are already using large systems that examine multiple data sources to identify and then react to emerging trends, two indicators of a more sophisticated approach to D&A. ARE THE NECESSARY BUILDING BLOCKS IN PLACE to TURN INSIGHTS INTO value? Likely as a result of their relative maturity, US respondents also reported the greatest levels of dissatisfaction with the insights that their D&A tools were providing. Just over half (55 percent) said they had managed to generate real cost savings from their D&A; only 50 percent said they had achieved sales growth as a result of D&A. Nobody in the US market doubts the potential of D&A; the US is, by all accounts, the most competitive marketplace in the world and so any technology or solution that promises to enhance the cost structure, drive growth and reduce risk will be fiercely fought over, notes Brad Fisher, Partner, 4 INSIGHTS TO VALUE: KEY TAKE-AWay Define what value you are looking for. What is it you want to achieve? Is it reduced cost? Better management of risk? Improved customer experience? The reality is that value differs depending on the issue you are dealing with. 2 14 GOING BEYOND THE DATA: TURNING DATA FROM INSIGHTS INTO VALUE 5 INSIGHTS Slightly less than half admitted that the appropriate data was not always available. Maurice Op het Veld, Head of Data & Analytics for KPMG in the Netherlands, explains, The challenge is the complexity of the data structures, especially when using multiple systems. Data quality can already be a challenge when it comes from just one system but when multiple systems are at play, data quality can quickly become the stumbling block for the organization. And once people start questioning the validity of the data, they are much less likely to have an appetite to take on more value-driven projects in the future. Once people start questioning the validity of the data, they are much less likely to have an appetite to take on more value-driven projects in the future. TO VALUE: KEY TAKE-AWay Maurice Op het Veld Head of Data & Analytics KPMG in the Netherlands Focus on customers. Ask yourself how to use new forms of data and algorithms to automate decision making in order to bring greater customer service and expand your capacity to transact profitably with customers. industry FOCUS: HOW DOES MATURITY vary ACROSS DIFFERENT SECTORS? While, perhaps unsurprisingly, these challenges were cited fairly consistently by the different industry sectors, it is interesting to note that respondents from the Banking sector were significantly more likely to say they faced challenges translating data into action
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