Changing to a Data-Driven Strategy is Crucial for Success in Business Today

 In the book Fail Fast, Learn Faster: Lessons in Data-Driven Leadership in an Age of Disruption, Big Data, and AI, author Randy Bean helps traditional businesses with their "long-term journey" of digital transformation and what is needed for "data-driven leadership."

Bean has a lot of knowledge about how data has been used to help businesses reach their goals in the past, now, and in the future. Twenty years ago, he helped start a management consulting company called NewVantage Partners. The company's main goal was to help big companies use data "to be smarter and better at what they do." In the book's forward, Tom Davenport says that most of the firm's clients are "legacy" companies that spend a lot of money on technology and data and hire smart people to run them.

Bean and his team have been asking these kinds of organisations about their experience managing data and putting AI projects in place every year for the last few years. In the most recent survey, only 24% of the executives asked said that their company is data-driven, and only 41.2% said that data and analytics were a competitive advantage for them.

When asked, "What is your organization's biggest obstacle to becoming data-driven?" Only 8% of the executives that NewVantage polled thought that technology was the problem. The rest said "people," "process," or "culture" were to blame. The survey has always found that human intelligence is to blame, not artificial intelligence.

So, becoming data-driven means getting past the problems that people make when they run their businesses. But why aren't "legacy" companies data-driven while "born digital" companies are?

Bean says, "Companies like Amazon, Google, eBay, Facebook, Uber, and Airbnb are built on data and analytics." "They have used new data-driven business models to disrupt and change traditional industries like retail, media, and travel." For creative companies like these, data gives them speed, agility, and the ability to fail quickly, learn from their mistakes, and work more efficiently.

"Traditional businesses are held back by legacy systems, data warehouses that are decades old, and cultures and skill sets that were in place before Big Data approaches." So, "mainstream firms whose success has been transformative or disruptive and can be measured" are still in the minority.

GE Digital is a great example of a business that failed to adapt to the digital age. Former CEO Jeff Immelt wanted GE Digital to lead the digital transformation of the whole company. He said, "You wake up one day and realise that the locomotive you used to sell is now a data centre, and you have to change." But GE just said that it will combine GE Digital with its energy and power businesses as part of its plan to split into three separate companies.

If you are creative and lucky enough, it is easier to start from scratch and make a new business legend than to add a new chapter to an old business story. And timing is very important. Walmart took over Sears as the biggest store in the U.S. in 1990 after using computers and satellites in creative ways for 20 years. Amazon stepped up to compete with Walmart by coming up with creative ways to reach customers through the Internet.

When data became king, companies that were born digital were able to start writing their success stories. When you run a virtual business, data is the most important thing. It's what your business is all about. This is especially true for Web success stories that have made all of their money from advertising. Success leads to more success, which in business mostly means you can hire the best employees, the risk-takers (people who move quickly and break things), and the best people who know how to use whatever is popular at the moment, which has been data science and now AI since around the year 2000.

In 2015, GE Digital ran an ad campaign called "What's the matter with Owen?" that was aimed at these "unicorns" of data science. Why didn't it work and make GE, as predicted, one of the top 10 software companies by 2020?

"Their online business had a lot of potential, but it went in the wrong direction." CIO advisor Tim Crawford told the Wall Street Journal, "I think a lot of that could be tied back to being part of a large company culture that GE Digital was trying to break free of and needed to do so."

"Culture" is often blamed when an old business doesn't make the transition to digital, but what is "culture"? How do people at work dress and talk? processes and rules that are set in stone? not having food for free?

I think a better way to tell the difference between legacy companies and "born digital" companies (and digitally successful companies that have been around for a long time, like Apple and Microsoft), is that "born digital" companies know they are in the data business.

In 2011, Marc Andreessen tried to get the tech industry to focus on software instead of hardware and faster and faster processors.

It's not software, though. The world is being eaten by data.

Being born digital and living the online life meant not only being great at making software but also coming up with new ways to collect and analyse the huge amounts of data that come from online transactions. Hardware and software are no longer at the centre of everything; data is now the most important thing. Data is the lifeblood of tech companies. and, more and more, the heart of any kind of business.

Mainstream businesses have a lot of history to deal with and a lot to learn about data, but they also have strengths that could help them do even better than the "born digital" companies they try so hard to copy. Twenty, fifteen, or even ten years as a business is enough time to build a legacy that might slow down your much-loved ability to fail quickly. Mark Zuckerberg wants to completely change Facebook because of this.

The most important test for the new Meta is whether or not it can find a profitable way to make money that doesn't involve ads. Because this reliance on advertising has led to data practises, policies, and processes that hurt the reputation of companies that were born digital and may eventually slow their growth and profits.

Bean says that mainstream businesses that "embrace data as an essential corporate asset" may have a big business advantage because they don't have to rely on advertising to make money from their data practices. They have a great business opportunity to create new data practises, new ways to collect and analyse data, and new ways to lead and define how to do AI right.