There are many ways to think about the recent explosion of digital technologies and data. Not surprisingly, the ubiquity of personal information that can be easily and cheaply collected from online and offline transactions, social media and sensors embedded in a growing array of physical objects such as TVs and smartphones, can trigger suspicion, anxiety and fear.
Organizations that sweep up, store and analyze that information are often unsure how to use it.
The leaders of some of the world’s top firms who gathered for the spring 2016 Innovators’ Roundtable approach the vast quantities of unstructured data — often called “big data” — as an opportunity to create value for their customers and, in the process, unlock new ways to grow their businesses.
The roundtable, hosted by Darden’s Batten Institute for Entrepreneurship and Innovation in Washington, D.C., brought together senior leaders from 3M, Abundant Power, Capital One, Celgene, Corning, Danaher, Eastman Chemical, IBM, Recast Energy, Siemens and Smithfield.
Led by Darden Professors Rajkumar Venkatesan, Yael Grushka-Cockayne and Ed Hess, the executives explored the use of data and analytics to make faster decisions, lower costs, predict and better meet customer needs, and create innovative products, services and business models. They also discussed the challenges their organizations and industries face as they become increasingly data-driven.
Several best practices emerged from the daylong discussion.
Know Your Purpose
It’s easy to get caught up in the hype surrounding the unprecedented volume of never-before-examined data and be dazzled by this “new, shiny thing,” as one executive put it. “Too often, big data becomes the goal.”
Big data is touted as a way to boost innovation. However, before business leaders start capitalizing on the insights gleaned from the torrents of data they collect and analyze — and before they innovate — they should have a clear understanding of the “why.” As one executive noted, “all efforts should connect to the purpose of your company. Why do you innovate? Toward what end are you using data? Does it really serve your purpose?” In other words, big data is most effective when it’s tied to the company mission and aligned with its strategy.
For example, Celgene’s mission is to deliver innovative, life-changing drugs to its patients. Therefore, using data to dramatically cut drug development time and cost makes perfect sense.
Rethink Your Business Model
Digitization of data enables companies to innovate not only their products and services but also their business models. For example, firms that used to make money selling and servicing industrial equipment can now rethink their customer value proposition. In addition to selling reliable jet engines, gas turbines and medical equipment, they can offer customers all kinds of efficiencies and performance improvements by combining data generated by that equipment with advanced analytics.
Take Siemens. The company’s industrial data analytics platform called Sinalytics generates new value for its customers by predicting and preventing equipment faults, thereby saving energy, reducing costs and increasing operating efficiency. One of Siemens’s customers, a Spanish railway company, operates more than 20 Siemens high-speed trains. As a result of predictive maintenance, the trains running between Barcelona and Madrid have achieved a punctuality rate of 99.9 percent.
Create an Entrepreneurial Culture
Innovation requires the right culture.
While startups, by their very nature, are innovative, large established corporations that are good at strategy execution are notoriously bad at out-of-the-box thinking. They also are less agile than startups. Companies trying to leverage data and analytics to drive innovation should be able to quickly respond to data-driven insights. Therefore, leaders in large firms need to work hard to build an entrepreneurial culture that fosters agility and innovation.
Senior leaders from Siemens, IBM and Capital One talked about the mechanisms their organizations use to promote collaboration, creativity and entrepreneurship.
Siemens holds hackathons, where even the most junior employees win innovation awards. Respect for innovative ideas, however crazy they may seem, permeates its culture.
Capital One took steps to build an agile, entrepreneurial culture by creating small, five- to eight-member squads that operate like mini startups. While the leaders figure out which problems to solve, squads collaborate with each other to figure out the best solutions to those problems. Even though squads have the high degree of decision-making autonomy, which is highly motivating, they are tightly aligned with Capital One’s mission.
And IBM has an internal crowdfunding mechanism iFundIT to pitch and fund new ideas. Employees are given $2,000 of “IBM money,” which they can use to fund the projects they believe have the most potential.
Digital data is here to stay. It’s reshaping businesses and industries, changing the ways companies create and capture value. To compete in a data-driven economy, business leaders must become savvier about where data fits into their businesses. They must learn how to convert the torrent of data flowing from every part of the global economy into actionable insights. And last but not least, they must build a culture that encourages and rewards the use of data to drive innovations aligned with the company purpose.
Gosia Glinska is associate director at Darden’s Batten Institute for Entrepreneurship and Innovation.