Yet the implementation of Big Data remains a work in progress for most organizations, with most having started but very few having completed implementation. The increased emphasis on data and the work to implement Big Data effectively within an organization provides an opportunity for finance and accounting professionals—who traditionally are proficient at pulling data from a variety of information systems, manipulating that data, and gleaning insights from it—to assume a business partnering role with others in their organizations.
To better understand the implementation of Big Data in companies and its impact on accountants and finance professionals, we conducted a survey of IMA® (Institute of Management Accountants) members to ask about the use of Big Data in their companies, including who and what are driving its use, the areas in which it’s being applied, the stage of implementation, and more. Their responses not only help shed insight on the current state of Big Data and the areas in which companies are using it, but they also identify areas of opportunity for the future as companies strive to become data-driven organizations.
USING BIG DATA
The business environment is increasingly competitive, and most organizations are looking for an edge. For many companies, that edge is the implementation of new technology, enabling the mining of vast amounts of data (Big Data) using leading-edge analytical tools.
Most organizations are still in the development stages of mining Big Data (see Figure 1). Very few have completed implementation, but most have started and are on the road to obtaining additional important business insights from their data.
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Key among the areas in which these companies are implementing Big Data is performance management. Organizations face significant challenges in objectively evaluating the performance of their employees, processes, machinery, and so forth. Deploying Big Data capabilities to collect and evaluate the mountain of data needed to make these evaluations “makes sense” for many organizations. All the companies in our study deploying Big Data capabilities are using it as part of their performance evaluation process (see Figure 2).
Strategy formulation and implementation represent another important area where organizations are deploying Big Data capabilities. More than half of the organizations in our study currently employing Big Data are using it for this purpose. This makes sense as incorporating such data in the formulation of their strategies will lead to a more robust process and deliver competitive advantage.
Like any organizational change initiative, getting Big Data implementation “right” involves paying attention to several key items. One of these is deciding where to start. Organizations may have quite a bit of data but can struggle identifying which of it is useful. In such cases, many experts advise framing useful business questions and focusing the analysis on answering those questions.
Another important consideration is the scope of initial implementation. Often the best way to embark on the Big Data journey is to start small, harvesting “low-hanging fruit” from such projects. By choosing a relatively small, simple example and achieving success, the benefits of Big Data adoption will be clearly demonstrated, facilitating additional, more impactful adoptions. Working with business partners in other functional areas to identify those projects that are more important and impactful is key here.
Consistent with the idea of starting simple and small when implementing Big Data projects, we find companies are more likely to use existing data sources when starting their Big Data journey, although both existing and new data sources are being used (see Figure 3).
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The increased emphasis on data provides an opportunity for finance and accounting professionals to build on this core competency. The challenge now is to expand the sources of data used and to explore potential uses not only of data available internally but also of data available externally.
The majority of organizations today understand the importance of using data from new and varied sources. More than 50% of respondents indicated that they consider both internal and external data when developing and executing their strategy. Yet much work remains in this area, as many organizations continue to rely heavily on preexisting internal data structures and relatively few currently employ new external unstructured data sources.
A NEED FOR STRATEGY
An essential factor for establishing a data-driven organizational culture employing Big Data is having strategies for the effective use of leading-edge analytic techniques and technologies. It isn’t enough to just buy leading-edge technology for Big Data and analytics. To be truly data-driven, an organization must have strategies in place to ensure everyone is trained on the technology, uses it appropriately, and understands and reports results based on it.
Most importantly, executives and employees must be committed to act on insights based on the data. Without having these strategies in place, purchasing the technology is a waste of money. Even worse, if employees using the technology uncover insights for improvements that get ignored because management isn’t prepared for change, it can have a negative and deflating effect on the morale and motivation of employees.
If organizations are to realize the potential of Big Data, much remains to be done in regard to developing strategies. Fifty-three percent of organizations in our survey have developed strategies around the use of Big Data, while 43% haven’t. The 4% of respondents indicating “Other” when asked about developing Big Data strategies reinforce the idea that this is an evolving area, providing comments such as “We plan to revisit this in our annual company meeting,” “Somewhat—working on a more consistent process,” and “Our parent group has a strategy around Big Data analytics; this will percolate to other associate companies.”
While the number of survey respondents whose organizations have already implemented strategies around Big Data was relatively small, its impact is clear: Of those who have implemented strategies, the vast majority (80%) report improvement in organizational performance, with the remaining organizations indicating it was too early to tell.
Before a Big Data strategy can be developed, however, it’s essential to build strong data governance and quality infrastructure. Regardless of the data source, ensuring its integrity and quality is key. But this is still a work in progress for many companies. According to Jenny Okonkwo, founder of Transform Consulting, “The challenge for financial professionals is how to incorporate [Big Data] in sensible way [sic] into current data governance infrastructure, have the business recognize its value and realize the business value to set the stage for analytics and KPI [key performance indicators] development.”
It’s important to have governance around the data selected for analysis. It’s easy to be overwhelmed by the magnitude of data available. Not all data is equally important, and a process must be in place to determine the benefit of various analyses.
When implementing leading-edge analytics, having the right “tone at the top” is essential: Executive buy-in is critical. The story is a bit different when it comes to Big Data. Even though two-thirds of respondents report that executives are championing their organizational Big Data initiatives, the companies that have completely implemented Big Data already are most likely to be those in which the initiative came from the functional departments instead (see Figure 4).
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A possible explanation for this may be that departmental initiatives are narrower in scope than those promoted by executives. It may also reflect the prevalence of the use of Big Data for performance management, with departments needing the more granular data that Big Data can provide.
Nevertheless, buy-in by top executives is critical for the ultimate success of Big Data initiatives, as such initiatives can change the decision-making culture of an entire organization, enabling more real-time decision making and promoting a culture of answering questions and gathering evidence. Such changes across an organization typically require support of the CEO.
THE ROLE OF ACCOUNTING AND FINANCE PROFESSIONALS
Today’s data environment differs from that of the past in the immediacy and availability of data and the ability to access it. The deployment of this data and the technologies that exploit it present both opportunities and threats to the management accounting profession. In order to stay relevant, finance professionals must take advantage of opportunities to create value around Big Data (see “Adding Skills to Meet the Challenge”).
This includes addressing the areas of data governance, the use of data to gain insight into business trends and an organization’s operations, and the use of Big Data to enhance organizational risk management.
Data governance. Data governance is a critical underpinning for Big Data and is difficult for large, complex organizations to achieve. Given the discipline, rigor, and structure in thinking that finance professionals have around financial data, they should be well placed to take a stronger role in data governance activities.
Linked to data governance is the issue of data privacy. With the extensive use today of personal data in Big Data activities, this is a major concern from regulatory, legal, and customer perspectives. As a result, appropriate governance needs to be in place around the security and use of data, and finance professionals can help ensure that this is the case.
The key to success with Big Data is establishing strong governance over data quality and standards. Finance professionals can help make internal data sets more secure and robust, increasing their value. Consistent with their traditional stewardship role, finance professionals can help build trust in the quality and provenance of data. Working with others, they can ensure the data used in critical decision making is robust and from reliable sources.
Gaining insights. Finance has a unique position that provides a holistic view of the business and enables it to understand the controls and processes in place throughout the organization. As new technologies free up finance resources, they will create opportunities for finance to exploit its unique view of the organization by taking on a more strategic role, enabling finance to move up the value chain.
There’s a significant opportunity for finance professionals to support the business-critical use of data. They can work with other business functions to more effectively support planning and decision making. They can provide analysis to help business functions understand the financial implications of their activities or plans. They can help business functions improve the quality of information that goes into financial decision making. Big Data provides opportunities for better analysis and new insights to support these activities.
Risk management. Finance professionals can leverage the resource of Big Data to help organizations anticipate or preempt risks—and protect performance. For example, social media can effectively indicate early warning systems of shifts in consumer sentiment or serious social and political risks. By including diverse sets of data in their calculations, accountants and finance professionals can help better identify and mitigate the risks faced by their organizations.
Technology is rapidly changing the business world. Becoming “data-driven” is increasingly part of many organizations’ competitive strategy, and harnessing Big Data is an important part of this. Our study confirms that Big Data is “hot”—it’s one of the new technologies most likely to be implemented in the relatively near future by organizations. Yet for most organizations, implementation remains very much a work in progress. The combination of Big Data and leading-edge analytics has the potential to deliver significant organizational value.
Organizations looking to maximize the benefits from mining Big Data should pay attention to several key items, including:
- Starting simple and small when first implementing Big Data projects.
- Expanding the sources of data used and exploring potential uses not only of data available internally but also of data available externally.
- Getting information based on data into the hands of those who need it and on a real-time basis.
- Getting buy-in for Big Data and leading-edge analytics initiatives at both the executive and departmental levels.
- Developing strategies for the effective use of leading-edge analytic techniques and technologies.
- Building strong data governance and quality infrastructure in order to ensure data integrity and quality.
The increased emphasis on data provides an opportunity for finance and accounting professionals, with their traditional proficiency in pulling data from a variety of information systems, manipulating that data, and gleaning insights from that data, to build on this core competency. By doing so, they can enhance their role within the organization and serve as business partners with other areas in the organization.
This article has been adapted from the IMA report, The Impact of Big Data on Finance: Now and in the Future, the third in a series of IMA reports on the digital transformation of business and how to become a data-driven organization.
Other reports in the series include How to Embrace Data Analytics to Be Successful and The Data Analytics Implementation Journey in Business and Finance .