“Crunching the numbers” takes on a whole new meaning when it comes to big data.
Here’s the way it used to work (and often still does). The CMO discovers that one of their most successful products has been losing market share, but slowly enough that panic isn’t hitting the C-Suite. By capturing and analyzing unstructured data; data coming in from a wide range of social sites, review sites, e-commerce, and other areas, he or she finds that the customer is looking at the product as “old.” The product is still fine, but the messaging isn’t. Changing that requires a huge marketing campaign…and that requires money. The CFO looks at the bottom line, questioning how data resulting from tweets and photos posted online can possibly be trusted to predict much of anything and decides the investment isn’t worth it. Then they watch in amazement as the product line slowly falls apart. That’s because finance falls far behind many other areas of business when it comes to utilizing and trusting what we call “big data.”
Not utilizing big data can be an awfully big mistake
In a recent Accounting Today article, big data was listed as one of the main issues that accountants are facing. In fact, The 2014 AICPA Survey on International Trends in Forensic and Valuation Services finds that 85% of those surveyed anticipated spending considerably more time on electronic data analysis, or big data, in the future.
An article earlier this year in CFO, “Accounting’s Big Data Problem,” discusses the gap between what Finance should know when it comes to big data and what it does know. Business today has to adapt to a world where information comes in at the push of a button (or a smartphone). Customers expect immediate answers and ASAP results. And data is coming in from everywhere…social media, e-commerce, Websites, product reviews, and more. Marketers have developed the ability to aggregate and draw correlations from these huge amounts of data, most of it unstructured. But what about Finance? In companies, other than those that specifically deal in data, the Finance professionals are in danger of falling behind.
Structured data is important, but unstructured data can be the key to success
One of the main problems is “inertia,” described in Webster’s Dictionary as “a property of matter that remains at rest or continues in uniform motion unless acted upon by some outside force.” So for departments and personnel that continue to use paper-based processes, or who feel that using Excel spreadsheets is a big step into the online world, making that next move into capturing data from a wide range of sources and then using that data to make major business decisions is difficult at best. As the CFO article states, “those that are involved with internal and external financial reporting are limited, by training and inclination, to working with structured data – the kind that can fit readily into tables, Excel spreadsheets and, ultimately, financial statements.”
The emergence of big data is the outside force that will end that inertia. Finance departments will need to develop new KPIs that measure more than simply which employees reached a pre-determined goal and which did not. “Numbers” people will need to accept that some numbers aren’t simply listed on a spreadsheet. Rather than being a department whose main function is reporting, Finance will need to get deeper into analysis, looking at information coming from a variety of sources, and using that information strategically to better the company’s profits and future growth. It’s happening, company by company. The silos are falling; departments are working together for a common cause, and big data is a main reason that the gap between CFOs and CMOs is shrinking.
Interested in learning more? Check out Finance Breaks Out of Its Traditional Role.