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Boards Can Help Management ‘Steer the Future’ by Using Big Data

Directors should be conscious of and even proactive about big data on at least two levels, according to a consensus of experts: How corporate strategy is harnessing the capabilities of this powerful new tool, and specifically, how board members can use it to improve the board’s performance of its own fiduciary duties.

Board members often initiate top-level discussions about big data because they’re hearing about it everywhere. But as they delve deeper, directors must ask themselves what business challenges can be addressed by big data—whether this mushrooming endeavor can really help boards keep executive teams on task in allocating capital, making the right people decisions, innovating and implementing strategy.

“Why is big data needed to achieve our desired results?” is what boards should ask themselves, said James R.F. Berkeley, managing director of Ellice Consulting. “Boards need to focus C-suite attention on outputs such as top-line revenue growth and happier clients” that come as a result of data insight, he said.

“Boards need to focus C-suite attention on outputs such as top-line revenue growth and happier clients” that come as a result of data insight.”

What boards should do
At the strategic level, “boards need to make sure that the C level understands not just the benefits, but also the challenges of big data,” said business consultant Phyllis Ezop. To do so, boards should ensure that “management strives to find ways to get those with subject-matter expertise and judgment working together with the data scientists who specialize in developing the algorithms.”

If board direction has been required to get the company moving more deliberately and effectively on the potential of big data, directors may need to help define how much time executives need to do it right, and then make sure they are given that time.

“It takes time, people and money” to get a company’s big-data house in order, “without any real visible short-term ROI,” said John P. Kelley, leader of Berkeley Research Group’s predictive analytics practice. Those three items form the essential foundation, “and the CEO needs to be allowed time to pursue and complete the effort.”

Directors also need to be conscious of the tendency of company decision-makers to be reactive rather than proactive. “CEOs or board members have … less of an idea of what it really is,” and then that lack of understanding filters downward, Anand Rao, principal in PwC’s advisory practice, told Spotlight on Boards. As a result, “Some guys make the mistake of saying, ‘We need to do something about big data’ just because the CEO and the board want them to do it.”

To generate the most from these buzz words and their capabilities, Rao suggests that business units and value-chain partners look at what decisions are being made and how they can be made better with big data and data analytics. This will result in “some quick wins on the board so that C-level executives and directors can see that big data delivers value before management and their teams start doing big things.” They also can direct team leaders to put data analytics to use specifically in areas where the firm has the highest statutory and fiduciary responsibilities.

For example, “Directors are increasingly reaching out to specialists with the ability to combine advanced data analytics with traditional legal analysis to extract key insights” on potential compliance and legal issues such as detection of violations of the Foreign Corrupt Practices Act, screening for product-liability issues in manufacturers’ data, and monitoring of potential antitrust, price-fixing and cartel behavior, according to Rob Hellewell, vice president of the data-analytics group for Xerox Legal Services.

Furthermore, Berkeley Research’s Kelley suggested that boards must “demand that data and analytics be a larger part of every board meeting.” Go beyond not only “human bias,” but also beyond “bare spreadsheets and basic analytics,” he advised, “and move into the world of predictive analytics, which employs data science to make statistically sound calculations of what the future holds. The board and management can then steer all teams toward the future together.”

 

About Dale Buss

Dale Buss
Dale Buss is a long-time contributor to Chief Executive, Forbes, The Wall Street Journal and other top-flight business publications. He lives in Michigan.