Ever since Henry Ford came up with the idea of using moving assembly lines to build automobiles faster at lower cost and at higher quality, efficiency has been the driving force in industry.
Unfortunately, it’s the wrong approach for modern businesses. We’re no longer in an industrial economy. Today, information powers our world. Efficiency drives profit in the short term, but making it your primary focus doesn’t drive innovation; it opens the door for competitors to provide something better.
Despite this, we’ve applied the efficiency mantra to almost every aspect of business. The primary use of data in many organizations is to cut costs and increase profitabilty for existing products. Dashboards and reports are really tools to answer questions like: Where is our process breaking? Which parts of our business are the least efficient? Where can we reduce cost? Data is the language of that conversation.
But the focus on efficiency is limiting. Businesses have more opportunities in environments of plenty, fewer in environments of scarcity. Most businesses today exist in a world of plenty: We have new ways to reach customers, like smartphones, chatbots and global logistics networks, and more ways to innovate, like machine learning, 5G, and an abundance of data and cheap processing power.
Using fewer resources, which is the focus of an efficiency program, makes us lean and mean, but it doesn’t provide fertile ground for growth. It can even be counterproductive. Call times can only be so low while still maintaining acceptable customer service. After a certain point, productivity gains are offset by quality issues.
Does this mean we should throw efficiency off a cliff? Obviously not. But using data smartly can provide the best of both worlds. Efficiency is appropriate for non-differentiating, mature cost centers, but it shouldn’t be the prevailing corporate philosophy. To succeed in today’s fast-moving tech landscape, the focus has to be innovation.
That’s all well and good, but how do we apply data to drive innovation instead of efficiency? I have three recommendations.
Think outside your business
Data isn’t just for internal stakeholders. Increasingly, companies realize that providing data externally is a vital part of their business. Whether it’s providing billing detail to business customers, transaction detail to consumers, or performance data to vendors, data is increasingly a differentiator. Making it available externally is a great first step away from an efficiency focus.
Get data to business users, not just technical users
Historically, access to data has been limited to technical people who speak the language of data, but these are rarely the same people who own the business outcome. Business users need wider access to data, which will allow them to think of new uses that only they can identify because they understand the customers and the business.
Opening up access to data is becoming easier. Modern analytics tools allow non-technical users to experiment with data in creative ways. To enable this, make sure the people who can innovate with data have access to it — not just the analysts.
Optimize for maturity, innovate for growth
It’s important to distinguish among different parts of the business. Efficiency should be applied in the mature areas. Use data to identify segments that have slow or declining growth and apply efficiency there. Everything else should be managed through the lens of innovation.
That applies especially to areas of differentiation — and these can vary even within the same industry. For example, a bank may view its customer call center as simply a cost center, so outsourcing those services may be appropriate. Another bank may see customer service as its competitive advantage. It should use data to identify its best customers, predict their future value, and route them to the best agents.
We’re in a remarkably different economy from the world of Henry Ford. His laser focus on speed and cost were appropriate at the time, and still are for some traditional industries. But for most of us, innovating quickly is a prerequisite to survival. That means loosening the chokehold that efficiency has on our thinking and making data-driven innovation the driving force in business.
Doug Bordonaro is Field CTO at ThoughtSpot.