Let us be clear, there is no such thing as too much data, but the following are all problems:
- Having multiple versions of the same data
- Having data presented to the point of overload
- Having the wrong data.
Having conflicting data is not always a problem and, of itself, too much data should not be a problem.
The problem arises with a lack of understanding on what to do with the data, or the lack of a consistent approach on how to extract insight from data. Extracting value from data requires a structured and disciplined approach driven by a keen understanding of the objectives. Ultimately, “what is it you want to know?” rather than “what can I do with all this data?”
With data, you can extract information and from the way the information is presented, you can gain insight. For the finance function to add value, it needs to provide insight from the data and that requires an understanding of the data along with the data sources, and paring back the data to provide meaningful, value-add insight.
What does good look like to you?
Millions of people around the world drive a car. The modern versions of which are equipped to gather vast amounts of data and present it to the driver and passengers. If you have ever seen the cockpit of a modern jumbo jet, the dashboard is hugely overwhelming at first glance. These are both managed in different ways.
In the car, for example, you are only presented with the data that is important and relevant at the time. The speedometer, rev counter, fuel gauge etc. are all displayed. But driving forward, the side and reversing cameras are not visible, the tyre pressures are only shown when asked or if there is an issue, warning lights appear only when a risk is identified. For the average car driver, you are a passive recipient of the data, it is presented to you only when required and only as necessary.
Step onto the flight deck of a modern airliner and it is a different story. The sheer volume of data is, to the untrained eye, quite overwhelming. In such an aircraft, the data is always available and accessible. The emphasis is no longer on presenting the data only as and when required and at the command of the vehicle, rather it is now for the aircrew to determine what matters and when.
The amount of information presented in a report or on a dashboard is therefore dictated by the needs of the recipient. Regardless of whether it is a simple slide presentation or a detailed document, it should all still have the same data and the same data sources that can be validated and verified to be accurate.
How can we avoid information overload?
According to CFO.com there is “Too Much Data, Too Little Judgment” but in reading the article it is very much about the over-reliance on data and the under-reliance on analysis and judgement.
Gartner states that, “when you give people too much information, they actually underperform. There is more and more data coming in, but that doesn’t make it any easier for FP&A teams to deliver actionable insight to their business partners”. In other words, the problem is not the data, the problem is people.
Reporting clarity can require different approaches:
- This depends foremost on the operational need or role of the recipient, and perhaps less so on their personal preference for presentation and detail
- Not all reports are the same, not all dashboards are the same
- What the CFO requires may be similar but different to what is required by the CEO, and altogether different again for the level of detail required by auditors.
Finding a single source of data
Getting clarity in reporting is a simple process of going from many to one. Taking data from silos and aligning it to have a centralised place to start will prevent later errors. As we all become more data hungry, this usually means a large server or cloud-based solution, certainly the days of the spreadsheet to do this are behind us, or at least should be for any medium and larger-sized organisations.
According to MuleSoft, a single source of truth is about “aggregating the data from many systems within an organization to a single location. A SSOT is not a system, tool, or strategy, but rather a state of being for a company’s data in that it can all be found via a single reference point”.
- For a large organisation, a typical finance department can take data from anything between three and six sources.
- As business complexity grows, as the demands of investors change and as new requirements are added – environmental, supply chain, human resource, etc. – the number of data sources is only ever set to increase.
- With a well-developed foundation, adding data sources need not be an onerous task and should bring value. Where there are overlaps and conflicts, different versions can provide insight when done correctly.
Solving the problem of too much data requires a tool to extract or receive the information and align the different sources to give a single source of truth. Not all tools are equal in doing this, some very specialist, and some more generalist. Finding the right tool that will grow with an organisation or will allow the office of finance to do more is an important part of the selection process.
Starting with the data in mind is the wrong approach. Starting with the current need, too, is the wrong approach. Understanding the needs of the business and aligning it with the future trajectory is a key part of the selection process. Today it may be reporting and in one currency, but tomorrow could see multiple additional needs whether that is through organic growth, company acquisition, produce development or additional needs of the finance department and the wider organisation. Having a clear vision of what is and what will be needed will inform tool selection, and maximise use of current and future data sources.
The solution - our top tips
- Understand your needs. What is it you’re trying to achieve? What are the questions you need to answer?
- Understand the difference between data and insight
- Have a single source of the truth and extract from that the data you need, as and when you need it. Do not become overwhelmed with the volume of data you have
- Understand the source of the data and the accuracy. Not all data is perfect, but that does not mean it cannot be a source of insight
- Prioritise data sources based on their value and their accuracy. Where there are conflicts, understand why and use the tools you have to make meaning out of discrepancies
- Make sure the data is traceable from the report. Drill back through the report to find the data points that can provide additional insight or create more questions to be answered
- Embrace transformation and evolution. New data sources and new demands are an opportunity to do more with the data you have
- Data is a source, it is not the answer. But used effectively and with the right tools, it can provide value-add insight to help direct the business.