Good Data Is Profitable Data
The antitrust trial of Microsoft served a couple of years ago as a warning to corporate information-meisters that you can have too much e-mail hanging around. Now, smart controllers of corporate knowledge weed out e-mail every 90 days or so, and only retain truly vital messages.
A similar sort of realization that you can have too much paper hanging around came Sept. 11, as the World Trade Center towers fell. This was the financial district of the free world, with billions of dollars worth of deals sloshing around on electrons at any given time, yet a good deal of the best record-keeping on large deals still ended up on paper.
Collateralized debt obligations. High-yield bonds. Emerging market loans. Structured asset financing, involving intellectual property, shares of stock, real estate. Sure, no one keeps stock certificates any more. But the types of securities and capital being sold are getting mind-numbingly complex. The brain still can only comprehend what the eye can see and track.
So it was with great horror that captains of finance watched that week as the records of others' transactions floated into the sky and eventually fell up to a mile away, to be walked on or picked up by any passerby.
Among the high priorities in information management arising from that day should be a recognition on the part of almost any company that does complex deal-making of any sort that electronic records can and should be your best allies. Properly formatted and stored, they can be housed in any number of locales and retrieved at the stroke of a few knowledgeably tapped keys.
But proper formatting and storage is easier stated than done, Wall Street information keepers are likely to find. The more complex the deal-making becomes, the more complex the data storage becomes. Creating fields and structures that can accommodate increasingly involved transactions is no easy feat.
This is no paean to some sort of all-electronic future in document keeping. That's not going to happen. E-mail has increased paper usage, rather than decreased it. Demand for paper doubled from 1990 to the turn of the century, reaching 108 million tons in the United States alone. Indeed, the idea of paper actually disappearing has been debunked so many times it is now a nonfiction book, The Myth of the Paperless Office by Abigail Stern and Richard Harper (MIT Press, 2001).
No, the point is that, just as simply recording data on paper is not good enough, neither is simply warehousing it on servers in condition-controlled environments. The challenge is raising the quality of information stored. It is not a matter of record-keeping any longer. It can be the difference between profit and loss.
Here's a not-complex example. Say you've got $20 million in delinquent receivables. But only half of your records have accurate names, addresses and phone numbers for your customers. You're essentially writing off half of your receivables before you've even given them over to the collector. Even if the collector pulls in one out of four of the remaining receivables, you're only getting $2.5 million. Try telling that to your board of directors or shareholders, before you finally bite the bullet and write off $17.5 million. With accurate data, you might have collected $10 million or more without even bringing in a collection agency.
Never mind the depressing effect on customer receptivity or loyalty from bad data. Who wants to start up a lasting relationship with someone who can't spell your name right on a mailing label?
According to a recent Data Warehousing Institute survey, 93% of companies say they see the need for top-quality information to course through their electronic veins. But only 17% have actually tried to implement a plan for achieving it.
Which seems to say: Before you begin cleaning, consolidating, enhancing and massaging deal and customer data, you need buy-in from the top. In turn, that means you have to prove that good data is profitable data.
Don't wait for a busted quarter, year or worse to make the point.