Sparse data, not big data, is the real challenge for businesses

Data science pioneer and Starcount CEO, Edwina Dunn, has urged businesses to focus on the real barrier to effective digital transformation. Speaking at the MRS Annual Conference yesterday, 14th March, she described the key challenge as not ‘big data or technology’, but ‘sparse data’. A lack of data is a universal problem to all but the highest frequency transaction businesses, i.e. grocery, credit cards and mobile phones.

She said: “The truth is that we tend to know ‘a lot about a few’ and ‘little about most’ consumers or businesses. That means, most businesses focus only on the high frequency (high value) segment of their customers, about whom they have some knowledge/data, bombarding them with endless offers and discounts. This can lead to high opt-out rates where disaffected customers stop believing in the brand and its relevance.

The new winners in data transformation will learn how to unlock insight across the whole consumer base and thus ‘nudge’ small changes in behaviour across millions of consumers – the next best product, next best offer. This leads to millions of pounds sales uplift and transformational growth.”

“There will be winners and losers in Digital Transformation – but it’s Sparse Data, not Big Data, that is the real challenge”

Dunn pointed to the agility of disruptive companies such as Amazon, Uber and AirBnB where vast caches of data are recognised as the key differentiator in their success, feeding their strategies and informing customer-centric operations and delivery systems.

As Amazon says on its customer service website; “Your feedback is helping us to build Earth’s Most Customer-Centric Company”.*

Describing her maxim as being ‘data is truth’, Dunn told delegates to embrace how data reveals a true picture of business performance. She said: “The truth can sometimes be painful, especially if it shows your best customers are leaving you or if it challenges long-held instinctive beliefs.” But, knowing this ugly truth can help explain falling sales. She urged businesses to embrace the principles of test-and-learn and not to be afraid of failing. “If you’re not failing, you’re not improving.”

She outlined seven key success factors in achieving data transformation. These are:

  1. Appreciating both the art and science of data: the key to unlocking the science is all about creating actionable insight that changes customer engagement and communication.
  2. Understanding the difference between functional and emotional data: moving beyond transaction data and understanding peoples’ motivations and passions that trigger behaviour, e.g. moving house, retiring or having a baby.
  3. Speed of change: creating a constant flow of customer and data to continuously measure cause and effect – to know if your best customers are leaving you.
  4. Embracing a learning culture: encouraging a test-and-learn culture where some failure is acceptable and even welcome.
  5. Education: creating a multi-disciplinary and cross-functional skill set to truly unlock the power of data. Technology is not the same as data knowledge, but both are critical.
  6. Top down buy-in and a place on the Board: embedding data at the top level is mission critical – but who should own this?
  7. Becoming goal-orientated: ensuring insight doesn’t become analysis paralysis and that the insights are acted upon.

*Amazon might be the leading global customer centric business today but Tesco through Clubcard was the early and successful pioneer – thanks in good measure to Dunn and her partner, Clive Humby.

New Starcount report on the challenges of sparse data coming soon. Watch this space!

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