A little data goes a long way
While businesses across the country have embraced mobile technology as a way to streamline their processes and boost employee productivity, there is little solid evidence of a direct correlation between financial performance and the greater use of data. But a new report released today by mobile enterprise vendor Sybase and the University of Texas in Austin quantifies the relationship between effective data access and key performance metrics of Fortune 1000 companies, which include verticals such as electricity, oil and gas providers, as well as transportation and construction entities.
The conclusion: The median Fortune 1000 business in the study’s sample could increase annual revenue by $2.01 billion just by increasing the usability of its data by 10%.
Conducted by researchers from the McCombs School of Business at the University of Texas, in conjunction with the Indian School of Business, the study looked at five distinct attributes of data — quality, usability, intelligence, remote accessibility and sales mobility — and examined how a 10% improvement in any one or two of these attributes affects the metrics commonly reported for assessing the financial performance of businesses.
Researchers not only surveyed a cross-section of Fortune 1000 companies, but also matched their responses with public financial and operational performance data. They also looked at the percentage of new products introduced, new customers acquired and competitiveness in a particular sector, to come to the conclusion that only a minimal increase in data access can reap billions in new revenues.
What surprised head researcher Anitesh Barua with UTC was the dramatic impact greater data accessibility has on the financial metrics of companies that operate in vertical markets.
“If we only saw the usual suspects, such as retail and finance companies, we would expect a good impact, but we were excited about the fact that for a whole bunch of verticals such as construction, petroleum and automotive — companies that are not on the cutting edge of IT — the potential of improving data is significant when it comes to improving financial performance,” Barua said.
For instance, a 10% improvement in data quality and sales mobility for electric/gas companies translates into a whopping 218% increase in the return on equity, which is defined as net income/shareholder equity, an important indicator of a business’s ability to grow.
Overall, the study found that if a Fortune 1000 business were to increase the mobility of its sales organization’s data by just 10% and the amount of capital is held constant, net income would increase by $5.4 million each year. Taking the five-year horizon for benefits at 10% cost of capital, that particular company would present value of $22.52 million in additional net income, the report said.
“Even though our sample consisted of Fortune 1000 firms, the average values for quality, usability, intelligence, remote accessibility and sales mobility (on a one-to-seven point scale) were 4.66, 4.21, 3.76, 5.45 and 4.63 respectively, which represent relatively modest values, and which suggest a lot of headroom for improvement,” the report said.
Current levels of mobility access and quality of data “are good but not great,” Barua said. “On a scale of one to seven, data intelligence came in at a three, which has a very large impact on financial performance.”
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