“Any enterprise CEO really ought to be able to ask a question that involves connecting data across the organization, be able to run a company effectively, and especially to be able to respond to unexpected events. Most organizations are missing this ability to connect all the data together.” Tim Berners Lee -(English computer scientist, best known as the inventor of the World Wide Web)
We have discussed vertical industry business challenges across sectors like Banking, Insurance, Retail and Manufacturing in some level of detail over the last two years. Though enterprise business models vary depending on the industry, there is a common Digital theme raging across all industries in 2017. Every industry is witnessing an upswing in the numbers of younger and digitally aware customers. Estimates of this influential population are as high as 40% in areas such as Banking and Telecommunications. They represent a tremendous source of revenue but can also defect just as easily if the services offered aren’t compelling or easy to use – as the below illustration re the Banking industry illustrates.
These customers are Digital Natives i.e they are highly comfortable with technology and use services such as Google, Facebook, Uber, Netflix, Amazon, Google etc almost hourly in their daily lives. As a consequence, they expect a similar seamless & contextual experience while engaging with Banks, Telcos, Retailers, Insurance companies over (primarily) digital channels. Enterprises then have a dual fold challenge – to store all this data as well as harness it for real time insights in a way that is connected with internal marketing & sales.
As many studies have shown, companies that constantly harness data about their customers and perform speedy advanced analytics outshine their competition. Does that seem a bombastic statement? Not when you consider that almost half of all online dollars spent in the United States in 2016 were spent on Amazon and almost all digital advertising revenue growth in 2016 was accounted by two biggies – Google and Facebook. 
Let us now return to the average Enterprise. The vast majority of industrial applications (numbering around an average of 1000+ applications at large enterprises according to research firm NetSkope) generally lag the innovation cycle. This is because they’re created using archaic technology platforms by teams that conform to rigid development practices. The Fab Four (Facebook Amazon Google Netflix) and others have shown that Enterprise Architecture is a business differentiator but the Fortune 500 have not gotten that message as yet. Hence they largely predicate their software development on vendor provided technology instead of open approaches. This anti-pattern is further exacerbated by legacy organizational structures which ultimately leads to these applications holding a very parochial view of customer data. These applications can typically be classified in one of the buckets – ERP, Billing Systems, Payment Processors, Core Banking Systems, Service Management Systems, General Ledger, Accounting Systems, CRM, Corporate Email, Salesforce, Customer On-boarding etc etc.
These enterprise applications are then typically managed by disparate IT groups scattered across the globe. They often serve different stakeholders who seem to have broad overlapping interests but have conflicting organizational priorities for various reasons. These applications then produce and data in silos – localized by geography, department, or, line of business, or, channels.
Organizational barriers only serve to impede data sharing for various reasons – ranging from competitive dynamics around who owns the customer relationship, regulatory reasons to internal politics etc. You get the idea, it is all a giant mishmash.
Before we get any further, we need to define that dreaded word – Silo.
What Is a Silo?
A mind-set present in some companies when certain departments or sectors do not wish to share information with others in the same company. This type of mentality will reduce the efficiency of the overall operation, reduce morale, and may contribute to the demise of a productive company culture. (Source- Business Dictionary -)
Data is the Core Asset in Every Industry Vertical but most of it is siloed in Departments, Lines of Business across Geographies..
Let us be clear, most Industries do not suffer from a shortage of data assets. Consider a few of the major industry verticals and a smattering of the kinds of data that players in these areas commonly possess –
Data In Banking–
- Customer Account data e.g. Names, Demographics, Linked Accounts etc
- Core Banking Data going back decades
- Transaction Data which captures the low level details of every transaction (e.g debit, credit, transfer, credit card usage etc)
- Wire & Payment Data
- Trade & Position Data
- General Ledger Data e.g AP (accounts payable), AR (accounts receivable), cash management & purchasing information etc.
- Data from other systems supporting banking reporting functions.
DATA IN HEALTHCARE–
- Structured Clinical data e.g. Patient ADT information
- Free hand notes
- Patient Insurance information
- Device Telemetry
- Medication data
- Patient Trial Data
- Medical Images – e.g. CAT Scans, MRIs, CT images etc
DATA IN MANUFACTURING–
- Supply chain data
- Demand data
- Pricing data
- Operational data from the shop floor
- Sensor & telemetry data
- Sales campaign data
The typical flow of data in an enterprise follows a familiar path –
- Data is captured in large quantities as a result of business operations (customer orders, e commerce transactions, supply chain activities, Partner integration, Clinical notes et al). These feeds are captured using a combination of techniques – mostly ESB (Enterprise Service Bus) and Message Brokers.
- The raw data streams then flow into respective application owned silos where over time a great amount of data movement (via copying, replication and transformation operations – the dreaded ETL) occurs using proprietary vendor developed systems. Vendors in this space have not only developed shrink wrapped products that make them tens of billions of dollars annually but also imposed massive human capital requirements of enterprises to program & maintain these data flows.
- Once all of the relevant data has been normalized, transformed and then processed, it is then copied over into business reporting systems where it is used to perform a range of functions – typically for reporting for use cases such as Customer Analytics, Risk Reporting, Business Reporting, Operational improvements etc.
- Rinse and repeat..
Due to this old school methodology of working with customer, operational data, most organizations have no real time data processing capabilities in place & they thus live in a largely reactive world. What that means is that their view of a given customers world is typically a week to 10 days old.
Another factor to consider is – the data sources described out above are what can be described as structured data or traditional data. However, organizations are now on-boarding large volumes of unstructured data as has been captured in the below blogpost. Oftentimes, it is easier for Business Analysts, Data Scientists and Data Architects to get access to external data faster than internal data.
Getting access to internal data typically means jumping over multiple hoops from which department is paying for the feeds, the format of the feeds, regulatory issues, cyber security policy approvals, SOX/PCI compliance et al. The list is long and impedes the ability of business to get things done quickly.
Data and Technical Debt…
Since Gene Kim coined the term ‘Technical Debt‘ , it has typically been used in an IT- DevOps- Containers – Data Center context. However, technology areas like DevOps, PaaS, Cloud Computing with IaaS, Application Middleware, Data centers etc in and of themselves add no direct economic value to customers unless they are able to intelligently process Data. Data is the most important technology asset compared to other IT infrastructure considerations. You do not have to take my word for that. It so happens that The Economist just published an article where they discuss the fact that the likes of Google, Facebook, Amazon et al are now virtual data monopolies and that global corporations are way way behind in the competitive race to own Data .
Thus, it is ironic that while the majority of traditional Fortune 500 companies are still stuck in silos, Silicon Valley companies are not just fast becoming the biggest owners of global data but are also monetizing them on the way to record profits. Alphabet (Google’s corporate parent), Amazon, Apple, Facebook and Microsoft are the five most valuable listed firms in the world. Case in point – their profits are around $25bn in the first quarter of 2017 and together they make up more than half the value of the NASDAQ composite index. 
The Five Business Challenges that Data Fragmentation causes (or) Death by Silo …
How intelligently a company harnesses it’s data assets determines it’s overall competitive position. This truth is being evidenced in sectors like Banking and Retail as we have seen in previous posts.
What is interesting, is that in some countries which are concerned about the pace of technological innovation, National regulatory authorities are creating legislation to force slow moving incumbent corporations to unlock their data assets. For example, in the European Union as a result of regulatory mandates – the PSD2 & Open Bank Standard – a range of agile players across the value chain (e.g FinTechs ) will soon be able to obtain seamless access to a variety of retail bank customer data by accessing using standard & secure APIs.
Once obtained the data can help these companies can reimagine it in manifold ways to offer new products & services that the banks themselves cannot. A simple use case can be that they can provide personal finance planning platforms (PFMs) that help consumers make better personal financial decisions at the expense of the Banks owning the data. Surely, FinTechs have generally been able to make more productive use of client data than have banks. They do this by providing clients with intuitive access to cross asset data, tailoring algorithms based on behavioral characteristics and by providing clients with a more engaging and unified experience.
Why cannot the slow moving established Banks do this? They suffer from a lack of data agility due to the silos that have been built up over years of operations and acquisitions. None of these are challenges for the FinTechs which can build off of a greenfield technology environment.
To recap, let us consider the five ways in which Data Fragmentation hurts enterprises –
#1 Data Silos Cause Missed Top line Sales Growth –
Data produced by disparate applications which use scattered silos to store them causes challenges in enabling a Single View of a customer across channels, products and lines of business. This then makes everything across the customer lifecycle a pain – ranging from smooth on-boarding, to customer service to marketing analytics. Thus, it impedes an ability to segment customers intelligently, perform cross sell & up sell. This sheer inability to understand customer journeys (across different target personas) also leads customer retention issues. When underlying data sources are fragmented, communication between business teams moves over to other internal mechanisms such as email, chat and phone calls etc. This is a recipe for delayed business decisions which are ultimately ineffective as they depend more on intuition than are backed by data.
#2 Data Silos are the Root Cause of Poor Customer Service –
#5 – Data Silos vastly magnify Cyber, Risk and Compliance challenges –
Enterprises have to perform a range of back-office functions such as Risk Data Aggregation & Reporting, Anti Money Laundering Compliance and Cyber Security Monitoring.
It must naturally follow that as more and more information assets are stored across the organization, it is a manifold headache to deal with securing each and every silo from a range of bad actors – extremely well funded and sophisticated adversaries ranging from criminals to cyber thieves to hacktivists. On the business compliance front, sectors like Banking & Insurance need to maintain large AML and Risk Data Aggregation programs – silos are the bane of both. Every industry needs fraud detection capabilities as well, which need access to unified data.
My intention for this post is clearly to raise more questions than provide answers. There is no question Digital Platforms are a massive business differentiator but they need to have access to an underlying store of high quality, curated, and unified data to perform their magic. Industry leaders need to begin treating high quality Data as the most important business asset they have & to work across the organization to rid it of Silos.
 The Economist – “The world’s most valuable resource is no longer oil, but data” – http://www.economist.com/news/leaders/21721656-data-economy-demands-new-approach-antitrust-rules-worlds-most-valuable-resource
 Definition of Silo Mentality – http://www.businessdictionary.com/definition/silo-mentality.html