Outside In: Big Data, but how to put them to good use?

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15TH JAARCONGRES VAN NBA-VRC UTRECHT – 30 OCTOBER 2013 1

Wim A Van der Stede

CIMA Professor of Accounting and Financial Management

London School of Economics

Outside

In:

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Understanding what it takes for

organisations to effectively use relevant information

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• Big data!

“Companies are collecting more data than ever before. In the past they were kept in different systems that were unable to talk to each other, such as finance, human

resources or customer management. Now

[1] the systems are being linked, and [2]

firms are using data-mining techniques to get a complete picture of their

operations.”*

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• re

[1] – systems and data quality

“Most CIOs admit that their data are of poor quality. In a study by IBM half the managers quizzed did not trust the information on

which they had to base decisions. Many say that the technology meant to make sense of it often just produces more data.

Instead of finding a needle in the

haystack, they are making more hay.”*

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“For the first time in our long-running Key Issues Study program, finance executives ranked improving the quality of data above creating a

competitive cost structure as the

number one priority.”*

* Hackett Group,2013 Finance Agenda (21 January 2013)

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“The problem with managers is that they are

human. They have biases; they make

mistakes. But with better tools, they can make better decisions. Software that

crunches piles of information can spot things that may not be apparent to the naked eye.”*

* The Economist,Big data(6 April 2013)

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• But ...

“Torture the data long enough and they will confess to anything”*

Making the most of data is not easy

How to make meaningful inferences?

* The Economist, A different game (25 Feb 2010)

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• Designed and

• used by humans

How to have honest, unbiased

discussions of information?

How to encourage expansive, strategic thinking?

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eg, Johnson & Johnson

profit 2nd _year

plan forecast 5-10 year plans

1997 1998 1999 2000 2005 1998 1999 2000 2005 2010 1999 2000 2001 2005 2010 2000 2001 2002 2005 2010 2001 2002 2003 2005 2010 2002 2003 2004 2005 2010 2003 2004 2005 2010 2015 2004 2005 2006 2010 2015

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How to have honest, unbiased

discussions of information?

How to encourage expansive thinking?

Requires a decoupling from any type of performance evaluation

Debiasing will not happen without such decoupling

Incentives ruin the strategic discussions

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• Is the proliferation of data making them increasingly inaccessible?

– Required employee skills and training? • How to extract nuggets of gold from among the dross?

– Use of analytics to help make

organisations sense of their mountains of data?

• Role of data scientists, software programmers, consultants and business professionals?

– Are CIOs becoming more prominent in the C-suite?

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Algorithms and big data are powerful tools. But they must be designed and used by

humans. Wisely used, they can help.

But because they are designed and used by humans, they can also go horribly wrong.

eg, a case where the software rejected every one of many good applicants for a job because the firm in question had specified that they must have held a particular job title–one that existed at no other company*

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• Big question, big data, big

deal!

“During the financial crisis it became clear that banks and rating agencies had been relying on models which, although they required a vast amount of information to be fed in, failed to reflect financial risk in the real world. This was the first crisis to be sparked by big data – and there will be more.”*

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Wim A Van der Stede

CIMA Professor of Accounting and Financial Management

London School of Economics