Counting the cost of data mismanaged

February 17, 2009: No one is 100% certain of the cause of the global credit crisis, but Dr Thomas Redman points a finger at the lax approach to data by financial institutions. Dr Redman is the author of Data Driven: Profiting From Your Most Important Business Asset, and a keynote speaker and workshop presenter at the upcoming DQ Asia Pacific 2009 event in Sydney.

IDM: I see that your new book is getting good reviews.
REDMAN: It is. Thank you for noticing.
IDM: Can you tell us a little bit about it.
REDMAN: Of course. It is a mainstream business book, aimed at the general business community. It takes the position that data are assets on par with other assets, such as people and capital, and should be managed as aggressively and professionally as those assets. Most people think that statement is pretty obvious and it is. But managing data assets is hard work.

IDM: What are the top two or three things organisations need to do?
REDMAN: First, they need to make huge improvements to quality. The financial crises illustrate what can happen when the data are bad. Second, they need to put their data to work, most often to make money. And third, they need to recognize that data have properties far different from other assets. And they need to be managed accordingly.

IDM: Wait a minute. Are you saying that bad data caused the credit crisis?
REDMAN: “Caused” may be too strong. But bad data certainly made enormous contributions to the credit crisis. Think about it. Incorrect, maybe falsified, data on mortgage applications meant that bad loans were made. Bad ratings encouraged investors to buy the securities these mortgages got sliced and diced into. These helped make the sub-prime mess. And the credit crisis exploded when banks couldn’t even trust each other’s balance sheets!

IDM: I hadn’t though about it that way. I guess I thought the problem was just a bunch of greedy bankers.
REDMAN: Don’t get me wrong. Excessive greed certainly played a role. So did a lack of regulation and the reward structure. It is interesting to look at those things through what I call the “data and information lens.”

IDM: Please explain
REDMAN: Look at greed. Bad data makes it easier for the greedy to proceed unchecked. And the greedy are motivated to be opaque and manage the facts. So bad data and excessive greed exacerbate one another. I don’t think you can do anything about greed. But you can do something about bad data!

IDM: Fair enough. That seems like an important message for senior leaders at Australian financial services companies.
REDMAN: It is. And certainly not just for Australian companies. Nor financial service companies. As far as I can tell, financial data is no worse that health care, national security, or any other data. Indeed people have always told me that “data about money” has to be better than other data. So what happened in financial services can happen anywhere.

IDM: So is this a wake-up call?
REDMAN: I guess so. But I prefer to think of it as an opportunity. An opportunity to make financial markets more transparent, more fair, more efficient. An opportunity to make people healthier at lower cost. An opportunity to make all of us safer. And so forth. Viewed in that way, its not just senior leaders who can get something started. Factory workers, consumers, middle managers, practically anyone can lead at least one improvement project.

IDM: Hmm. I’ll have to think about something I can do. Now let’s get back to your book. What does “putting data to work” mean?
REDMAN: To me the true spirit of the Information Age is using your data and information in unique ways, to make better decisions, to “informationalize” other products and services, to provide content that helps consumers and others. There are at least fifteen ways to put data to work.

IDM: Aren’t organizations doing some of these things already.
REDMAN: Sure, but they’re just scratching the surface. Data Driven shows organizations how to think through the issues and opportunities in a disciplined way.

IDM: I can accept that. Now tell me a little bit about how data differ from other assets.
REDMAN: The most profound, and I think the least understood, is that an organization’s data are uniquely its own. Think about that a second. Your dollar and your competitor’s dollar are exactly the same. And they can hire away your best employees. But your data are yours and yours alone.

IDM: Okay, so what?
REDMAN: Think about how hard organizations work to distinguish themselves from their competitors. But there, in their databases, is stuff that no one else has. Not all data of course. But at least some of it. Organizations need to figure out exactly data they have that no one else does, figure out how to use those data for to competitive advantage, improve their quality, and make them more and more unique.

IDM: Yes that does make perfect sense. Let me change direction for a minute. You’re coming back to Australia?
REDMAN: Yes. I actually did my first consulting projects, when I still worked for Bell Labs, in Australia. That was in the early 90s. It was great to come back for the Ark conference last year and I’m coming back for this year’s conference, in March.

IDM: Are you going to expound on these topics?
REDMAN: Indeed.

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