The effects and costs of poor data quality in SMEs must be made transparent. Only then can the path to digitalization be successfully taken. The goal is master data management and thus the optimization and standardization of master data maintenance. Effective master data management (MDM) enables companies to ensure that their core business data is consistent, correct and available across different systems and departments.
Data and data management are a very abstract topic for many people. Data cannot be touched. The costs of poor data quality are rarely obvious. There is no cost center for poor data quality. But even if the costs of poor data quality are usually not visible, they are always significant. Good examples help to sensitize management to the topic of data management. They can be used to demonstrate the effects and costs. The task of data management is to systematically collect and process data and use it in communication. This applies in particular to master data management. With this in mind, CDQ AG has identified six strategic drivers that demonstrate why master data management is at the top of the agenda for many companies.
Driver 1 - Digitization
Simply trying to use customer and product data for multichannel marketing and sales can cause unexpected problems. For example, an insurance company's digital marketing campaign failed due to the poor quality of the email addresses. The marketing campaign was carried out in the end - but by post. One task of data management is to systematically collect and process data and use it in communication.
Read more about this in our blog post "What is master data management?".
Driver 2 - Business processes
Tens of thousands of postal returns due to incorrect address data, unnecessary legal costs due to duplicate customer data - these are not isolated cases. At one insurance company, for example, more than a third of customer addresses are incorrect, resulting in around 50,000 letters being returned. The costs for postal returns amount to over 350,000 euros - per year. In addition, the multiple entry of the same customers (duplicates) results in unnecessary data entry costs and additional work in the processes. One task of data management is to create a uniform and up-to-date database for the entire company. This reduces costs and throughput times.
Read more about this in our blog post "What is a single point of truth?".
Driver 3 - Reporting and analytics
Companies have an interest in transparent, fast and accurate reporting. There are known cases in which expensively paid data scientists spend two thirds of their time searching for and cleansing data due to poor data quality. For example, one company was missing the industry classification for 30% of its corporate customer data. In addition, the VAT numbers were often incorrect or outdated. Due to duplicates in the supplier and material data, analyses of the entire purchasing volume generate a high manual processing effort. One task of data management is to improve the quality, accessibility and transferability of data.
Read more about this in our blog post "Data preparation - the basis for meaningful analyses".
Driver 4 - Compliance and risk management
There is no shortage of regulatory requirements in the European Economic Area. This applies, for example, to the implementation of the General Data Protection Regulation. In order to implement this, requests for stored information or even a customer's deletion request should be made quickly. To do this, it must be clear which customer data is stored in which systems. But this is often not the case. If there are problems with customer data, this damages the company's reputation; the economic damage is also not insignificant: violations of the EU GDPR can result in fines of up to 20 million euros or four percent of annual turnover. One task of data management is to manage data in one place. This saves costs for unnecessary data searches and avoids costly penalties.
Read more about this in our blog post "How data management leads to better business results".
Driver 5 - IT landscape
Master data management is often neglected during major system transformations. The effort involved in providing master data is often underestimated - particularly in relation to preparing the data for migration. The result: in some cases, poor-quality legacy data is migrated to a new system; the efficiency and user satisfaction targets associated with the introduction of the new system can then not be achieved. One task of data management is to synchronize and merge master data. This relieves the burden on master data maintenance and simplifies migration to new software systems.
Read more about this in our blog post "Mastering the SAP S/4HANA migration".
Driver 6 - Mergers and acquisitions
When companies are acquired or parts of companies are spun off, the data stocks must follow. Integration or separation - both cause costs and time expenditure. It is often not possible to adhere to timetables for integration or separation. In addition, the partial migration of poor-quality data to new systems means that savings and synergy targets cannot be fully achieved. One task of data management is to merge data silos and keep them centralized. This makes it easy to find data and make it available when required.
Our conclusion
All these examples show: Master data management is not just about creating and maintaining product, customer or other master data. The topic is much, much broader. Master data concerns almost everyone in the company. It is therefore crucial to get those involved to understand the importance of data management. The effects and costs of poor data quality in companies must be made transparent. Only then will the path to digitalization work. It is primarily about a change in attitude, not about enthroning someone who is responsible for the topic. For this change to succeed, it is essential to clearly highlight the value contribution of master data management. Examples must be used to demonstrate the monetary benefits of master data management and the damage caused by poor data management.
We would be happy to exchange ideas with you on a person-to-person basis. Get in touch with us by email or telephone.
