Knowing and Competing with the Truth - Tapscott...

Knowing and Competing with the Truth:

The Advent of “Master Data Management” and Why it Matters to the CEO

By Don Tapscott Bob Tapscott and Don Tapscott

Knowing and Competing with the Truth:The Advent of Master Data Management

© 2006 New Paradigm Learning Corporation

1

Executive SummaryCORPORATIONS FACE ENORMOUS transformativepressure. Industries are consolidating, new businessmodels are changing competition and regulatory andreporting demands have never been so acute. Success inthis environment demands a new level of informationsharing. Markets demand that companies collaboratebeyond the walls of the enterprise in business webs, butinconsistent data seriously impedes communication,decision-making and the basic operations of networkedbusiness models.

To compete in this new world companies must bridgeinformation islands. The IT industry heralds thecollaborative prospects of Web Services, ServiceOriented Architectures, and networked APIs. Yet manyfirms lack the prerequisite lingua franca of commondata. The irresistible force of the new collaborativeenterprise is meeting an apparently immovable object:legacy systems, which lock companies into old businessdesigns and bury management in multiple myopic viewsof disaggregated, inconsistent, and dated data. Strandedinformation islands abound within the firm—fromcorporate databases and design drawings to Excelspreadsheets. The result can be a tangled mess ofinformation that impairs customer service, forcesduplication of effort, creates risk, and fumbles marketopportunities. What was once everyone’s problem andno one’s responsibility needs someone to accept the rolefor master data governance. Disentangling such systemshas historically required Herculean efforts, and mostbusinesses today lack a single, coherent version of thetruth.

After many failed attempts to address this problem,there is finally a workable solution—master datamanagement. Master data resolves the chaos of duelingspreadsheets and other incompatible data with masterreference data, an “accurate version of the truth.” Itdescribes and manages the basic objects of businesscritical to the enterprise, including, but not limited to,customers, products, suppliers, and employees. Masterdata is not about transactional data (e.g., purchase ordersor invoices that shuttle their way across the informationdivide) but about the underlying reference data thatgives these transactions context and meaning. Withoutconsistent master data for products, suppliers, andcustomers, “what” and “with whom” a transaction hasbeen instantiated is open for misinterpretation. Thisbasic level of hygiene creates the foundation for CXOsto know what is happening in their companies. And itprovides a foundation for true networked collaborationboth within and outside the firm.

To survive and thrive, you need to do more than justhook together disparate information systems. You needaccess to the single version of the truth in a context thatmeets both corporate and inter-corporate needs. In thepast, responses to the problem often required risky “big

bang” approaches. Today, those in search of master datahave new tools, techniques and governance practicesthat enable a discipline for the capture, control,verification and dissemination of master data. The resultis a more feasible iterative approach for untangling yourdata. Leading companies are using accurate master datato lift the veil of uncertainty from their businessoperations, aid reporting/compliance, reduce costs,increase sales, simplify processes, improve loyalty, andoptimize other IT investments.

As firms move to the next level, accurate referencedata is becoming the bedrock for both collaboration andcompetition. This paper examines the significance ofmaster data management, analyzes the challenges ofachieving it, and explains what’s required to make itsuccessful.

1.0 The Data Challenge:BackgroundIn the knowledge economy, they say, your company’smost valuable asset goes down the elevator and leavesthe building at the end of the workday. It’s a nice way toillustrate the idea that intellectual capital literally resideswith employees. And it’s a warning to corporate leadersabout losing control of the very thing that gives theircompanies value.

Of course, it’s an overstatement—information doesn’tentirely empty out of the building and join the eveningrush hour. But it raises the question: where doesinformation reside?

The historical answer is that information is maintainedin the areas of the business that need it. In the daysbefore electronic connectivity, that meant duplication,because departments kept or maintained their owncopies. Product groups, relationship managementgroups, shipping, and billing might all have versions ofthe same data. In other cases, information was strandedin one area of the business. The sales division, forexample, kept a trove of customer information inRolodexes, Excel spreadsheets, electronic address

“Master data resolves the chaosof dueling spreadsheets.”



2

books, and customer relationship managementapplications unavailable to the rest of the organization.Duplication and isolation aren’t good ways to manageinformation, but even when management tried to createand control the master copy, convenience often trumpedcompany policy, and documents suddenly had fraternaltwins in other departments.

With the advent of the Internet and low-costubiquitous networks, the information housing marketheated up, and we saw generations of informationmanagement tools attempt to organize intellectualcapital so that it was accessible, consistent, and secure.Ubiquitous connectivity can magnify the problem ofwhere information lives, but it also contains a potentialsolution:

• Connectivity can exacerbate the problem: Thesame human/business issues remain, on a largerscale. We now can (and do) generate much moredata1, and it still tends to live in multiple versionsaround the organization. What was once guardedin mainframes can now be readily accessed andused by a business analyst—who may make hisown copy and inadvertently generate even moreanomalies to reconcile, and new versions todebate… New islands of data surface continually.Too often, changes are initiated at the point ofpain (be it at the shipping label, the cell phonedirectory, or the invoice) without the correctionever making it back to the master file.

• Connectivity may enable a solution: On thebright side, ubiquitous connectivity is anopportunity to bridge isolated islands ofinformation or even to make that informationavailable in places it’s never been seen. Low-costconnectivity isn’t just a cheaper way to shunt datafrom place to place. It’s also a place to make workprocesses, collaboration, transactions, andcommunications more efficient. Lowercommunication costs allow for new forms oforganization and new ways to collaborate acrossorganizations. Business structures—largelyunchanged for decades—are transforming.

And transform they must. New global competitivepressures are creating the greatest shift in thecorporation in over a century. In yesterday’s commandand control organizations, management could cobbletogether enough information to make decisions and staycompetitive. But no more. To move to the next level,organizations must use their information to compete.That means changes in the organization itself, saysDavid Newman, Research VP, Gartner: the “advances in

Bad Master Data –A Cautionary TaleIn one regional Bell operating company,bad master data led to enormousprovisioning costs, and in many cases,unbilled services inadvertently provided tocustomers.

Telephone companies have complexsystems that provision and bill fortelephone lines—systems so complex thatmost regional Bell operating companieshave historically created separateorganizations to handle these twoessential business functions. Keeping thesystems separate, the theory went, wouldmake for cleaner systems. When acustomer ordered service, two processeswould occur in parallel: the provisioningsystem would deliver it, and the billingsystem would begin to charge for it. Atleast in theory.

But in practice, bad data, incompletebilling information, failed credit checks,incorrect ZIP codes, cancelled orders, andother anomalies can halt the billingprocess while the provisioning processcontinues. Conversely, lack of capacity,distance from a switch, and other factorscan cause parts of the service to “fall out”of the provisioning systems even thoughbilling begins. One regional Bell operatingcompany’s reconciliation efforts go backto 1993. In that case, fallout has reachedup to 25%, and unbilled loops in serviceran as high as 4%.

If the service is billed and not provided,customers get angry but, eventually, themistakes are corrected. However, whenthe opposite situation occurs—serviceprovided but not billed—far fewercustomers complain. Trapping informationsystems in silos hasn’t worked, but asolution to the problem has eludedmanagement.



3

enterprise information management are transforming,indeed flattening, prior organizational models.” 2 Intoday’s distributed organization, control and decision-making power is pushed out of the executive suite andonto the front line. The data that spans the corporationmust be consistent, credible, and available everywhere.

Uniform reference data, or master data, is a cornerstoneof the “actual version of the truth.” To be a recognizedtruth, everyone who needs it—in and outside theboundaries of the organization—must have access to itand be able to use it. The truth can’t be hidden andprotected in an isolated database or legacy system.History has shown that if IT will not share, businessunits will create their own copies. But a successfulmaster data implementation is a significant challenge.Even the most progressive firms have found the goal ofcoherent master data almost within their grasp, only tosee it slip further away with the next merger, acquisition,or business opportunity. More and more often,opportunities are based on partnerships in fluidconfigurations of networked businesses. Membershipand roles shift continually in these new business webs,and moving at the speed of your legacy systems isn’tenough to participate or compete.

In the new sea of information systems, access to thetruth is more important than ever. Says Newman: “this isa symptom of a much broader problem: how to useinformation and how to manage information morestrategically.”3 Today, there’s little competitiveadvantage to be gained through physical assets buttremendous benefit to having the best customerrelationships, the most efficient coordination, and themost accurate business intelligence. That’s why gooddata is so critical. To survive and thrive, you need to domore than just hook together disparate informationsystems. You need access to the single version of thetruth in a context that meets both corporate and inter-corporate needs. In the past, responses to the problemoften required risky "big bang" approaches. Today,those in search of master data have new tools,techniques and governance practices that enable adiscipline for the capture, control, verification anddissemination of master data. The result is a morefeasible iterative approach for untangling your data.

2.0 Master Data: The Threats

The information and operating silos that characterizedorganizational structures of the past created multiplemyopic views of a company’s master data. Logical andsemantic differences and reference numberinconsistencies create a world of headaches. Untanglingand rationalizing your information systems is a case ofeasier said than undone.

Today, data anomalies can propagate quickly—notjust through an organization but beyond its walls. It’slike a bad rumor: difficult to contain once it gets out.The critical master data that spans and reaches outsideorganizational boundaries has been the hardest to controland organize. Even if you could achieve consistent andwell-defined data within the boundaries of yourcompany, it’s not enough. Control is now distributedbeyond the organization to associations, supply chainpartners, and customers, all of whom expect and thendemand accurate data. Ed Toben, CIO of Colgate-Palmolive, notes that “within the consumer goodsindustry, there’s a real push with the retailers on datasynchronization.” It seems simple, says Toben, but aretailer’s product database doesn’t always match theinformation maintained by the manufacturer: you can“have discrepancies just based on data.”4

Your bad data can harm customers and suppliers anddestroy long-standing relationships in an instant. For oneCanadian bank, the trouble was a single extra digit in acorporate fax number. Between 2001 and 2004, bankemployees mistakenly faxed hundreds of confidentialcustomer records to scrap yard owner Wade Peer inWest Virginia. Peer tried to contact the bank about theproblem but, he explains, “We couldn’t get the time ofday…They were rude and hung up the telephone.”5

When the story broke, the bank’s customers wereunderstandably outraged.

Or your customers and suppliers may use your baddata to take advantage of you. For example: a large realestate conglomerate approached three arms of the samemultinational bank for an eight-figure loan. Not havingaccess to good master data, the three departments cameback with different proposals. The real estate firm, ofcourse, took the best deal: it knew and exploited thebank’s blind spots. The global bank was thinking global,but acting local—and with disaggregated local data,what else could they reasonably be expected to do?

The speed of business cycles contributes to datamanagement headaches. It used to be that reviewingyour results once a quarter was enough. But paradigm-busters such as wireless networks, RFID, GIS data,

“To move to the next level,organizations must use theirinformation to compete.”



4

micro-transactions, enterprise-wide databases, and next-generation business intelligence tools now allow you totake the pulse of your business in real time. If yourcompetitors are monitoring daily trends, it does you nogood to learn that last quarter you lost serious marketshare in a key territory. William McKnight, Senior VicePresident, Data Warehousing, Conversion ServicesInternational, remarks on the increasing importance ofmaintaining one version of the truth: “firms are nolonger granted a wide margin to pull together a singleversion of the truth on the fly. In the heightenedcompetitive environment, firms need to be able to reactto market conditions quickly. It’s worth the up fronteffort to ensure that your systems have access to trueand accurate data.”6

It’s embarrassing and expensive to join a business web(b-web) and discover that b-web partners know morethan you do about your relationship. Gartner’s DavidNewman remarks on this particular strategicdisadvantage:

Research and observations verify gaps in applyinginformation strategically, especially for leveragingglobal purchasing power. I’ve been privy to situationswhere suppliers knew more about a businessrelationship than the company did, and it wasembarrassing to the CIO. Such exposures are drivingCIOs to fund initiatives, such as business intelligenceapplications, which consolidate, track and producepreferred supplier relationships. Results from suchefforts can yield between 20–30% savings fromvolume discount programs.7

What Newman describes is not only embarrassing butalso expensive, and the lost opportunities add up.

3.0 Why Worry About MasterReference Data Now?Why did we ever tolerate disconnected or inaccuratesystems? The chaotic hairballs of Mandelbrot-inspiredcorporate data flow diagrams date back thirty years, andmany a project has tried and failed to unravel them. Whyall the current buzz about master data management andEnterprise Information Architectures? And why, as aCEO, must you act now? Yes, it’s good housekeeping:clean and accurate data helps cut costs and improveefficiency. But now master data is becoming strategic:as businesses become information businesses, dataissues become business issues, and the firm with the bestdata wins. Let’s look at some of the drivers.

3.1 Think Global, Act Global

The mantra of the last decade “Think Global, Act Local”is no longer sufficient. Only recently have globalorganizations begun to act beyond local operatingcountries. In the early 1980s, one of the leading NewYork money center banks developed a cash managementsystem that would allow a company to see its accountpositions globally. Using the system, a multinational’scountry CFOs could see positions by currency and bycountry—for example, if the CFO in London was longYen, and the CFO in Bonn was short Yen, they couldexchange funds internally without paying to buy and sellcurrency on the open market. But when the bankpresented the system to a Detroit-based automanufacturer, the country CFOs were horrified. Theywere accustomed to sending monthly summaries of theirresults to head-quarters. The thought of Detroit beingable to see their numbers before the local CFO hadadded value to the summary (or spun the numbers) wasunacceptable. Their balances, they believed, were notthe business of another country’s CFO, even if suchknowledge could create global efficiencies.

The money center bank’s cash management productwas decades before its time. Back then, it wasacceptable—even necessary—for every country to havea separate relationship with each supplier. Until recently,for example, trade barriers encouraged ColgatePalmolive and others to locate manufacturing operationsin each country, and IT operations with local databasessprung up to support these operations. Incompatiblecountry-by-country information systems made itdifficult for different operations to communicate withone another. To optimize global purchasing powertoday, you need a global view of your relationships.Without master data on products, suppliers, andcustomers, optimizing these relationships is not possible.

3.2 Crisis of Trust

In the last few years, businesses have experienced acrisis in trust. Accounting scandals, exaggeratedearnings, analysts on the take, and other conflict-of-interest scandals have shaken the integrity of the system.Today’s CXOs must not only contend with the resultingmistrust, but also conform to a list of new regulatory andcompliance measures (Sarbanes Oxley, Basel II, amongothers). In itself, trust and integrity in business is a

“How can you be honest without a‘single version of the truth’?”



5

simple concept. It’s the expectation that the other partywill be honest, considerate of your interests, accountablefor their commitments, and open and transparent. Eachof these values has corresponding implications for yourdata:

• Honesty: Firms need shared visibility into theirown operations to set expectations withstakeholders and the rest of the world. Shellreported inaccurate information about their oilreserves, which led to a trust crisis and theresignation of their CEO. How can you be honestwithout a ‘single version of the truth’?

• Consideration: Firms cannot take intoconsideration stakeholders’ interests unless theyknow what those interests are. Without afoundation of reliable data for iterative analysis,understanding stakeholder needs and interests is aguessing game.

• Accountability: To abide by their commitmentsand be consistent with their claims, firms needsystems to translate strategy into measurableaction. They must monitor and report performanceagainst goals. Performance measurement systemsare only as good as the data they rely on.

• Transparency: Open firms require open ITarchitectures that can share accurate data withcustomers, suppliers and other stakeholders.Financial reporting, product information,transactions, and market data all have wideaudiences. Fulfilling demand for good data notonly improves stakeholder relations but, byenhancing visibility across the enterprise and thesupply chain, lowers transaction costs andaccelerates innovation. The movement towardseXtensible Business Reporting Language (XBRL)will open the corporation to an unprecedentedlevel of quantitative and qualitative analysis. Line-by-line analysis of your balance sheet and incomestatement versus your competitors will reveal thecredibility of your organization and thesustainability of your brand. Bad master data willaffect not only your relationships but also yourstock price.

3.3 Cost / Complexity

Companies have long understood the internal impact ofbad data but have found it prohibitively expensive tountangle the hairballs. Distances were vast between theislands of data, in terms of geography, data structures,and platform. Though MVS and VMS have three letters

in common, connecting the two platforms withreliability and integrity was difficult and connectingacross long distances impractical. It was faster andeasier to create another local copy than to coordinatesystems for universal access to consistent master data.But now low network costs mean multiple disjointedcopies of master data are highly visible, and new globalrelationships make these anomalies embarrassingimpediments to doing business. At Nortel, a global ITrollout is designed to integrate the company’sinformation systems across all regions and divisions ofthe company. An integrated approach with sharedmaster data will support the company’s transparencyobjectives and remove costs from Nortel’s supply chain.Says Gabriele Bauman, SAP Technology Lead at Nortel,“The number of systems and the number of interfacesthat we’re reducing are quite significant, and we expectto lower our SG&A [Selling, General, andAdministrative] costs.”8

3.4 Advances in Connectivity

Manually synchronizing data used to be tolerable.System design was a trade-off between actual businessrequirements and the hardware, network, and peoplecosts. You only have to think back to the origin of theY2K problem in the 1970s and 1980s—the savings of afew bytes by programming a six-digit date—to realizethat information system designs were often tradeoffsbetween the expenses of hardware versus the cheaphuman “middleware” that kept them in sync. Today thatcost/ benefit data equation has been reversed. Thehuman costs of unsynchronized data are much higherthan the network and systems costs that could keep themunified. The Internet is a cheap, fast, reliable way toconnect the world’s computers, and reliable high-speedglobal bandwidth is nearly free.

3.5 Advances in Software

The service bus as a construct, and the creation ofmiddleware to leverage it, has greatly simplified someaspects of the problem. Connecting all computers to oneservice bus dramatically simplified the inter-connectivity issues. But connectivity is notcommunication: without MDM the potential benefits arelimited. Store and forward, publish and subscribe,replication, and other tools and techniques make it easierto share data. Now, with inexpensive off-the-shelfsoftware, master data can be consistently and reliablyreplicated to many sites, as bandwidth and availabilitypermit. It’s a powerful enabler, but without commonmaster data, it’s of limited value. The commitment of



6

many companies to Service Oriented Architecturescould offer tremendous benefits—services may be mucheasier to share and reuse. However without commondata definitions and data instances the connectedsystems will have no basis to communicate. Data is onlyas strong as its weakest instance. You may have acustomer’s name, country, and valid shipping address,but without a coherent master data strategy, you won’tknow whether customer John Smith has two differentshipping addresses, or whether you have two differentJohn Smiths. Creating multiple instances of the samereference data has been easy; reconciling them nearlyimpossible.

The upshot is this: bad data has been a problem sincethe time of competing abacus models. But today thestakes are higher: business cycle times are faster, thevolume of information is exponentially higher, andsurvival depends on being closely networked with youremployees, customers, and suppliers. We’ve reached the“second half of the chessboard.”

4.0 Attempts to Solve theProblem in the PastIn the past, organizations have recognized, organized,and taken action against the problem of bad data. Theseapproaches have been largely unsuccessful, but they dohelp identify the characteristics of a real solution.

4.1 Status Quo

For many, the path of least resistance is to do nothing.Some companies, unaware of the macro-level issues,apply quick fixes when and where problems appear.Others are overwhelmed by the complexity of moving toa better architecture and have simply decided to livewith the mess. Periodic efforts to harmonize data aresoon out of date, so what’s the point? From time to time,these companies do the minimum data scrubbing neededto keep the business operating. Data woes are usuallyinherited, and all too frequently executives pass them totheir successors as a corporate “heirloom.”

4.2 The Silver Bullets

Methods and technologies that promise to solve legacyproblems come and go, but disconnected incongruentdata remains. The list is long: Relational, StructuredDesign, 4th Generation Languages, Rapid ApplicationDevelopment, Encapsulation, eXtreme Programming,Object-Oriented Design, Centralized then Distributedthen re-Centralized, then ASP’ed processing. No clients,

then fat clients, then thin clients, now rich clients.Unfortunately, most of these foundations for a fix haveonly exacerbated the problem. Though they sometimesmade it easier to connect and integrate isolatedinformation systems, they didn’t reconcile the data. Toooften the solution to the current problem became thenext problem. For example, connectivity betweenisolated systems needed to reconcile data createdopportunities to generate yet more copies. Even whenprioritized, primitive data scrubbing or cleansing toolsand techniques weren’t up to the task. The result? Firstand third party systems that promised a centralizedCustomer Information File (CIF) produced yet anotherone. And “CIFs” is a one-word oxymoron: if you havemore than one CIF, by definition you don’t have one.

4.3 Scrap and Rewrite

This approach attempts to redesign and rebuild coreapplications to undo past mistakes. Such projectstypically assume that the organization can stay the samewhile it cleanses and consolidates systems and data. Thevertically integrated corporation might have been able toclose up shop and bear the expense and inconvenienceof retooling (Ford, for example, shut its River Rougefactory for an entire year in the 1920s to retool for theModel A). But today data and information technology isa lifeline for many businesses, and in a 24/7 world,every minute of uptime counts. The cost and risk offreezing the business model to clean house is simply toohigh. And why bother? The house won’t stay clean forlong: the next merger, acquisition, or b-web entrantbrings with it a new and unknown set of data, semantics,redundancy, and inconsistencies. Industry standardssuch as UCCNet and XML have helped, but with datamoving to the edges and becoming inter-enterprise, anyopportunity that CIOs might have had to controlcorporate data definitions is quickly slipping throughtheir fingers.

4.4 The Borg

In the past, one approach was to replace all your systemsto conform to a single vendor’s solution and itsunderstanding of the industry’s best practices. Thisapproach often worked well for non-differentiatedfunctions. But for those functions, services, and systemsthat make your company and its relationships unique,

“The cost and risk of freezing thebusiness model to clean house issimply too high.”



7

integrating these new comprehensive systems with otherexisting legacy differentiators remained a formidablechallenge. What is needed is an approach that offers thebenefits of integration from a single vendor, yet is openenough to plug into the network of inside and outsideservices and applications.

4.5 Data Warehousing / BusinessIntelligence

Extracting Transforming and Loading (ETL) legacy datato create a more sensible view of the enterprise is thebasis for the explosion of Business Intelligenceapplications. The ETL programs are written to eliminatesuspected redundant data and to collect and assemblepartial data from multiple repositories to achieve a morecoherent view of the customer, the products, and theenterprise. For the first time in many companies, seniormanagement can get a credible macro view of, amongother things, corporate activities, products, customers,and their interrelationships. The new multi-dimensionaldata structures allow for sub-second response time toslice and dice the data in ways never before imagined. IfCXOs prefer a different view, it can be constructedwithout modifying the legacy systems or underlyingdata. Very powerful. In reality though, the “garbage in;garbage out” maxim still applies. Making best guessesabout data does not give you the best data. Making

assumptions about inconsistent data and good guessesabout incomplete data may paint a more completepicture but not always a truer one. Though tempting, thisnew data cannot be used as a Production Data Store orfor Corporate Performance Management.

5.0 The New Solution:Master Data Management

5.1 Schematic: Enterprises Engage WithBusiness Webs (see Figure 1)9

Master data management will be a foundation of the newcollaborative enterprise and a necessary building blockfor the new Services Enabled Organization. Master datais moving towards the edges in terms of its definition,semantics, attribution, and use. Open access to sharedreference data, a prerequisite for effectivecommunication, will be essential to the emergingcollaborative Internet.

5.2 Master Data Management

Master data management once was everyone’s problem:shipping had to have the right address, sales the rightphone numbers, marketing the right householding andother demographics. Everyone attempted to guarantee



8

the integrity of their relevant but overlappingpiece—which meant that everyone was in charge but noone was actually responsible. IT frequently attempted todeclare ownership and take responsibility but generallyfailed. Says Robert Scott of Procter & Gamble,“Managing data is a business issue not a technologyissue. If the IT organization tries to take it on by itself asa technology issue, it won’t work.”10 Effective datamanagement requires not only system and processchanges, but changes in corporate culture andgovernance on how data is perceived, viewed, shared,distributed, and used.

Every CIO dreams of re-architecting and rebuilding anew set of business-driven solutions to meet today’s(and ideally tomorrow’s) needs. But you can no more“freeze” the business than you can decide to take a napwhile driving down the highway. You need the methodsand tools that can take you from A to B without hittingthe pause button. For any existing company, a solutionto master data management means more than just newarchitecture, shared data definitions, and data scrubbing.What was once everyone’s problem and no one’sresponsibility needs someone to accept the role formaster data governance. As Leslie Hagan, ContentManagement Leader, GE Consumer & Industrial, notes,“technology by itself does not fix broken processes.”You need to drive responsibility and accountability saysHagan, “Prior to MDM…we really didn’t have definedowners. Now we do.”11

The real challenge is making inroads on the ‘spaghettidiagrams’ that represent an organization’s informationflows. Confides David Newman of Gartner: “Thepicture of integration complexity today is the proverbial

‘spaghetti diagram’ of point-to-point interfaces—acomplex maze of duplicate and inconsistent informationwhich creates maintenance backlogs for IT andinconsistency in decision-making and a [lack of]responsiveness by business units.”12

Historically, efforts to untangle the spaghetti weretransient. You could win every battle while losing thewar. As one tangle of redundant data was straightenedout, efforts moved to the next, but new modifications toa member of a previously reconciled group would

retangle the clean data. What is needed is a system thatcan remember the results of a point-in-timereconciliation and ensure that future changes arepropagated to all occurrences one attribute at a time.

To make the transition to one master set of globalreference data, the ideal master data management systemneeds to:

• Provide powerful tools for untangling data:Master data systems need to do more than simplyhighlight and help repair discrepancies. They mustensure that once discrepancies between the valuesin question are resolved, they stay resolved.Furthermore, organizations need tools andtechniques that can untangle redundant,incomplete, and inconsistent data while it’s still inuse. The ideal solution creates and thenremembers the relationships between the legacydata islands and then ensures that all instances ofthe same data are kept up to date. The previouslyunfathomable task of preventing disparatedatabases from diverging needs to be automated.

• Integrate to enable reduced complexity: Masterdata should openly integrate as seamlessly aspossible across your systems and the systems ofyour b-web partners. Removing complexity meansreducing the number of “interfaces” within yourIT systems. “The fewer moving parts the better,”says Colgate Palmolive CIO Ed Toben, “you’vegot to make it simple, because quite frankly, it’stoo hard.” MDM solutions that maintain all masterdata in one place can ensure that the rules that anorganization needs to apply to its reference dataare consistently applied. No more addresseswithout customers, or orders for phantomproducts. Built-in support for industry data poolslike Transora or UCCNet are desirable assets inany b-web master data system. But theimplementation of master data should ultimatelysimplify the processes as well as eliminate thereconciliations.

• Be good enough to feed operations: A masterdata system needs to have the intelligence andintegrity to bidirectionally harmonize legacydata—wherever changes occur to wherever it isstored—with integrity sufficient for theoperational systems that depend on it. Unlike theETL process that creates a best-guess datawarehouse, verified master data will become thesystem of record for all operational systems.

• Recognize the reality of a heterogeneouscomputing environment: Vendors can’t be all

“The real challenge is makinginroads on the ‘spaghetti diagrams’that represent an organization’sinformation flows.”



9

things to all people and, even if they could, not allmembers of your b-web will have chosen thesame vendor. Heterogeneous computingenvironments are alive and well, so master datamanagement solutions must be open, interface andrapidly reconcile with these applications, andbring rogue and foreign data into the fold.Reference data are the common semantics withwhich you describe your business, be it throughtraditional applications or as a foundation of your

Service Oriented Architecture. Clean referencedata is required for unambiguous communication.

• Be ubiquitous, and readily accessible: Userswho need the reference data that’s hidden andprotected in a corporate data center will sooncreate their own. The data needs to be highlyvisible, so that its anomalies are quicklyrecognized and resolved. Support for rendering ofimages, be it a photo or a CAD diagram, needs tobe fully integrated to discourage multipleunofficial versions from propagating. Master dataproperly secured must be visible on the intranet orInternet to everyone who needs it—be it to aprogrammer through an API or to an end userthrough a browser or a spreadsheet. The onus ison data to “go” where the business users are, notthe other way around.

• Keep data clean: Master data management isn’t aproject that starts and ends, says Joe DeZarn,Director of Marketing Communications,Rubbermaid Commercial Products—”nothing inthis realm is a one-time purchase.”13 The idealsolution means adopting a relationship and way ofdoing business, not just a product. Master datamanagement is a discipline that combinestechnology, data stewardship, and a process ofcollaboration and standardization of informationwithin the firm that keeps your data clean.Entropy doesn’t surrender: you need a disciplinedand ongoing approach to keep it at bay.

• Avoid silos based on different data definitions:Some master data management approaches aredesigned for specific data types—for instance, onemaster data solution for customer data, another forproduct data, and perhaps a third for employees.The underlying (false) assumption is that these are

islands unto themselves. But what happens whenyour b-web needs to recognize a customer as asupplier, or when a supplier contract precludesselling to a particular customer? What happenswhen the delivery of the products have employeedependencies? The reference data need not onlydefine the basic objects of business thattransactional systems reference, but also enforcethe business rules on interrelationships betweenthese objects, on which the business depends.

These are the “non-negotiable” requisites of a masterdata management solution. A truly useful solution is notjust a common repository but a killer app. With acombination of technology, data stewardship, and newprocesses, it can radically simplify the effort required tostandardize information within and between firms, andcan be a powerful tool in creating the communicationrequired in new business webs.

6.0 The Reward:Single View of Data Helps YouSurvive, Compete, Grow

6.1 The ROI of Master Data Management

The Bob Dylan approach to business cases (“You don’tneed a weatherman to know which way the windblows”) is inadequate for most CEOs, especially when itcomes to investing in information technology. CEOswant evidence that investments can, have, and will payoff. The business case for master data management iscompelling. Our research shows that companies can:

• Reduce costs through simpler processes: Oftenthe reconciliation of data anomalies is what drivesup costs. Clean master data lowers costs byreducing errors through more efficient, effective,and repeatable processes. According to IDC, GEachieved an ROI of 123% on its master datamanagement investment. For GE, a master datamanagement product and its dynamic publishingcapabilities also offered dramatic benefits inmaking master data more visible and, through thatprocess, more accurate. GE’s Leslie Hagan saysthat by using MDM to manage productinformation in GE’s appliance business, “Wefound a 50% increase in the catalog teamproductivity [and] 90% decrease in cycle time.”14

Many business users and data owners within thebusiness are now owning and updating their datawithout using an intermediary in IT. There are farfewer errors.

“You’ve got to make it simple,because quite frankly, it’s toohard.”



10

• Optimize a prior investment: For others, masterdata management is a way to achieve greatervalue from existing investments. For example,some organizations consolidate their ITinfrastructure to cut costs and increase efficiency,but soon discover that their systems, thoughconnected, still don’t communicate. Properlyimplemented, master data makes true businessvalue materialize. Take the example of NewYork-based Pfizer. The company attempted tointegrate 14 different information systems in orderto obtain an enterprise-wide view of its data.Along the way, Pfizer recognized that datainconsistencies were paralyzing its integrationefforts. Explains Danny Siegel, Senior Manager of

Business Technology at Pfizer, “You put all thedata together and you’ve won the battle, but lostthe war.”15 For Pfizer’s integration effort tosucceed, adds Siegel, “We saw that we had to putin place some rigorous data standards.”16

• Increase sales and customer loyalty: Effectiverelationship management depends on reliablemaster data: without it, you limit your ability tocross-sell or up-sell or offer appropriaterelationship pricing. As pricing strategies becomemore transparent to customers, you can’t afford tomake do with myopic views of your customerrelationships—when you get it wrong, youalienate customers. On the other hand, havingaccurate real time information customized to thepoint of delivery is a powerful marketing tool. JoeDeZarn of Rubbermaid believes accurate data canalso drive sales: “When you go to market throughdistribution, every one of those distributors isrelying on our company to provide them withaccurate, timely and complete (product)information. If they don’t know about it and don’thave it right, they can’t sell it… We have gonefrom being—like most of the othermanufacturers—pretty good at delivering most ofthe information most of the time… to being verygood at delivering all of the information all of thetime.”17

6.2 The Strategic Advantage ofMaster Data Management

For others, the move to effective master datamanagement goes beyond traditional approaches tobuilding a “business case.” They recognize master datamanagement as a prerequisite for growth: it’s moreabout market share than about operational efficiency.

If you want to think globally and act locally,unreconciled country-specific copies of master data maysuffice. But if you want to act globally you needcommon reference data. A company placing a globalorder with you for a specific product will expect theproduct to have one reference number and onedescription, regardless of country. So in reality thedecision to clean up your data anomalies may be madeby your customers and the markets you in which youcompete.

In the past, few departmental data reconciliationprojects truly succeeded, and positive results werefleeting at best. The benefits did not justify the massiveefforts for a permanent fix. But advances in technology,including the Internet, have made the problem morevisible and the solution less expensive. At the sametime, the creation of b-webs has exacerbated theproblem, redefined its dimensions, and reduced the timeavailable to solve it. It takes much less time to resolvetwo departments’ data disorder than to integrate in anever-changing b-web. But is there a traditional businesscase? Do the strategic benefits—greater agility andfaster decision-making—show up in quarterly financialstatements? Progressive companies see the larger picturefor their organizations, pushing forward in cases wherethe benefits are obvious but difficult to enumerate.Robert Scott describes this tension in the rollout ofP&G’s worldwide standardization effort, where thesheer momentum of the company’s globalstandardization effort took on a life of its own. Numberof implementations completed started to become asimportant as dollars saved or speed to market:

We decided to step back and ensure we were realizingthe savings we set out to achieve. In many cases, wewere able to document the savings, but in some caseswe simply weren’t able to. We just shrugged ourshoulders and said “For the good of the order we’redriving a standard platform that will pay off in thefuture.” The approach was borne out with our next setof acquisitions. For example, Clairol was twice thesize of some of our previous acquisitions, but webrought it into P&G in half the time.18

“Properly implemented, masterdata makes true business valuematerialize.”



11

The most effective approach is to seek concrete ROIthat’s derived from these strategic benefits:

• Improved business intelligence: Conclusions areonly as good as your data, and master dataprovides a more accurate foundation for businessintelligence. Says Robert Scott at P&G, “If one ofyour key indicators is out of whack, you want tobe able to drill down and understand what’s out ofwhack and why, and what you can do to correctit.”19 Making no decision based on not knowingcan be better than the wrong decision based onbad data or wrong assumptions in your ETLprograms. Better information also helps firmsoptimize their business relationships. Says DavidNewman at Gartner, “Many organizations can’tleverage their global purchasing power because,although each division is dealing with the samesupplier, the divisions don’t know at a corporatelevel that this is going on. Centralizinginformation about suppliers for the purposes ofleveraging or developing volume discounts basedon global purchasing power is just notaccomplished in many organizations.”20 A moreaccurate picture of supply chain and businessrelationships gives you the competitive advantageof better decision-making.

• Increased agility: Good master data allowscompanies to incorporate Mergers & Acquisitionsfaster (at P&G for example) and increases theirability to digest inevitable changes in products,customer information, or b-web relationships.Rapid integration of customer, product, andresource information can offer enormous strategicbenefits. Firms with bad master data are like aperson with no memory—even if they interacteddays or just minutes before with a customer,supplier, or internal division, every interactionfeels like a first-time meeting.

• Better relationships: For many, the desire forexternal communications has driven master datamanagement efforts. Once master data isconsolidated, interacting outside corporate wallscan yield tremendous strategic opportunities:

» Streamline the flow of complex information:GE Consumer & Industrial uses a master datamanagement system to draw data frommultiple sources and publish it for customers.“We really have honed and fine-tuned ourability to deliver content to these customersjust in the last year,” says Leslie Hagan; GE’smaster data management system offers

customers a wide choice of formats, “Did theywant it in Excel spreadsheets? Did they wantit in XML?”21 Master data management helpsstreamline the flow of information and publishit in whatever form customers need.

» Support industry standards: One driver ofP&G’s master data management effort wasthe desire to interact with supply chain datapool 1Sync (formerly Transora): “Our workplan for the past couple of years has beenbuilding [systems] so that we can bestandards-compliant,” says Milan Turk Jr.,Director of Customer e-Business.22

» Present a single face to the customer:Presenting a single face to the customer is animportant part of sharing information beyondcorporate walls. Whether it’s reducing theburden for customers with one password orfewer reconciliations or making sure that aninteraction in one distribution channel isreflected in all the others, master data is astrategic prerequisite for effective customerrelationships. Says Tim Butler, NorthAmerican Market Development OrganizationCIO at P&G, “For global customers, ratherthan seeing four or five different faces ofP&G, and different outputs from thosesystems, they’re getting consistent output nomatter what country it’s coming from.”23

» Forge relationships proactively: Says LeslieHagan at GE, “We’ve gotten voice-of-the-customer data specifically from our contactsat [Home] Depot, at Lowe’s, Wal-Mart aswell…Our ability to proactively forge therelationship, now that we’re in a position tocontrol our content, has benefited usgreatly.”24 If you become the source of datafor your supply chain, the connections youbuild are a source of competitive advantage.In the world of information, it’s better to be ahub than a spoke.

» Reach the users of data: Data does little goodisolated in an Excel spreadsheet or hidden inan inaccessible legacy database. In manycases, business users are forced to constructSQL queries or request technical support tohelp them get the data they need. Next-generation master data management toolshave the flexibility (via APIs, dynamic HTMLgeneration and other interfaces) to makeconnections to end users within the firm



12

easier. At GE, product managers andmarketing managers can import and maintainmaster data directly. Now the same benefitscan also be extended beyond corporate wallsto customers, suppliers, and partners.

» Make Web 2.0 your reality: Next-generationorganizations are already creating the newwave in collaborative relationships—a worldof seamless services that traverse theboundaries of the firm. Web services andService Oriented Architectures arecompressing development and release cyclesand enabling important service innovations.Coherent and consistent master data sharedoutside the firm can provide the foundationfor engaging employees, customers, suppliers,and partners in new collaborative serviceendeavors.

7.0 Looking Ahead

Master data is not just an issue for CIOs. Truth inorganizations shouldn’t be a scarce commodity, andsharing it more widely requires more than bridgesbetween IT systems: you need bridges to the processesand people that drive the enterprise. Everyone—fromthe CEO to the employees who are the public face ofyour business—needs consistent, timely, and credibleaccess to one truth, whenever and wherever they need it.Without it, inaccurate data looks like a bad rumor—itspreads quickly and morphs continuously, leavingfrayed reputations and uncertainty in its wake. Effectivemaster data management allows firms to reach beyondthe confines of their enterprise and compete in thenetworked world. As the saying goes, “the truth will setyou free.” Sharing that truth—or arriving at it in the firstplace—is easier and more important than ever.

DON TAPSCOTT is CEO of New Paradigm, which he founded in 1993, and adjunct professor of management, Joseph L.Rotman School of Management, University of Toronto. He is one of the world’s leading authorities regarding the role oftechnology in productivity, business design, effectiveness and competitiveness. He is author or coauthor of 10 managementbooks, including 2004’s The Naked Corporation: How the Age of Transparency Will Revolutionize Business (with DavidTicoll). His new book, to be released in Fall 2006, is Wikinomics: Promise and Peril in the Age of Collaboration (co-authorAnthony Williams).

Research assistance for this report provided by Denis Hancock, Erin Lemon, Alan Majer, Brendan Peat, and Bob Tapscott.

www.newparadigm.com



13

Endnotes

1 In 2003, 49,000 Terabytes of electronic information weretransmitted daily, and the amount of stored information is growing30% annually (15,000 Terabytes of new information every day in allforms of media). “How much information,”http://www.sims.berkeley.edu/research/projects/how-much-info-2003.2 Interview with David Newman, Research VP, Gartner Group,conducted by Alan Majer, Bob Tapscott, and Brendan Peat,December 8, 2005.3 Ibid.4 Interview with Ed Toben, CIO, Colgate-Palmolive, conducted byAlan Majer, Don Tapscott, Bob Tapscott, and Brendan Peat,December 12, 2005.5 David Akin, “Scrap yard receiving bank clients’ private data,”CTV.ca, November 25, 2004.6 Interview with William McKnight, Senior Vice President, DataWarehousing, Conversion Services International, conducted by BobTapscott and Alan Majer, November 29, 2005.7 Interview with David Newman, Research VP, Gartner Group,conducted by Alan Majer, Bob Tapscott, and Brendan Peat,December 8, 2005.8 Interview with Gabriele Bauman, SAP Technology Lead at Nortel,conducted by Bob Tapscott, Alan Majer, and Brendan Peat,December 13, 2005.9 Don Tapscott, David Ticoll, and Alex Lowy, “Digital Capital:Harnessing the Power of Business Webs”, Harvard Business SchoolPress, 2000, pp. 17–22.10 Interview with Robert Scott, Vice President of IT, Procter &Gamble, conducted by Alan Majer, Bob Tapscott, and DenisHancock, December 7, 2005.11 Presentation by Leslie Hagan, Content Management Leader,General Electric, May 18, 2005.12 Interview with David Newman, Research VP, Gartner Group,conducted by Alan Majer, Bob Tapscott, and Brendan Peat,December 8, 2005.13 Q&A with Joe DeZarn, Director of Marketing Communications,Rubbermaid Commercial Products, June 20, 2005.14 Presentation by Leslie Hagan, Content Management Leader,General Electric, May 18, 2005.15 Julia King, “Business Intelligence: One Version of the Truth”,Computerworld, December 22, 2003.16 Ibid.17 Q&A with Joe DeZarn, Director of Marketing Communications,Rubbermaid Commercial Products, June 20, 2005.18 Interview with Robert Scott, Vice President of IT, Procter &Gamble, conducted by Alan Majer, Bob Tapscott, and DenisHancock, December 7, 2005.

19 Meg Mitchell Moore, “300 Brands, One Strategy”, CIO Magazine,September 1, 2003.20 Interview with David Newman, Research VP, Gartner Group,conducted by Alan Majer, Bob Tapscott, and Brendan Peat,December 8, 2005.21 Interview with Leslie Hagan, Content Management Leader, GE

Consumer & Industrial, with Alan Majer, Bob Tapscott, and BrendanPeat, December 15, 2005.22 Brian Sullivan and Michael Meehan, “Big Retailers Push DataTies,” Computerworld, June 10, 2002.23 Meg Mitchell Moore, “300 Brands, One Strategy,” CIO Magazine,September 1, 2003.24 Interview with Leslie Hagan, Content Management Leader,General Electric, December 15, 2005.

Knowing and Competing with the Truth - Tapscott...

Documents

Transcript of Knowing and Competing with the Truth - Tapscott...