New Research Uncovers $500 Million Enterprise Value Opportunity with Data Literacy

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According to a major academic study commissioned by Qlik®, on behalf of the newly launched Data Literacy Project, large enterprises that have higher corporate data literacy experience $320-$534 million in higher enterprise value (the total market value of the business).

Corporate data literacy is the ability of a company workforce to read, analyze, utilize for decisions and communicate data throughout the organization. Beyond having a data literate workforce, organizations must ensure these skills are used for decision making across the business to compete in the fourth industrial revolution.

Despite clear correlation between enterprise value and data literacy, there is a gap between how companies perceive the importance and relevance of data, and how they are actively increasing workforce data literacy. While 92% of business decisions makers believe it is important for employees to be data literate, just 17% report that their business significantly encourages employees to become more confident with data.

Corporate Data Literacy Can Improve Financial Performance

The Data Literacy Index is a rigorous model that scores companies based on the extent to which firms have the necessary data and the capabilities to use data for decision making. When correlated to measures of corporate performance, organizations that rank in the top third of the Data Literacy Index have a 3 to 5% higher enterprise value. In addition, improved data literacy appears to have a positive correlation with other measures of corporate performance, including gross margin, return-on-assets, return-on-equity and return-on-sales.

This is the first time that data literacy has been measured on a company level, which includes not only the data skills of company employees, but also the use of data for making decisions throughout the company,” said Lorin Hitt, Professor at Wharton School of the University of Pennsylvania. “This is important because our research suggests that this broader concept of corporate data literacy represents a mutually reinforcing set of business practices that are associated with higher financial performance.”

To inform the Data Literacy Index, 604 global enterprise business decision makers in 10 geographies were surveyed on their companies’ use of data and approach to data literacy. The research study was defined by Wharton academics and conducted by PSB Research. Other key findings include:

Businesses Not Ready to Pay for Widespread Data Expertise

The majority of business decision makers feel it is vital for employees to be data literate, but just 24% of the global workforce reports being fully confident in their ability to read, work with, analyze and communicate with data.

Further aggravating this skills gap, while two-thirds of companies (63%) are planning on hiring more data literate employees, the onus is on the individual. Business leaders have been unwilling to commit resources to improve the data literacy of their workforce, with only 34% of firms currently providing data literacy training, and only 36% willing to pay higher salaries to employees who are data literate.

Data Skills Are Not Leading to More Data-Driven Decision Making

Nearly all business leaders acknowledge that data is important to their industry (93%) and in how their company currently makes decisions (98%). Shockingly, just eight percent of firms have made major changes in the way the data is used over the past five years.

In fact, data-driven decision making has the lowest score of the three dimensions of corporate data literacy measured. Even companies that have data-literate employees across every business unit are likely not turning data into useable information as effectively as possible.

European Companies Show the Highest Data Maturity

Europe holds the highest data literacy score of any region, with the UK, Germany and France among the most mature nations for corporate data literacy. Slightly lower, the US and APAC regions were not statistically different from one another, although Singapore is the most data literate nation globally.

This reflects a greater recognition that European business decision makers have for the value of data, with 72% affirming that it is “very important,” compared with just 60% in Asia and 52% in the US.

While US business decision makers have made the most changes to the way their companies use data, with 47% saying that at least “quite a few” changes have been made compared to 40% in Asia and 36% in Europe, they are doing less to equip employees to deal with data. The US exhibits the lowest levels of data literacy training (30%) and only 16% report that their companies “significantly encourage” employees to become more comfortable with data.

Industries with Higher Data Literacy

There are far greater differences in corporate data literacy between industries than between regions. The healthcare, retail and real estate industries underperformed on data literacy (with respective data literacy scores of 67.1, 69.2 and 70.7), while the administrative, technical services and finance industries performed more consistently (81.1, 80.2 and 77.4 respectively).

The Corporate Data Literacy Index was created by Qlik on behalf of the Data Literacy Project, a new global community dedicated to igniting richer discussion and developing the tools we need to shape a confident and successful data literate society. Founding partners include Cognizant, Qlik, Pluralsight, Experian, the Chartered Institute of Marketing and Data to the People.

Methodology

Business decision maker survey

The survey was conducted by PSB Research in the period of June 27 through July 18, 2018. Business decision makers were selected from global publicly traded companies, with at least 500 employees and which represented a wide range of industries including banking and financial services, manufacturing, retail, transportation, healthcare, energy, construction, utilities, and communications. The total number of interviews conducted was 604: 200 in US and Europe, 204 in Asia.

Corporate Data Literacy scores

The measure of corporate data literacy was established by IHS Markit and a Professor from the Wharton School. It lies on a continuum based on (1) the data skills of the employees (human capital) (2) data-driven decision making and (3) data skill dispersion (how widespread is the use of data throughout the organization). A survey was designed to measure the three dimensions of corporate data literacy. For each question a scale was developed from the categorical responses and the z-score computed to standardize responses across all indicators in order to aggregate them. The overall corporate data literacy score is computed as the sum of the three pillar scores. For the global sample, the distribution of CDL scores range from a low of 0 to a high of 100.

Measures of Firm Performance

The corporate value can be interpreted as the percentage difference in enterprise value of the organization for a one standard deviation difference in the corporate data literacy score, holding fixed all other assets of the firm. The analysis of performance was completed using public financial data for the surveyed companies. The result is statistically significant at conventional levels, and consistent with estimates from the performance regressions using other performance variables.

 

 

 

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