Final - Data Literacy - Module 1 - Topic 2

Data literacy is critical in the business world as data is becoming as important as oil. Companies skilled in using data perform better financially and have higher market value. Data proficiency is linked to better financial health overall. However, many organizations struggle with analyzing and using data insights in their decision-making process. Data literacy is necessary in today's digital economy to understand, interpret, and use data effectively. Data has value and should be treated as an asset. Data-driven decision-making provides numerous benefits, including reducing uncertainty, improving accuracy, identifying patterns, optimizing resources, and maintaining competitiveness. On the other hand, a lack of data literacy can lead to missed opportunities, poor decision-making, inefficient use of resources, inability to adapt, and lack of competitiveness. Data literacy is essential for accurate, competitive, and efficient decision-making, while avoiding potential risks. In the previous topic, we discussed the value of data with emphasis on personal data and how it affects our daily lives. Now we're going to take a look at how much value data brings to the business world. Remember how data has been compared to oil in terms of use and value? In 2024, around 31% of the world's energy production relies on oil. Imagine what sort of impact the loss of that much oil would have on the world economy. If we acknowledge that data is rapidly becoming as important to the economy, we recognize that data literacy is critical. Let's back up this statement with some evidence. The Data Literacy Index is a tool created by a number of leading data analytic companies which measures the effect data literacy has on a company. It checks how well companies understand and use data. It ranks their scores and measures if companies that understand data better tend to perform better financially. What were some of its key discoveries? Companies with teams skilled at using data tend to perform better financially. In fact, those companies with top peer data skills are worth 3 to 5% more on the stock market. To put that statement into perspective, a company valued at $10.7 billion could add an additional $320 to $534 million to their value, just from being more data savvy. Beyond market value, data proficiency is linked to better financial health overall, encompassing profits, asset efficiency, shareholder equity and sales income. However, it can be difficult for some to really grasp the essential value data literacy can bring. In 2022, Forbes magazine published an article that compared unlocking value in your data to completing a marathon. Reaching the finish line gets harder as you progress further along the course. In data analytics, the prize is improved decision making. Just like starting a marathon is relatively easy, 99.8% of organizations are good at beginning the data analysis process. They collect, prepare and visualize their data with ease. However, the challenge arises when it comes to the last mile, analyzing and communicating the insights drawn from the data to guide decisions. What often happens is that organizations shift their focus to a new race before they reach the end of their current one. They don't take the final critical step of using the data insights they collect in their decision making process. This may be because the decision makers in the business are not data literate enough to unlock the true value of the available data. This aspect of data literacy is key. In today's digital economy, having an appropriate level of data literacy is not just a desirable skill, it's a necessity. It's the tool that can empower business users to effectively understand, interpret and use data in their day-to-day roles, leading to data-informed decisions that can revolutionize business operations. How do we arrive at the conclusion that data has value? Let's look at how a company views and manages physical assets and then apply this concept to assigning value to data. Investopedia describes an asset as follows. An asset is a resource with economic value that an individual, corporation or country owns and controls with the expectation that it will provide a future benefit. Assets are reported on a company's balance sheet and are bought or created to increase a firm's value or benefit the firm's operations. If we view data as an asset, basically something with economic value which will provide a future benefit, the concept becomes clear. The right data used correctly will create value. Here is the data valuation cycle we follow for managing data as an asset. First, perform a data assessment. This is where you investigate what data you have and decide where you can use it. Second, measure the value of the data you have by performing a data valuation. The third step is to make informed investments in the data to make it more useful. Once you have good data, you can start to use it effectively which, in turn, results in providing value back to the business and shareholders. The final step is reflecting on what we have learnt and where we can improve. And the cycle starts over again. Can you see why data literacy is being promoted as the in-demand skill for the future workplace? It should be obvious that the value of data-driven decision-making cannot be understated in the contemporary business world. Improved decisions backed by data insights can give companies a competitive edge by helping understand customer behaviour, market trends and operational efficiencies. This understanding can lead to actionable insights into opportunities and challenges. The benefits of data-driven decision-making include reducing uncertainty, data aids in understanding the business landscape better, diminishing the ambiguity in business decisions. Improving accuracy. Decisions based on data are fact-orientated, eliminating bias and assumptions and thus increasing the accuracy of decisions. Identifying patterns and trends. Data reveals patterns and trends in operations, empowering businesses to make informed decisions. Optimising resources. Data guides businesses to allocate resources efficiently, improving productivity and prioritisation. Maintaining competitiveness. In a data-centric business environment, data-driven decisions keep a company competitive by leveraging insights for decision-making. On the other hand, a lack of data literacy can lead to detrimental consequences for both businesses and individuals, particularly in data-intensive industries. Some potential risks include missed opportunities. Without data, businesses may overlook growth opportunities and strategic decisions, resulting in lost revenue and customers. Poor decision-making. Assumption-based decisions can lead to undesirable outcomes, impacting one's reputation and career negatively. Inefficient use of resources. Without data, resources may be misallocated, causing waste and potentially leading to missed deadlines or budget overruns. Inability to adapt. In a fast-paced business environment, failing to identify trends or anticipate changes due to a lack of data can put a business at a disadvantage. Lack of competitiveness. Companies not using data in their decision-making process risk falling behind their competitors, impacting market share, revenue and career prospects in industries that value data-driven decisions. We now know that data literacy is essential in the future workplace because it facilitates accurate, competitive and efficient decision-making, while helping businesses avoid potential risks associated with the lack of informed data-driven decision-making. Next, we're going to investigate four benefits of data-driven decision-making. Before you move on, review what you have learnt by completing the revision exercise and the quiz.