FREE email newsletters 
Clean, Accurate and Synchronized: Overcoming Master Data Management Challenges
Information Management Special Reports, February 2007
Getting different functional areas of your business - and the various applications they run on - to "talk" to one another can sometimes seem like a session of the United Nations.
This often happens because the sales organization defines "customer" one way, the finance team defines it another and the customer service group begs to differ with both of them. The end result of this difference (in opinion and in systems) is fragmented customer data, leaving a critical corporate asset being defined and managed differently in different parts of the business, with little or no systematic integration between the different silos.
Advertisement
This can be crippling to the process of becoming more customer-centric, increasing profitability and to making good day-to-day business decisions.
In today's more complex business enterprises, companies need to put an organization and process in place, supported by the appropriate technology and trusted external content, to manage master data across the enterprise in order to increase revenue, reduce costs and improve compliance.
This holistic combination of organization, processes, technology and information is termed master data management (MDM), and the techniques and approaches, as applied to the "customer" domain within the enterprise, are known as customer data integration (CDI).
Defining the Space
MDM is a set of disciplines and processes for ensuring the accuracy, completeness, timeliness and consistency of the most important types (or domains) of reference data in the enterprise - across different applications, systems and databases, and across multiple business processes, functional areas, organizations, geographies and channels.
The most common MDM domains are customer data, known as CDI in the MDM subset, and product data, known as product information management (PIM) in the MDM subset.
Critical MDM capabilities include data quality, identity management, data enrichment, grouping, synchronization and process management.
Data quality capabilities are critical to ensure that only accurate, completely, timely and consistent data is being synchronized across the entire enterprise.
Identity management serves three important and related functions:
- Recognize an organization or person (and whether they're a prospect or an existing customer) regardless of which channel (call center, Web store, etc.) they use to interact with you,
- Validate identity so you're confident people are who they say they are, and
- Prevent duplicates, so you avoid adding a new record unless it's "truly" new.
Data enrichment brings in external information on an organization or person, telling you valuable things you didn't already know.
Grouping links organizations and persons in useful ways, typically in corporate hierarchies when dealing with businesses and households when dealing with consumers.
Synchronization and process management (usually through middleware and business process management software) allow you to not only move information from Point A to Point B in the enterprise, but also to do more sophisticated things than simply move information. You can have processes that are long running, tightly monitored and controlled, and span multiple applications and even enterprises.
Without a systematic way to manage critical master data, collaboration across the enterprise, between the diverse IT systems and the various business functions, can be difficult and costly. But, as MDM becomes more widely used, organizations are starting to figure out how to build robust MDM solutions, using a combination of off-the-shelf hubs, middleware and process management tools, plus data quality software, Web services, service-oriented architecture and custom components.
It is evolving this architecture that will prove critical in the future as organizations need better information, increased agility, efficient processes and less costly compliance to compete in today's increasingly "flat" and competitive business environment.
Dealing with Dirty Data
MDM by its nature is tough, partly because a company often expects it to solve some of the "holy grail" problems and because of the number of moving parts and the state of the market. The hard things are easy and the easy things are hard - the organizational and process questions turn out to be the toughest, and the technology and information challenges, while not trivial, can be managed.
One of the biggest of these challenges is data decay. D&B manages a global commercial database with more than 110 million business records and finds that, i n one year:
- 21 percent of CEOs will change
- 20 percent of all addresses change
- 18 percent of telephone numbers will change
- 17 percent of business names will change.
It almost doesn't matter which data element you're talking about - approximately 20 percent of the values in that field will change over a 12-month period. Most people assume that customer data is fairly static, and it just has to be cleaned centrally one time before being distributed throughout the enterprise. Unfortunately, that's a big oversimplification.
The truth is that collecting information is not the hard part. It's maintaining and evolving the data over time that is difficult. As business needs change, the "single view of the customer" has to evolve and change with it. Otherwise, the promise of MDM and CDI will be unfulfilled, and today's hubs will be just another brittle silo of customer data within the enterprise.
Businesses today also want more and different ways to look at their customer data - "functional area" views. For example, sales may want a way to view customers by assigned salesperson and roll it up in a "sales organization" hierarchy; marketing wants a way to view customers by rolling them up by customers' legal hierarchy and customer service is looking to quickly find the existing customer record no matter what channel that customer comes in through (phone, Web, in-person visit, etc.) and no matter what information the customer provides (account number, phone number, email address, etc.).
In fact, most companies want a single view of the customer for their organization to be more customer-centric. But many took the easy way out during their enterprise resource planning (ERP) and customer relationship management (CRM) implementations and often didn't pay enough attention to data quality - or to thoroughly integrating their front- and back-office systems.
MDM represents their best (and perhaps last) chance to finally and successfully get to the single source of truth.
In a classic 2002 white paper on the bottom-line impact of data quality, The Data Warehousing Institute (TDWI) estimated that poor-quality customer data costs U.S. businesses a staggering $611 billion a year. Therefore, end-user adoption and customer satisfaction, not to mention achieving the anticipated ROI on enterprise technology projects, have suffered.
In TDWI's Data Quality survey, 83 percent of respondents reported that their organizations have suffered problems due to poor master data or have not yet studied the issue. But almost half of the respondents to that survey claimed to have derived benefits from improved master data.1
In the end, MDM affects almost every facet of a company - from sales to marketing, from finance to IT - but how can it be implemented effectively?
A Holistic Solution
In order to create a trusted single version of the truth that is used companywide, an organization must put four key components in place:
- People. Ensure that the entire organization - from the CEO to the sales assistant - buys into and understands that MDM can increase both productivity and the company's bottom line. In addition to the individuals responsible for entering new data into the various source systems, a successful MDM process requires that dedicated data stewards be responsible and accountable for all aspects of customer data quality. Companies must be prepared for the cultural and political transitions that this represents, as MDM represents a brand new discipline for most enterprises.
- Process. Create closed-loop business processes for MDM (including a way to ensure data quality), then monitor selected metrics regularly. While organizationally, creating a dedicated group of data stewards is a must; on the process side, you will need the same process reengineering and internal controls disciplines you would have for any critical corporate asset. MDM and CDI represent your opportunity to get it right - to organize your customer data for success and leverage it across the enterprise to grow revenue, reduce costs, improve customer satisfaction and make better business decisions.
- Technology. Implement the customer hub, middleware, process management and data quality tools that make sense for your business.
- Information. Enrich your customer database with trusted third-party content and leverage the consistent, uniform identifiers and other attributes that the content provider can make available.
Begin with the End in Mind
Before beginning your MDM journey, take the time to think through where your enterprise would like to be when all is said and done.
Today's enterprise applications are starting to move toward SOAs, where the master data for important domains like customer and product is not stored directly in the major sales force automation (SFA), CRM or financials/ERP operational systems. But that migration will take years and, in the meantime, your company can be making some good short and medium-term moves that will position you well for the MDM-SOA end game.
Begin by creating a small, dedicated team of data stewards. Challenge them with getting up to speed on the current thinking on CDI and MDM. Let them debate and discuss what your organization's long-term enterprise MDM strategy should be.
As part of creating that group, find an executive sponsor within your company's senior management team who understands the strategic importance of well-managed, high quality enterprise master data. Educate that person on the impact of not having that in place. Feel free to share some of the well known horror stories of companies from your business or your industry that made expensive mistakes, paid large fines or missed major revenue opportunities as a result of poor quality or highly fragmented customer data.
Once you start creating an MDM strategy and data stewardship team, be sure to follow as many best practices as you can find, and don't ignore the hard-learned lessons from the ERP, CRM and business intelligence/data warehousing world when it comes to the need for robust project management and organizational change management.
Although it may be tempting (and perhaps even necessary at first) for your company's IT organization to build the required data governance organization and processes on behalf of the business, to really understand and value the mission and deliverables of an enterprise MDM initiative, the business has to own it. Otherwise, the whole exercise runs the risk of being a solution in search of a problem.
We've already discussed the importance of a holistic approach to MDM. This is not a technology problem. In fact, you could argue that there is already enough technology in your organization, and you'd be partially right. What has to change is how technology is used and applied - systems have to be integrated in a way most companies haven't done yet, to a much further extent than before, and enterprises must incorporate CDI hubs, data quality, middleware and business process management in that integration process.
Another somewhat counterintuitive aspect of MDM is that it never ends. The importance of clean, accurate, timely and consistent information, available everywhere in the organization, doesn't go away after a project goes live. That's just the beginning. MDM should be ongoing and repeatable, supporting continuous improvement and continuing to evolve as the organization changes.
And agility counts - you don't want your MDM strategy and platform to become a bureaucracy that holds the enterprise back. You want it to be the central repository that becomes the driver for more and better target marketing, increased cross-selling and up-selling, better and faster granting of credit and collection of receivables, and so on. Once that repository starts slowing down the business, they'll quickly discard it and be back to using their Excel spreadsheets, Microsoft Access databases and other formal and informal silos of data.
Your Organization's Competitiveness is at Stake
A successful MDM implementation has a lot of "moving parts" - a central hub, data quality tools, third-party content, middleware and process management. Further, some organizations have dozens or hundreds of source systems containing customer data. And finally, as companies transition to Web services and SOA, they want to ensure they don't disrupt the front- and back-office transactional systems that their businesses run on - a tall order indeed. But if it were easy, it would not represent such a sizeable opportunity for gaining or maintaining a sustainable competitive edge.
Over the last several years, we're starting to see leading companies in a variety of industries experiencing the benefits of CDI and MDM. These companies are growing their revenues and profits, taking market share away from rivals that are not customer-centric and creating enterprise capabilities they'll be able to build on for years to come.
For at least the next couple of years, companies that join these leaders in successfully using CDI to get the trusted single source of truth will have a significant competitive advantage over those in their industry that don't.
Reference:
1. Eckerson, Wayne. "Data Quality and the Bottom Line, Achieving Business Success through a Commitment to High Quality Data." The Data Warehousing Institute. 2002.
Dan Power is the founder and president of Hub Solution Designs, Inc., a management and technology consulting firm specializing in master data management (MDM) and data governance. He has 21 years of experience in management consulting, enterprise applications, strategic alliances and marketing at companies like Dun & Bradstreet, Deloitte Touche Tohmatsu, Computer Sciences Corporation, eCredit and Parson Consulting. Power speaks frequently at technology conferences and advises clients on using MDM to solve business problems.
For more information on related topics, visit the following channels:
