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Data management: the building blocks to investment, according to a new report.

What investors want: A good D&A strategy

| Corporate insights

It may come as a surprise to hear how much raw data companies can produce. It’s rumoured that each Boeing jet engine creates 10 terabytes (10,240 gigabytes) of data every 30 seconds. In the five hours it takes to fly from Brisbane to Perth, a twin-engined Boeing aircraft will produce around 200 terabytes of data from the engines alone – or enough to fill the entire memory of more than 1,560 of the largest Apple iPhone 6 devices.

Even smaller businesses are now curating and collecting a vast amount of useful, though largely unstructured, data. The reason why we say this might surprise many is because much of this information is not easily accessible, stored in silos for a time when it may be useful; however, it can be used at the highest level of the business today.

D&A strategies are rewarding companies with higher valuations

For instance, with the right data management processes in place, a business can use data and analytics (D&A) to deliver accurate and valuable information for investors. This matter was the subject of a recent report from KPMG, titled Data and Analytics: A New Driver of Performance and Valuation, which found just how valuable D&A is becoming for determining market-to-book value.

Higher investor valuations

One of the key findings from the survey of more than 250 investors and sell-side analysts is that one-third say effective D&A strategies are rewarding companies with higher valuations – or they will do over the next two years. The majority of respondents (82 per cent) said they believe D&A will cause some level of disruption in their relative markets within the next three years.

After all, if a company can use its data strategically in this way, valuations can be made more accurately and with less speculation. In terms of understanding value and risk, this makes it an attractive proposition for those on both the buy and sell side.

So much so, in fact, that KPMG said we are seeing “the emergence of a new virtuous circle within D&A”.

Better data management is praised by investors.D&A strategies are praised by investors.

A new virtuous circle

“Companies that invest wisely in data and analytics technologies and human expertise are likely to develop effective D&A strategies,” the report read.

“As these strategies improve companies’ fundamental businesses and operating models, they achieve stronger competitive positions and higher market valuations. These results, in turn, encourage companies to continue developing the right data and analytics strategies.”

Some other interesting findings from the KPMG study include:

  • In the past year, 24 per cent of respondents said D&A strategies have encouraged them to change at least one of their investment opinions.
  • Almost twice as many (45 per cent) say they expect this to happen to them some time in the coming two years.
  • In the last 12 months, half of the survey’s respondents from the buy and sell side have “proactively sought information” about the use of D&A by at least one company.
  • New market entrants in particular have a great opportunity to manage their information and create a D&A strategy from day one.
  • Information architecture investments are likely to pay off, with the report stating how “large companies that have the infrastructure to support ambitious D&A initiatives are likely to prevail”.

Of course, all these benefits hinge on the development of a D&A strategy, and whether a company has the business governance around their information assets. If they can manage and draw insight from their cluttered data, they can make the most of big data and analytics, providing them with a healthier chance of seeing their investment opportunities come to pass.

On the other hand, without an effective D&A Strategy, finding the information you need is like finding a needle in a haystack – with technology making the haystack forever bigger.

In terms of using data in this way, one buy-side respondent explained to KPMG: “across all industries, there’s no escaping it” – and businesses surely won’t want to.

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