Data literacy—the ability to read, understand, create and communicate data—has never been so challenging and essential. Leaders and managers can no longer make gut business decisions and workers need clear data and data skills to leverage the latest tech trends and innovations.
Data drives every business process, including sales, churn rates, supply chains, management and performance. Without good levels of data literacy, a company is sailing blind.
To understand data literacy, its impact on your business, how it works with data governance and how you can incorporate it into your organization, TechRepublic spoke to Forrester’s Michele Goetz, vice president and principal analyst, and Kim Herrington, senior analyst of data leadership for Org & Culture.
What is data literacy, and how can it affect your business?
Goetz explains that companies should look at data literacy from the unique perspectives of their own business. Data literacy is “the ability to recognize, evaluate, work with, communicate and apply data in the context of business priorities and outcomes,” Goetz told TechRepublic.
Herrington agrees and adds that data literacy has the potential to impact outcomes. To illustrate, Herrington gives an example of two people competing against each other in a fantasy football league for a prize they both want.
During the draft, one understood the states and historical data of players’ performance and leveraged those insights to select their players. Meanwhile, the other had access to the same stats and data, but the information was foreign to him, leaving them with the only option of picking player names out of a hat.
“Who do you imagine would come out on top to win at the end of the season? This is data literacy in action,” Herrington said.
Goetz explains that data literacy also impacts the internal operations and goals of a business. For example, suppose an e-commerce company wants to create personalized customer experiences on its websites. In that case, they need to understand who the customer is, their relationship with the company, their historical purchases and other key customer behaviors. A better understanding and management of this data will increase sales.
SEE: Learn how to visualize data like a pro (TechRepublic Academy)
“The literacy is first to recognize the data that is relevant, how to use it for insight to create the customer experience, and be mindful of the data governance standards (quality and understanding) policies (data security and privacy) to create trusted insight to achieve those outcomes,” Goetz added.
Poor data literacy can severely impact an organization. It can misdefine customers and products, violate policies on customer data consent or privacy regulations, or even create customer segmentations that are biased in a negative way across gender or racial populations.
Data literacy helps businesses move away from instinct-based decisions
The final component of data literacy, communication, is vital in the process. In the example of e-commerce, data communication presents a story to the customer and closes the product sales. Herrington says that data communications will break or make a company’s data literacy efforts. Similarly, data literacy will impact all internal and external aspects of a business, from how executives perform to how efficient the company is in meeting its targets.
“Data literacy is important because it is vital to get all users on the same page when working with information to make decisions that impact organizational outcomes,” Herrington said.
Research shows that only about 50% of a firm’s business decisions are made using quantitative information and analysis. Generally speaking, this means that for every decision made using data, there is a potential decision based on “gut” or instinct.
Leaders investing in data literacy training often share the same goal: to get more people to use quantitative insights or facts to inform decision-making and have fewer people making business decisions based solely on “gut” feelings.
Insight-driven decisions that use advanced analytics, good data governance and good data quality all require high levels of data literacy across an organization. Forrester’s research reveals that firms that excel in these fields are more than 8.5 times more than those in the beginner stages to grow their annual revenue.
How data literacy works in conjunction with data governance
While data literacy is the ability to read, understand, create and communicate data, data governance is the organization’s processes and policies to gather, store, manage and dispose of data. The connection is evident. Companies that don’t fully understand their data will fail to manage it throughout its life cycle.
Despite this important connection, on the ground, companies still struggle to combine both concepts, avoid the risk and consequences, and reap the benefits.
While Forrester’s Data And Analytics Survey 2022, reveals that 51% of data and analytic decision-makers indicate they have implemented or are expanding company-wide data literacy, only 15% of data and analytic decision-makers incorporate data governance training into their data literacy programs. For data literacy efforts to be approached, a data governance program must be in place.
“Before you make people aware of the data (data literacy), you will need to ensure the information they have access to is trustworthy (data governance),” Herrington said.
SEE: An overview of IBM data governance solutions (TechRepublic)
Data governance models can establish data governance teams that deal with specific internal or external data. These teams must have the proper skills, resources and technology. Additionally, communication channels must be established throughout the organization.
Data consumers and producers, such as analysts, data scientists and IT staff, must have clear roles and responsibilities, and their goals must align with the company’s business model, values and mission. Data literacy is woven throughout an organization’s entire data governance framework; it is part of its culture.
“Big picture, culture is holding us back from getting where we want to go with governance, literacy,” Herrington explained.
Herrington recommends companies avoid big bang approaches when establishing a robust data literacy culture. Rather, companies should begin with “communication and content within their departments that they have control over.”
Incorporating data literacy into your organization
Because data literacy affects every aspect and worker within an organization, companies often struggle when creating strategic plans to incorporate data literacy effectively into their culture. Where should leaders begin?
Employ the role of the data steward
Goetz highlights the importance of people in data literacy implementation and particularly the role of data stewards.
“It is very common that data literacy programs and efforts emerge and are championed by data governance teams. Data stewards will take the lead to deliver training and be a point of contact for questions and support,” Goetz said.
Data stewards will help deploy data literacy programs, extending them into the data science and analytic teams. Through their insight delivery, data science and analytics teams reinforce and expand data literacy to other areas and departments. Eventually, data literacy becomes a business-as-usual state among employees, stakeholders and decision-makers.
SEE: How do I become a data steward? (TechRepublic)
Develop data literacy protocols
According to Goetz, “data literacy can begin simply as part of a project.”
For example, data and BI modernization efforts force data consumers and producers to revisit data and insight needs. Data policies are also reviewed to triage the migration of existing data assets and the establishment of new ones.
Those discussions are the foundations of data literacy and can be codified into protocols for data literacy communication, training, and data governance policies and activities.
Encourage executive engagement and communication
Top-level executive engagement is one area with significant potential for data literacy due to its impact. In this area, communication is the key.
“Top executives seeking to improve organizational data literacy and governance initiatives must improve their ability to communicate internally across their company, committees and communities,” Herrington explained.
Tech leaders must work with their chief executive officers and internal communications staff to improve how information is disseminated across an organization. Known as data communications, or DataComs, the process implies the understanding and optimization of communication channels and mediums that insight professionals can leverage to change user perceptions and behaviors in a psychologically safe environment.
Applying DataComs strategies to data literacy initiatives
Forrester says that to win with data literacy and governance, executives must:
- Make DataComs manageable and measurable by applying data governance concepts to managing human-to-human communication: Establish responsibilities and roles and identify data stewards.
- Use your new DataComs owner to perform an internal communications systems and content audit for areas within your tech team’s direct control: Identify where bottlenecks and gaps are, and draw out how information flows from the top down to the bottom up to the middle out. Then, find and address these gaps to enable the success of insights-driven discussions later.
- Evaluate team psychological safety: Can everyone speak up in meetings without fear of rejection and ridicule? Do you have ways that staff can provide feedback verbally, non-verbally, and anonymously? Understand that if people are too afraid to speak up or be vulnerable at work, you won’t get the flipside benefit—innovation.
“If you cannot communicate across your team and your enterprise, data literacy and governance efforts will fall flat,” Herrington said.