Monday, May 16, 2011

The Butterfly Effect and Data Quality

I just wrote a paper called the ‘Butterfly Effect’ of poor data quality for Talend.

The term butterfly effect refers to the way a minor event – like the movement of a butterfly’s wing – can have a major impact on a complex system – like the weather. The movement of the butterfly wing represents a small change in the initial condition of the system, but it starts a chain of events: moving pollen through the air, which causes a gazelle to sneeze, which triggers a stampede of gazelles, which raises a cloud of dust, which partially blocks the sun, which alters the atmospheric temperature, which ultimately alters the path of a tornado on the other side of the world.

Enterprise data is equally susceptible to the butterfly effect.  When poor quality data enters the complex system of enterprise data, even a small error – the transposed letters in a street address or part number – can lead to 1) revenue loss; 2) process inefficiency and; 3) failure to comply with industry and government regulations. Organizations depend on the movement and sharing of data throughout the organization, so the impact of data quality errors are costly and far reaching. Data issues often begin with a tiny mistake in one part of the organization, but the butterfly effect can produce far reaching results.

The Pervasiveness of Data
When data enters the corporate ecosystem, it rarely stays in one place.  Data is pervasive. As it moves throughout a corporation, data impacts systems and business processes. The negative impact of poor data quality reverberates as it crosses departments, business units and cross-functional systems.
  • Customer Relationship Management (CRM) - By standardizing customer data, you will be able to offer better, more personalized customer service.  And you will be better able to contact your customers and prospects for cross-sell, up-sell, notification and services.
  • ERP / Supply Chain Data- If you have clean data in your supply chain, you can achieve some tangible benefits.  First, the company will have a clear picture about delivery times on orders because of a completely transparent supply chain. Next, you will avoid unnecessary warehouse costs by holding the right amount of inventory in stock.  Finally, you will be able to see all the buying patterns and use that information when negotiating supply contracts.
  • Orders / Billing System - If you have clean data in your billing systems, you can achieve the tangible benefits of more accurate financial reporting and correct invoices that reach the customer in a timely manner.  An accurate bill not only leads to trust among workers in the billing department, but customer attrition rates will be lower if invoices are delivered accurately and on time.
  • Data Warehouse - If you have standardized the data feeding into your data warehouse, you can dramatically improve business intelligence. Employees can access the data warehouse and be assured that the data they use for reports, analysis and decision making is accurate. Using the clean data in a warehouse can help you find trends, see relationships between data, and understand the competition in a new light.
To read more about the butterfly effect of data quality, download it from the Talend site.

1 comment:

Vish Agashe said...

Steve,

Excellent post! Your early commentary about how fluttering of butterflies impact weather patterns reminded me of book Tipping point (Malcolm Gladwell).


It is the interdependency of the data and business processes to drive organizational functions across organization makes for the snowball effect of poor data quality on overall business performance. Add to the equation regulatory pressures from today’s world of increased regulation. If your house is not in order from data management and data quality prospective, meeting regulatory requirements for the regulations of the future is going to be that much more difficult/risky and costly.


I have not read your paper, but would be doing so immediately after my comment is done.


Vish Agashe
http://vishagashe.wordpress.com

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Disclaimer: The opinions expressed here are my own and don't necessarily reflect the opinion of my employer. The material written here is copyright (c) 2010 by Steve Sarsfield. To request permission to reuse, please e-mail me.