The Advantages of a Golden Record in Customer Master Data Management

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1 Golden Record The Advantages of a Golden Record in Customer Master Data Management Dr. Wolfgang Martin, Analyst Master data describes the components of a company: its customers, suppliers, dealers, partners, products, service providers, suppliers, employees and equipment - in other words everything that is owned and important for a company. Therefore, master data should as the definition implies be consistent, fully-complete, up to date and correct, so that the [actually obvious] target can be reached: to deliver the right quantity of the right product, to the right customer, at the right price, at the right location, and with the right invoice. This requirement may seem almost trivial - but is actually quite the opposite. Let us take a look at the situation in a typical company. Master Data Management as a partial area of information management represents a complex task, including all strategic, organisational, methodical and technological activities relating to a company s master data. Its purpose is to ensure consistent, complete, up-to-date, correct and high quality master data for supporting the business processes of a company 1. Customer Master Data Management is the application of master data management to customer master data. Here, business processes are supported by applications. There is ERP, CRM, SCM, PLM, a data warehouse, and various other applications typical for the branch. Typically, there are a fifty or more applications for supporting the company; and because each application has its own master data, this means that there is a fragmentation problem. Master data lay around, spread out and is redundant in different applications. Each application has its own life and develops its own terminology. Master data management turns into a nightmare. Customer, product, or order numbers of one application do not correspond with those in other applications. A little help may be given here by the IT department with its translation tables, whereby attempts are made to transfer master data terminology from one application to another. But this is not a good solution, because, e.g. the interaction with suppliers and customer itself causes increased costs. Each time a new supplier, customer or product is added, a new translation table must be created, and/or further new terms must be added to all translation tables. This makes changes in IT slow, prone to errors, and worst of all [very] expensive. But far worse are the effects of unprofessional or missing master data management in the specialist departments. 1) Helmut Beckmann in Enzyklopädie der Wirtschaftsinformatik, Oldenbourg-Verlag, Accessed 3 March 2014.

2 Consequences of inadequate master data management When redundant master data is collected and dealt with by an application, considerable additional effort arises in specialist departments because of inadequate data availability. Time is lost when searching, and this increases exponentially with the number of applications being used. Employees are lost in operative activities, and insufficient time remains for business-relevant activities unless additional resources are made available. The costs increase. Storing redundant master data increases the data volume and leads to data of different quality and update standards. Inconsistencies and errors occur in operative business. This causes erroneous process results; and these add considerable extra costs for wrong production, wrong deliveries, wrong prices and wrong invoices. Deliveries are returned, orders are cancelled, and customers are dissatisfied. Process interruptions occur, or even a process cancellation. This means a loss of productivity and considerable extra costs being incurred for manual intervention in processes, loss of time, and possible contractual penalties. Inadequate master data management also causes inconsistencies and errors at a tactical and strategic level. Inconsistencies in reporting lead to incorrect and inaccurate management conclusions. Only the figures are discussed not the business. This results in market opportunities being missed. Inaccurate analyses mean flawed management decisions, often with unforeseeable negative consequences. Company errors lower the levels of customer satisfaction and customer loyalty, and this means both medium-term and long-term sinking profit figures. This all shows quite clearly that professional master data management is absolutely essential, and that it pays for itself many times over. It provides a financial advantage by avoiding additional process costs, increases the timeto-market speed, and raises company turnover. This financial advantage can be calculated, and these savings and avoided costs can be transferred into the budget for professional master data management. Of course this also applies equally to customer master data management. 2

3 Golden Record The Golden Record concept in master data management The golden record is the heart of professional master data management. To justify its role, there must be a specific concept for master data management, such as the Uniserv Customer Data Hub (CDH), the MDM solution for customer master data from the German company Uniserv GmbH. A golden record is a master data record uniting all relevant attributes from all available data sources; in other words it is a superset of all attributes from all data sources. It is administered in a central repository where data cleansing and data matching guarantee its quality. Identity resolution 2 arranges similar records from different sources into a single golden record. Duplicates are avoided and the level of data quality is raised. This all-encompassing data record also contains links to the master data records in the different data sources, from where the attributes originate. This means that when an update is made to an attribute in a particular data source, the same update is made to all other relevant sources. All available data remains consistent throughout, and because it does not have to be physically moved, it is not stored redundantly. The result is that data silos in the company are synchronised - and fragmented data is a thing of the past. Individual rule sets enable the golden record to be automated, and whenever necessary, manually processed and enhanced. Master data does not remain stationary. Not only does the acquisition of one company by another change master data by requiring new structures. Every organisational change, every change of business rules, and every market change, all require an update of the master data model. Simply having the most recently updated master data model in the repository is not sufficient. The entire master data life cycle must be available for company planning and typical analytical questions, therefore all data must be managed throughout its life cycle. This means too that the repository must have the lifecycle history available for all golden records. Fig. 1: Creating a golden record 2) see the specialist article Customer Identity Resolution (Wolfgang Martin, Computerwoche, 6 March

4 Business cases for the Golden Record in customer master data management Where does a golden record demonstrate its financial advantage in customer master data management? Let us take a look at some typical scenarios. offer the right customer the right products at the right moment. This speeds deals and transactions, reduces costs for sales processes and raises turnover. Marketing: A targeted customer approach based on a 360 customer view is now possible. The customer feels well looked after and that his/her needs are well understood. This leads to short-term increased turnover, and long-term customer satisfaction, and usually long-term customer loyalty as well. After-Sales Service: When a customer is known and can be identified immediately, any claims made or product problems arising, can be dealt with faster and more sustainable services; thus reducing service costs and improving customer loyalty. This also enables additional crossand up-selling - meaning additional turnover. Marketing: Campaigns improve. The advantage of more detailed knowledge about the customer based on analytics using correct master data, means that extremely precise customer segmentation is possible. The response rate as well as the conversion rate can be improved noticeably - thereby lowering marketing costs, whilst at the same time increasing turnover. Marketing: Product introduction is faster and more economical. Time-to-market times reduce, giving the financial advantage of earlier and higher turnover. At the same time, process costs are lowered due to using consistent, comprehensive, correct, and constantly updated customer master data. This all results in a faster ROI. Sales: All customer information is consistent, up-todate, correct and fully complete, enabling sales teams to Mergers and Acquisitions: With the aid of a golden record, customer records can be effectively and efficiently consolidated or separated. This gives marketing and sales departments faster access to the new customer database, and enables the advantages of mergers and acquisitions to be safely and rapidly transformed into monetary gain. IT: : Golden records reduce the costs for data availability, exchange and integration, as well as data migration. The whole system landscape can be trimmed down and the actual quantity of data reduced. Regulatory Demands: Golden records are the prerequisite for compliance with national and international guidelines, norms and standards. They help avoid the risk of penalties and image damage. 4

5 Golden Record Fig. 2 Process cycle in the Uniserv Customer Data Hub (CDH): Customer data is supplied from the different specialist departments. The CDH optimises the data quality with Cleansing, Matching and Identity Resolution; following which it creates the golden record, i.e. a central master dataset uniting all relevant attributes from all data sources; thus representing a superset of all attributes from all data sources. The CDH also enhances data with additional components and makes it available again for various specialist department systems, such as marketing via CRM. 5

6 Golden Record Conclusion: Professional master data management more than pays for itself. Risks in business processes are avoided, because consistent, correct, complete and up-to-date master data ensures that the right customer receives the right product, in the right quantity, at the right price, at the right location, and with the right invoice. High quality master data is the prerequisite for high quality processes. The consequences of poor master data can be expressed in monetary terms due to the unnecessary process costs it causes; but also serve as a reference point for a master data management budget. High quality customer master data is particularly beneficial for marketing, sales and service, because its 360 customer view enables reliable and more precise customer analyses. Financial gain can also be made in IT, as well as with compliance, and with company mergers and acquisitions. Dr Wolfgang Martin Dr Wolfgang Martin is an internationally recognised, independent analyst and expert in the fields of: BI / PM (Business Intelligence / Performance Management), Analytics and Big Data Business Process Management, Information Management and Governance SOA (Service-Oriented Architecture) CRM (Customer Relationship Management) His specialist fields are the reciprocal effects of technological innovation in business and the resultant organisation, corporate culture, business architectures and business processes. UNISERV GmbH Rastatter Str. 13, Pforzheim, Germany, T: F: , E: info@uniserv.com, Uniserv GmbH, Pforzheim, All rights reserved