Master data introduction

What is master data?

Master data describes the critical relationships your business has. Things like Customer, Product, Supplier, Employee. It’s especially important when the relationship is handled by multiple departments in the same business. In this video, we walk through the challenges posed when this data is not managed properly and show how frustrating and expensive this can be for the business.

Single version of the truth

In order to make sense of the transactions that we make, we absolutely have to understand the entities that we’re doing business with. So, for example, we need a common set of definitions around customers so that we can reliably say Customer X purchased product Y, and we delivered it to location Z. By defining master data in an organisation about these entities, we can interpret the transactions that we make and we can answer simple questions like:

• Who’s our best customer, and where are they based
• Which of our products are getting the best return on investment for marketing spend

So let’s take a look at a real-life horror story of what happens when you get master data wrong in your enterprise. This happened to me as we moved office address back in 2019.

Neil was a retail customer for StarHub since 2011. He has a subscription to their broadband offering, as well as the TV subscription. This means that StarHub has critical data about Neil that it knows:

• His First, Middle and Last Names
• Neil’s Home Address
• Neil’s Singapore ID card number, and other Personally Identifiable Information (PII data) about his identity
• His billing details (credit card etc)

These are the Nouns that StarHub knows about Neil. They know he’s a Person. They know his Location. StarHub knows his residential status. These facts are all types of Master Data – and it is critical to ensure these are shared across the systems your business uses in order to get transactions correct.

As the slide jokingly points out, StarHub should know Neil even more intimately than just the basics of who he is, where he lives and what his ID card number is. They have transactional data (the subject of the next course) that can give rich insight into what Neil’s likes and dislikes are. Unless the Master Data is correct, deeper analysis of transactions is pointless as you cannot reliably tie Neil’s transactions to his unique identity.

In this slide, we learn that Neil has selected StarHub for a Business Account. Some businesses sell their services to other Businesses – and the Business Names, Addresses and Identifying numbers are also types of Master Data.

Many companies struggle to align Master Data about their Retail customers (B2C) and their Business customers (B2B). Given that Neil is also listed as a director of Cognopia, good Master Data would allow StarHub to know that the Business Account is linked to a Retail Account via Neil’s identity.

Being able to link together Retail and Business Account data allows a richer understanding of the value of that customer to your business. Whilst individually these accounts may not look large and may not be bothersome for StarHub to see them churn, collectively this customer is more valuable.

Unless your Master Data allows you to see the full relationship you have with different entities you are unable to understand basic things, like what Neil’s Customer Lifetime Value truly is.

StarHub as an enterprise is behind the times. They still use paper forms that are completed by hand, faxed back to a Customer Service Representative, and then re-keyed into their systems. This creates risk and invites errors.

Good data management practices remove needless manual processes, making customer onboarding more seamless and enjoyable for all concerned.

Errors in data entry – by a “Data Creator” – can creep into your systems; watch out!

This slide really doesn’t have much to do with data. It’s basic Customer Experience that you could just call up one of your customers that have not paid and request payment. Unfortunately, StarHub decided to just block the number without warning.

Understanding your Customer’s Journey will help you identify areas where better data practices could be deployed. In this case, the Finance team should know Neil’s phone number (they provide it, after all) and could be prompted to request payment using a different channel. We have further lessons on this later in the course.

Billing errors are sadly prevalent in many industries. In this case, StarHub had not been paid. However, the customer had also not been invoiced. Errors in transactions (invoices, billing) can often be tied back to bad Master Data Management.

The root cause of this issue is that the systems StarHub uses to invoice are not linked to the systems used to onboard a new customer. Clearly, StarHub knew that the new address is the Cognopia office address – after all, they had just installed the internet there.

The system used to manage the customer relationship (typically called a CRM), had passed the right address to the installation team. However, the Invoicing system used by Finance had not been updated. There was no Master record. As such, the “facts” that the Finance team knew were incorrect – they had no idea that Cognopia as a customer had changed location.

Sending invoices to the wrong location is costly (printing, stamps, time) and is a major area that good data management can be deployed to reduce costs. When the invoice is sent to the wrong location, unpaid, and that leads to cutting off a customer, the costs start to climb (increased risk of customer churn, reputational risk). We cover this in later lessons so you can put a price on this.

So you can see here the issues with master data about customers is costing this organisation money. When they sent an invoice, one or more of their different systems presumably stored an old address in them and a new address in another – the new address being the same address they’ve just helped update the broadband connection in. This triggers a whole chain of unfortunate events:

• The finance team sends the invoice to the old address
• The customer never sees it, naturally
• The customer’s cut off
• And then this frustration, costs and anguish that comes alongside that

To avoid all this anguish, nail down your master data about those key relationships that you have, the key nouns that you’re engaging in business with. So customers, products, suppliers, employees, anything like that. Get that well defined so you can define the rest of your business processes around it. The result, seamless and slick interactions with customers and other critical stakeholders.

In the next video, we’re going to take a look at how master data sets the context for the transactions and transactional data that are important to our organisation.