Why is data literacy important to data governance?

Data literacy is a key component of data governance. Learn why it’s important to data governance and how to improve your data literacy skills.

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.

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.

“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.

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.