Transforming Data into Jet Fuel

If Data is the New Oil, how do we transform spend data into the equivalent of jet fuel to power business growth?

1 copy

Data is the new oil... a common phrase used recently to compare the value of data to oil, the commodity that effectively fuelled the growth of the 20th century. Commentators usually miss the element that crude oil requires refinement to be useful. Business data is currently in a similar state for many companies, as evidenced by these quotes from a few industries.

“Nearly three-quarters (70 percent) of businesses are struggling to unlock the value of their data – directly impacting their ability to innovate, according to 100 C-suite executives in Forbes Top 2000 companies across Europe.”²

A new study from Oracle, The Decision Dilemma, of more than 14,000 employees and business leaders across 17 countries found that “People are drowning in data,” said Stephens-Davidowitz, in a news release. “This study highlights how the overwhelming amount of inputs a person gets in their average day. People are tempted to throw out the confusing, and sometimes conflicting, data and just do what feels right. But this can be a big mistake. It has been proven over and over again that our instincts can lead us astray and the best decision-making is done with a proper understanding of the relevant data. Finding a way to get a handle on the stream of data at their fingertips, to help businesses distinguish between the signal and the noise, is a crucial first step.”³

“IBM’s estimate of the yearly cost of poor quality data to the US economy is $3.1 trillion, Gartner’s estimates a cost of $9.7 million per year to organizations. Whatever the truth is, it involves a Consultant Approved Very Big Number™.”⁴

Being driven by the intelligent use of data led to the phenomenal growth of the Tech Titans (Alphabet, Google, and Meta). The companies realized equally astounding wealth and shareholder value in the process.

However, a typical scenario in procurement today has spend data held across multiple IT systems and sprawling across multiple platforms varying from Excel to SAP. Making sense of this potentially invaluable resource is a significant challenge many companies still need to overcome.

In other words, data must be refined to be used intelligently.

From crude to jet fuel:

To look at the oil/data analogy in more detail, let’s take a quick look at the refining process of crude oil. The basic steps involved in refining petroleum to produce usable products are:

Distillation – similar to the process for creating high-strength alcohol, crude oil is processed to remove excess salts, heated to approximately 400 degrees Celsius, then sent to the Crude Distillation Unit (CDU). A temperature gradient is maintained throughout the fractionation distillation column by heating at the bottom and simultaneously cooling at the top. Different oil products are extracted at various temperature levels, with the three most important being petroleum gas, liquefied petroleum gas, and petroleum residue.

Conversion – converts residual oils, fuel oils, and light ends into high-octane gasoline, jet fuel, and diesel fuel.

- Cracking – there are three types of cracking used in the refining process. Thermal cracking breaks down the heaviest molecules to convert residual oil into diesel, fuel oil, naphtha, and petrol. Hydro produces petrol by breaking down larger gas oil, kerosene, and naphtha molecules. Catalytic cracking uses gas oil or residual oil to generate petrol and diesel.
- Reforming – increases production volumes from each barrel of crude oil, rearranging molecules to convert into gasoline molecules. Alkylation or Catalytic Polymerization converts molecules into high-octane options. Isomerization improves hydrocarbon quality.

Treating – stabilizes and upgrades, removing contaminants. The treatment process depends on various factors, such as the nature of the fractions, the amount and type of impurities, the extent of impurity removal sought, and the specific requirements of the intended end product. This process may occur at the intermediate or end stages of the refining process.

Blending – the final step involves mixing various components based upon specific octane requirements; viscosity, flashpoint, pour point, octane number, etc.

The refining process results in a variety of usable end products that give us everything ranging from light distillates (gasoline, LPG, methane & ethane), middle distillates (diesel fuels, kerosene, heating fuels, fuel oils), heavy distillates (wax, asphalt, lubricating & heavy oils), and others such as elemental sulfur and a product like coal called coke.

We have now examined how crude oil is converted into jet fuel at quite a granular level.

From crude data to fuel for 21st century success:

As stated previously, crude oil is essentially worthless before being refined. Once refined, it truly impacts almost every aspect of our lives, far beyond just the fuel for our tanks. Data is much the same... worthless without refinement into something beneficial in everyday decision-making.

Sir Frances Bacon could probably never fathom just how accurate his statement in 1597, “knowledge itself is power,” would be more than 400 years later. Today, knowledge in the form of data, coupled with the ability to unleash the insights possible from that data, drive business success in every sector.

Let’s continue with our crude oil refinement analogy, as it specifically applies explicitly to procurement data.

As with crude oil, data must be put thru a “distillation” process from bottom to top, identifying anomalies and noise. Data must then undergo a conversion process that includes appropriate categorization and cleaning to prepare for analysis. Afterward, the results must be critiqued and refined to address issues of skewed results, recleaning and critiquing until adequately prepared to enable a multitude of insights to be gleaned from it. Furthermore, the analytics team must structure the data to ensure stability and usefulness moving forward. And finally, high-level analytics blend the data based on desired insights and current needs.

ProcureVue^TM

ProcureVue^TM can transform your crude spend data into essential fuel for your procurement team. Our analytics processes take much less time than refining crude oil, produce powerful outputs, and deliver immediately actionable.

ProcureVue^TM has a simpler and less energy-intensive way of converting your spend data. We use AI supported by proprietary algorithms to clean and then harmonize data. Many companies need help with spend data distributed across multiple platforms, from Excel files to ERP systems, often across many locations, regions, or even countries. ProcureVue^TM processes this data to provide one source of truth for your procurement and executive leadership teams.

The ProcureVue^TM equivalent of the distillation process follows these steps:

- Data Cleansing – data is taken from multiple sources across an enterprise and cleansed.
- Harmonization – using proprietary technology, our data experts combine the cleansed data to provide a categorized overview.

- Enrich – ProcureVue^TM enriches your base data with trusted industry indices and additional relevant data to create ProcureVue^TM cost builds, enabling us to gain an accurate ‘should-cost’ overview.
- Visualize – the once dirty, unusable data is transformed into easily digestible visualized insights and provides a list of quick-hitting items to engage on immediately.
- Utilize – we partner with senior leadership and stakeholders to develop the best strategy that fits the business needs at that time, supporting them from concept to negotiations. Data-based facts and insights will be readily available on your ProcureVue^TM dashboards for critical decisions day or night when you need them.
- Monitor – Peter Drucker stated, “If you can't measure it, you can't manage it.” Using the data feed set up at the outset of our partnership, we monitor the process monthly, tracking successes and providing additional opportunities as the market changes. Accurate measures of your progress against defined goals are invaluable.

It might seem strange to compare the data analytics process with oil refining, but the similarities outweigh the differences. For the last 100 years, oil extracts have powered global economic growth. Insights gained from data that is analyzed quickly and accurately will help companies to grow throughout the 21st century.

“According to research conducted by McKinsey, data-driven organisations are 23 times more likely to acquire customers. Further still, they are six times as likely to retain customers and 19 times more likely to operate at a profit – such companies, on average, according to BARC, cut their costs by 10% and generate 8% more profit.”⁵

In 2022 research results, Forrester found that while many firms had gained ground towards being an insights-driven business (IDB), advanced capabilities still need to be realized. Additionally, they found that those companies considered to have achieved advanced insights-driven business status shared the following traits:

Enrich their internal insights with external data.
Continue to expand AI usage.
Undergird data initiatives with good leadership.
C-suite buy-in and utilization of data and insights.

Continual investment in extending insights-driven capabilities.

ProcureVue^TM is the partner to take you to the next level as an insights-driven business. Each of the traits Forrester identified is simply part of our wheelhouse. Furthermore, you will find that we do it quicker and more in-depth than our counterparts. Let us help you cut costs, increase profits, and bolster your competitive advantage.

3-Jun-20-2023-04-20-38-0702-PM