Data Shrinkage

The concept of shrinkage is considered when ordering raw materials to account for the loss of material during the manufacturing process.  Shrinkage is also used in accounting to represent the loss of finished product from the point of manufacture to final sale.  Data shrinkage is when data is lost in the process of executing a series of automated business processes.

Most of us are customers of some business.  Becoming a customer often starts with an application.  For example, to become a brokerage customer  you fill out a brokerage account application.   The application has all the data required or should I say may be required to open the brokerage account.   After filling out the form, the data is entered into a business application so the party you’re doing business with has the data they need to evaluate your application.  The first step in the process is done.

Some time in the future a business analyst, BA, is going do an analysis of brokerage customers.   Do you think all the data entered on the original form is available to the BA?  How about all the data entered into the business application to open the account?  Chances are the BA will only have access to a subset of the data about the customer due to data shrinkage.

Typically, what happens is that each process step has different requirements for data to move forward.   In the case of opening a brokerage account, the broker collects data about the new customer like annual income, assets, investment experience etc.   The broker uses this data to make sure he sells the appropriate investment product.   Once the application is accepted you proceed to the next step and open the account.

Once you open the account, you don’t necessary need to carry all the data from the application into the business application that is used to administer that account.  Initially, from the application you have a vivid the image of the customer and what you might expect in investment behavior from this new customer.  After just two steps, filling out the appliction and opening the account, you may have a much starker image of the customer based solely on account activity.  Why?

The first step of getting to know the customer has a lot of data about the customer.  The data may include notes from the broker or other ancillary data.  Once the broker has evaluated the new client, the broker enters  only the key data needed by the Open Account Business Application.  The Open Account Business Application doesn’t require all the suitability data so it’s not captured with the new account.

There are a number of reasons why the full set of data is not passed from process to process.  It can be as simple as a space restriction or to reduce re-keying in downstream systems because of a lack of system integration.  One solution for minimizing data shrinkage is to require that all data is entered into every business application.  This would be very inefficient.   A better approach is to take the time to understand your business processes and all the data collected.  Once you understand this, you can define the key data relationships so you can link the data collected in each process step to create a complete picture of your business.

Using data relationshps, based on values, enables you to leverage database technology.   Database technology helps you reduce the need to re-enter data while providing the capability to relate your data across business processes.   Relating the data from all the processes about the customer enables the BA to re-create the vivid image of the customer who filled out the application thus minimizing the affects of data shrinkage.

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One Response to Data Shrinkage

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