Master data management: The key to getting more from your data
Master data management (MDM) can enhance an organization’s performance by simplifying how data about customers, suppliers, products, and employees is organized and accessed. Imagine a scenario where a sales representative at a large company struggles to gather accurate information about a client due to multiple records with the same name. This inefficiency is illustrative of poor MDM, leading to suboptimal experiences, higher costs, and missed revenue opportunities. The collaborative effort by McKinsey Digital experts highlights the importance of MDM in streamlining information to support business processes and decision-making.
Master data, a type of organizational data, provides foundational information about entities and their attributes. Shared across business functions, it enhances efficiency and reliability, particularly in complex organizations with data silos. A 2023 McKinsey survey of over 80 large global organizations revealed that MDM is crucial for improving customer satisfaction, enhancing revenue growth, increasing sales productivity, and streamlining reporting.
MDM ensures data accuracy and consistency by cleaning, enriching, and standardizing data before it enters the data lake. It provides high-quality data hubs that improve decision-making, accurate reporting, and compliance. Moreover, MDM standardizes data across various systems, acting as a reference system via web services like REST APIs. Furthermore, MDM can integrate with artificial intelligence (AI) to improve data reliability, helping organizations achieve more effective generative AI systems.
However, many organizations struggle with MDM implementation due to constraints like insufficient funding, technological support, and data quality issues. Making a business case for MDM can be challenging as its return on investment is difficult to quantify compared to other projects with immediate benefits. Additionally, organizational silos, where different divisions have separate data management practices, lead to inconsistencies and decision-making difficulties.
Treating MDM as a mere technological discipline rather than a strategic differentiator limits its potential benefits. McKinsey’s 2023 survey found that client and product data are the most significant domains for organizations, and about 80 percent of respondents operate in silos. For instance, separate data systems for a sales team and a marketing team can lead to errors and inefficiencies unless addressed by holistic MDM practices.
To overcome these challenges, organizations must see MDM as an integral part of their data strategy, leveraging it to create consistent, accurate data that supports better business decisions and operational efficiency.
Source: Elevating master data management in an organization.
