The Benefits of Big Data
January 28, 2013
Rick Neil from Percepture directed me to a great infographic (shown below) that was created by neolane (www.neolane.com). The infographic is entitled “Transforming Big Data into Actionable Insight.” In my discussions about Big Data, I’ve persistently pointed out that having access to large data sets doesn’t mean anything if you don’t have a way of analyzing that data and presenting the results to decision makers in a user-friendly format (i.e., transforming Big Data into actionable insights displayed on an easy-to-use dashboard). The infographic provides an overview of what is encompassed by the term “Big Data” and points out that a lot of firms don’t know what to do with it (“60% of marketers don’t have or are unsure if their company has a big data strategy”).
In previous posts, I’ve discussed the fact individuals with the right mathematical skills are going to be in high demand by corporations and marketing firms (see, for example, a post entitled Future Jobs: The Times They are a Changin’). The infographic notes that 2018 there will be a shortage of 140,000 to 190,000 of such folks by 2018. I’ve also discussed the fact that privacy concerns are going to remain the elephant in the room whenever people discuss big data and how it can be used for targeted marketing. The infographic notes that a staggering 81% of marketers are “either somewhat or not very prepared to handle the new rules and regulations of marketing data governance.” That includes privacy rules and regulations.
The most important part of the infographic, however, is its description of the benefits of big data. It breaks the benefits into five categories: relevancy, timeliness, context, consistency, and personalization. Companies that offer big data services must master all five of those areas if they are going to add value to the business models of the clients they serve.
For Consumer Packaged Goods (CPG) manufacturers and retailers, I believe that targeted marketing is going to be the most important use of big data. Many analysts believe, however, that big data is going to touch almost every aspect of a business; which is why, business leaders need to become familiar with big data and what it means for their company. McKinsey & Company analysts James Manyika, Michael Chui, Brad Brown, Jacques Bughin, Richard Dobbs, Charles Roxburgh, and Angela Hung Byers write, “Leaders in every sector will have to grapple with the implications of big data, not just a few data-oriented managers. The increasing volume and detail of information captured by enterprises, the rise of multimedia, social media, and the Internet of Things will fuel exponential growth in data for the foreseeable future.” [“Big data: The next frontier for innovation, competition, and productivity,” May 2011] They offer seven key insights about big data. The first, and most obvious, insight is that big data has “swept into every industry and business.” The second insight is that “there are five broad ways in which using big data can create value.” Those ways of using big data are:
“First, big data can unlock significant value by making information transparent and usable at much higher frequency. Second, as organizations create and store more transactional data in digital form, they can collect more accurate and detailed performance information on everything from product inventories to sick days, and therefore expose variability and boost performance. … Third, big data allows ever-narrower segmentation of customers and therefore much more precisely tailored products or services. Fourth, sophisticated analytics can substantially improve decision-making. Finally, big data can be used to improve the development of the next generation of products and services. “
The third insight identified by the McKinsey analysts is that “the use of big data will become a key basis of competition and growth for individual firms.” The fourth insight is that “the use of big data will underpin new waves of productivity growth and consumer surplus.” The fifth insight is that not all sectors will benefit equally from big data analytics. The analysts explain:
“While the use of big data will matter across sectors, some sectors are set for greater gains. We compared the historical productivity of sectors in the United States with the potential of these sectors to capture value from big data (using an index that combines several quantitative metrics), and found that the opportunities and challenges vary from sector to sector. The computer and electronic products and information sectors, as well as finance and insurance, and government are poised to gain substantially from the use of big data.”
I’m surprised that the utility sector wasn’t mentioned. It appears that sector is well on its way to benefiting from big data as well. The sixth insight is one mentioned earlier in the infographic: “There will be a shortage of talent necessary for organizations to take advantage of big data. By 2018, the United States alone could face a shortage of 140,000 to 190,000 people with deep analytical skills as well as 1.5 million managers and analysts with the know-how to use the analysis of big data to make effective decisions.” The final insight is that policies are going to have to catch up with technologies in order “to capture the full potential of big data.” The authors assert, “Policies related to privacy, security, intellectual property, and even liability will need to be addressed in a big data world.” Together the infographic and McKinsey’s insights provide an excellent overview of big data and why there currently is so much hype about it.