Big Data Changes the Game in Strategy & Competitive Differentiation (Part 2)

Senior decision makers are struggling with how to get their arms around big data and determining a clear strategy that ties data and analytics to improved performance.  Companies deciding to embrace big data do so because decisions based on data-driven evidence rather than intuition transform business with remarkable outcomes.  With big data, leaders can measure more accurately, make better predictions, then manage more precisely. More effective interventions can be targeted. Decisions are smarter and produce better results. According to Harvard Business Review, big data has the potential to revolutionize management.

Evidence that using big data intelligently improves business performance:

According to Harvard Business research, the more companies characterized themselves as data-driven, the better they performed on objective measures of financial and operational results. In particular, companies in the top third of their industry in the use of data-driven decision making were, on average, 5% more productive and 6% more profitable than their competitors. This performance difference remained robust after accounting for the contributions of labor, capital, purchased services, and traditional IT investment. It was statistically significant and economically important and was reflected in measurable increases in stock market valuations.

“Simply put, because of big data, managers can measure, and hence know, radically more about their business, and directly translate that knowledge into improved decision making and performance.”  quote from “Big Data:  The Management Revolution” by Andrew McAfee and Erik Brynjolfsson, Harvard Business Review , October 2012

Big data is different from traditional analytics in 3 ways:

1.  Volume –  (see Part 1 of the WOA blog: Big Data Changes Game in Strategy & Competitive Differentiation),

2.  Velocity – Real time makes companies more agile.

3.  Variety – The sources of big data are new. Thus, the structured databases of most corporate information is only recently capable of storing and processing big data.  Plus, previously expensive data-intensive approaches are rapidly becoming economical.

With all the big data the challenge comes in how to capture, manage, store, search, share, analyze and visualize it.  Companies embracing evidence-based decision making are often hiring scientists who can find patterns in data and translate them into useful business information.   “You can’t manage what you don’t measure.  Exploiting vast new flows of information can radically improve your company’s performance.  But first you’ll have to change your decision-making culture.”  quote  by W. Edwards Deming and Peter Drucker from “Big Data:  The Management Revolution” by Andrew McAfee and Erik Brynjolfsson, Harvard Business Review , October 2012

Harvard Business Review examined  companies that have recently launched big data strategies to shed further light on the tough road C-level executives face in this mission critical arena.  Here are the four principles Harvard Business Review identified as challenges for organizations when defining a strategy and getting started with big data and high performance analytics:

1.  Size the opportunities and threats

The key is to establish a clear view of the business impact expected at each stage of implementation in order to better focus efforts and determine priorities.  For example, for one retailer studied, data and analytics were part of a challenging battle for market share.  The company’s strategy had been to match the moves of an efficient rival, but now a different online player was draining the company’s revenues and denting its margins.  At the heart of the threat was the new competitor’s ability to gather and analyze consumer data to generate recommendations across millions of customers while becoming a platform where vendors could sell excess inventory at a discount by using publicly-available price data.  Responding to this threat required both debate on ‘what business are we in’ and investment to use data and analytics to drive important performance improvements.

2.  Identify big data resources…and gaps

During the framing of big data strategy, discussions are critical regarding the kinds of information and capabilities required and review of analytical talent as well as potential partnerships to fill the gaps.  Consideration of internal and external data will often be an eye-opener for executives as they identify “data gems” inside their business units or recognize the value of creating the right kind of partnerships.

3.  Align on strategic choices

A common mistake companies make is to jump immediately into action-planning mode.  Instead they need to take time to think and ask the right questions.  Data strategies need to intertwine with overall strategy in order to achieve the desired results.  Also view data and analytics in the context of competing strategic priorities.

4.  Understand the organizational implications

The threats and opportunities associated with big data often have organizational implications that only senior-executives can address.  Network outages or perception of false advertising can cause devastating negative messages to spread like wildfire through social media.  With the velocity of big data, senior executives have to work even harder to get marketing and network organizations to work together.  Marketing messages must be carefully tailored to better explain new-product rollouts and network upgrades.  Harvard Business Review  also noted stresses on technical and analytic resources as a company seeks to capitalize on data and analytics.  No matter what the size of the initiative, the senior team must stay mindful of the resources required to shift quickly from pilot to “at scale” implementation.

Overwhelming? Stimulating?  It depends on what industry you are in.  The bottom line is you have no shortage of information, but what you need is solutions.  How will you capture, manage, store, search, share, analyze and visualize big data?

This short video clip helps visualize the big data concepts and challenges:

[youtube http://www.youtube.com/watch?v=tFV7GKccv2U&feature=relmfu&w=560&rel=0]

In all the excitement over big data and analytics, remember to keep the human component.  Machines don’t make the essential and important connections among data and they don’t create information.  Humans do.  Tools simply have the power to make work easier and enable, facilitate and accelerate the human capacity to solve problems.   Continue to engage in deep, insightful, meaningful conversations that are focused on  solutions.  Listen to concerns, understand the challenges, and look for connections to be viewed as a valued solutions partner.  Big data and high performance analytics change the game but the competitive advantage comes when you understand the issues and leverage your knowledge to build valued solutions.

References:

“Big Data:  The Management Revolution”  by Andrew McAfee and Erik Brynjolfsson, Harvard Business Review, October 2012

“5 Ways Big Data is Changing the World” by Taylor Hatmaker, Tecca, Entrepreneur Magazine, October 2012 http://www.entrepreneur.com/article/224582

“Facebook Has 1 Billion Users, Mark Zuckerberg Announces In A Status Update” Huffington Post, http://www.huffingtonpost.com/2012/10/04/facebook-1-billion-users_n_1938675.html?utm_hp_ref=daily-brief?utm_source=DailyBrief&utm_campaign=100412&utm_medium=email&utm_content=NewsEntry&utm_term=Daily%20Brief

“SAS High-Performance Analytics Tames Your Big Data Challenge” http://www.youtube.com/watch?v=D1p8rf41L30

” Governing Aided by the Power of SAS Analytics”  http://www.youtube.com/watch?v=tFV7GKccv2U&feature=relmfu

“Before & After High Performance Analytics – What do you get you combine big data with high performance analytics (HPA)?” http://blogs.sas.com/content/sascom/files/2012/02/HPA_Vertical_600w.gif

“IBM: Bringing Big Data to the Enterprise”    http://www-01.ibm.com/software/data/bigdata/

“Big Data’s Human Component”  by Jim Stikeleather, Harvard Business Review, September 17, 2012  http://blogs.hbr.org/cs/2012/09/big_datas_human_component.html

“Get Started with Big Data:  Tie Strategy to Performance”  by Dominic Barton and David Court, Harvard Business Review http://blogs.hbr.org/cs/2012/10/getting_started_on_a_big_data.html?referral=00563&cm_mmc=email-_-newsletter-_-daily_alert-_-alert_date&utm_source=newsletter_daily_alert&utm_medium=email&utm_campaign=alert_date