The Basics of Big Data Revisited
As the world continues its conversation about big
data and its implications, let’s revisit the seminal report that first
brought the topic to a high level of visibility. In May 2011, the
McKinsey Global Institute published “Big Data: The Next Frontier for Innovation, Competition, and Productivity”;
the rest is, as they say, history. McKinsey’s observations have
unfolded across the globe, and the report has become one of the world’s
most cited sources on the topic.
The report defines big data as follows:
data’ refers to datasets whose size is beyond the ability of typical
database software tools to capture, store, manage and analyze. This
definition is intentionally subjective and incorporates a moving
definition of how big a dataset needs to be in order to be considered
big data—i.e., we don’t define big data in terms of being larger than a
certain number of terabytes (thousands of gigabytes). We assume that, as
technology advances over time, the size of datasets that qualify as big
data will increase. Also note that the definition can vary by sector,
depending on what kinds of software tools are common in a particular
industry. With those caveats, big data in many sectors today will range
from a few dozen terabytes to multiple petabytes (thousands of
Seven Major Points About Big Data:
- Data has swept into every industry and business function and is now an important part of production.
- Big data creates value in numerous ways:
a. Creates transparency.
b. Enables experimentation to discover needs, expose variability, and improve performance.
c. Segments populations to customize actions.
d. Replaces/supports human decision making with automated algorithms.
e.Innovates new business models, products, and services.
- Use of big data will become a key basis of competition and growth for individual firms.
- The use of big data will underpin new waves of productivity growth and consumer surplus.
- While the use of big data will matter across sectors, some sectors are poised for greater gains.
Computer and electronic products and information sectors, traded
globally, stand out as sectors that will benefit substantially from the
use of big data.
b. Two services sectors—finance and insurance and government—are positioned to benefit very strongly from big data.
- There will be a shortage of talent necessary for organizations to take advantage of big data.
- A number of issues will have to be addressed to capture the full potential of big data:
a. Data policies
b. Technology and techniques
c. Organizational change and talent
d. Access to data
e. Industry structure
Clearly, the economic impact of big data will be profound. In a post on the Harvard Business Review blog
network, David Court makes the case for organizations crafting a big
data plan. He notes a growing consensus among executives that the
returns from big data are real, but notes as well that moving forward is
challenging. In terms of costs and commitment, the investment can be
large. He posts a basic approach:
“The answer, simply put, is to develop a plan.
It may sound obvious, but in our experience, most companies fail to put
in the time required to create a simple plan for how data, analytics,
front-line tools, and people can come together to create business value.
The power of a plan is that it provides a common language that allows
senior executives, technology professionals, data scientists, and
managers to talk through where the greatest returns will come from, and
more importantly, select the two or three places to get started.”
Court draws a parallel between big data planning
and strategic planning, noting how the beginnings of the latter by a
few companies in the 1970s has now become standard operating procedure
for virtually all companies. Sooner rather than later, big data planning
is likely to become commonplace as well.
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