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:
“’Big 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 terabytes).”
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.
a. 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.
Posted by the Epicor Social Media Team