This morning on my way into work I was listening to a McKinsey podcast on public and private sector opportunities to capture the future value of Big data. I’m guilty of knowing about a growing mountain of data out there but never having done enough to understand what value it will offer, or how it will shape the next 50 years.
- 15 of 17 sectors in the US have more data stored per company than the US Library of Congress
– 30 billion pieces of content shared each month on Facebook
– 5 billion mobile phones in use in 2010
– $600 to buy a disk drive that can store all the world’s music
- $300 billion annual value of Big data to US health care
– $250 billion annual value to Europe’s public sector
– 60% potential increase in retailers’ operating margins
– 1.5 million more data-savvy managers needed in the US alone
The diagram below shows by sector where value can be most easily derived from big data.
What does “big data” mean?
“Big data” refers to datasets whose size is beyond the ability of a typical database tool to capture, store, manage, and analyze. The definition is intentionally subjective because it is assumed as technology advances the size of datasets will also increase.
Many see the world’s massing volume of data as a threat or quagmire, but there is strong evidence to show big data will play a significant roles in national economies, citizens lives, and private commerce. It is already showing signs of contributing to enhancing productivity and competitiveness. Big data is now everywhere, in every sector, every economy, every organization, and surrounding every user of digital technology such as smart phones or even modern cars.
The McKinsey report states that we are currently on the cusp of a tremendous wave of innovation, productivity, and growth, as well as new forms of competition, value capture, and impact.
The research yields seven key insights:
- Data have swept into every industry and business function and are now an important factor of production.
- Big data creates value by:
- Creating transparency
- Enabling experimentation to discover needs and improve performance
- Segmenting populations to customize actions
- Replacing/supporting human decision making with automated algorithms
- Innovating 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.
- There will be a shortage of talent necessary for organizations to take advantage of big data.
- Several issues will have to be addressed to capture the full potential of big data.
Big data will help to create new growth opportunities and entirely new categories of companies. Many of these will be companies that sit in the middle of large information flows where data about products and services, buyers and suppliers, consumer preferences and intent can be captured and analyzed.
Drawing on detailed analysis of five domains—health care, retailing, the public sector, manufacturing, and personal location data—the research identifies five broadly applicable ways to leverage big data:
- Making big data more accessible in a timely manner. In the public sector, making data more accessible across otherwise separated departments can sharply reduce search and processing time. In manufacturing, integrating data from R&D, engineering, and manufacturing units to enable concurrent engineering can cut time-to-market.
- Using data and experimentation to expose variability and improve performance. As they create and store more transactional data in digital form, organizations can collect more accurate and detailed performance data on everything from product inventories to personnel sick days.
- Segmenting populations to customize actions. Big data allow organizations to create ever-narrower segmentations and to tailor services precisely to meet customer needs. This approach is well-known in marketing and risk management, but can be revolutionary in places like the public sector.
- Replacing and supporting human decision-making with automated algorithms. Sophisticated analytics can substantially improve decision making, minimize risks, and unearth valuable insights that would otherwise remain hidden. Such analytics have applications from tax agencies to retailers.
- Innovating new business models, products, and services. Manufacturers are using data obtained from the use of products to improve the development of the next generation of products, and to create innovative after-sales service offerings. The emergence of real-time location data has created a new set of location-based mobile services from navigation to people tracking.
Policy makers will need to recognize the potential of harnessing big data to unleash the next wave of growth in the economy. The report states the public sector will need to enable the institutional frameworks that will allow their society to create value out of the data while protecting their citizens and providing security.
The public sector will also have a key role to play in helping to close the gap of talent through education and immigration policy, putting in place technology enablers that accelerate research in the areas of advanced analytics and establishing an additional framework that encourages open innovation.
Public welfare will be improved with creative solutions to align incentives with societal development in harnessing the growing power of big data.
Some key questions emerge from this.
- “What impact will big data have on global development and sustainability programs?”
- “As global (and regional) competition increases, how will big data evolve our current understanding of competitive advantage?”
– “How can evaluation methods be improved with the use of big data?”
- “What additional value can big data have on the delivery of public sector programs of work and utilities to promote economic growth?”
– “What new opportunities for social innovation will emerge with big data?”
– “What implications will big data have for the health and education sector?”
The podcast can be heard here: Distilling Value from Mountains of Data
- ‘Digital Universe’ to Add 1.8 Zettabytes in 2011 (datacenterknowledge.com)
- New McKinsey Report on Big Data (revolutionanalytics.com)
- Five Ways To Start Using Big Data (blogs.cisco.com)
- Democratizing big data – is Hadoop our only hope? (gigaom.com)
- Big Data Inhabits New Space in the Virtual Market (arnoldit.com)