Big data is a big deal according to the latest McKinsey report, but just how big?

Just how big a deal is big data? Well, according to the latest McKinsey report it’s a very big deal – in fact it regards big data and predictive analytics as one of the 5 leading game-changers in driving growth and renewal. According to the report big data could drive $325 billion incremental annual GDP in retail and manufacturing in the U.S. by 2020 whilst also cutting $285 billion in costs across the government and health care sectors. If that isn’t a big deal, it’s difficult to imagine what is.

However, the report also highlights an anomaly, and that is whilst big data may be important, its impact is not as significant as might be expected; in fact its impact is surprisingly small compared to low-tech areas like improved trade and shale gas production, with better infrastructure like roads and improved education promising dramatically bigger gains in the long run.

McKinsey surveyed the market for factors that have a broad impact across the U.S. economy, affecting multiple sectors. According to the report, each development had to be a catalyst with the ability to drive substantial growth in GDP, productivity or jobs. In addition, it needed to be ready to achieve scale now and capable of producing tangible impact by 2020. The short list was distilled into 5 dominant forces: Shale-gas and -oil production (Energy), U.S. trade competitiveness in knowledge-intensive goods (Trade), Big Data, increased investment in infrastructure like roads (Infrastructure) and a more effective US system of talent development (Talent).

Although McKinsey only rated big data as the third most influential factor for driving growth and renewal, it calculated that big data could none the less still drive $55 billion in productivity gains in the retail sector alone by helping businesses make more accurate predictions of store traffic and associated staffing needs to optimize labour scheduling, and that it could boost annual GDP by some $325 billion by 2020. Whilst the report didn’t include Healthcare and Government in its study because they didn’t necessarily translate into improved GDP, it still accepted that Big Data was expected to have a major impact there too, potentially yielding as much as $285 billion in cost savings in these sectors.

What is perhaps surprising is that the report missed the obvious, and that is that the role of big data in improving each of the other ‘game-changers’. Big Data analytics helps governments determine the most efficient areas in which to build improved infrastructure. Big Data helps educators assess the effectiveness of certain educational programs, and Big Data is already being used extensively in the Energy sector to improve drilling and production performance, according to IBM. Big data clearly is an integral component of each of McKinsey’s game changers. Whilst its value may not have been fully recognised in the report, a good argument can be made to justify the claim that big data is possibly the biggest game changer of all of them.