Isthe final frontier as some technology experts have suggested? Well, that all depends on your point of view. Some believe it is, whilst others are slightly more guarded in their opinions. What can’t be disputed is that is certainly the next technological frontier. The importance of data and its analysis can’t be over-estimated. The amount of available data has exploded over the last decade, driven largely by the growth of the internet, and the rise of multimedia and social media. Businesses and enterprise can see the enormous potential that this information can bring, but have struggled to come to terms with how best to analyse this data. The analysis of this data, or , is crucial: it will ultimately become the key basis of competition, and will underpin new waves of productivity growth, innovation and consumer surplus. That’s the view of the McKinsey Institute, the global management consulting firm, and trusted advisor to the world’s leading businesses, governments and institutions. MGI’s Business Technology Office believes that leaders in every sector will quickly have to come to terms with the implications of big data if they are to mine this information effectively.
MGI bases this opinion on the research it carried out into big data in five separate domains: healthcare in the United States, the public sector in Europe, retail in the United States, and manufacturing and personal-location data globally. It believes the effective mining of data big data will undoubtedly generate value in each of these sectors. To illustrate the point, MGI pointed out that a retailer using big data effectively could increase its operating margin by more than 60 percent. Moreover these potential benefits won’t just be felt in the retail sector: harnessing big data in the public sector has enormous potential, too. MGI argues that if the US healthcare were to use big data creatively and effectively to drive efficiency and quality, the sector could create more than $300 billion in value every year; 66 percent of that would be in the form of reducing US healthcare expenditure by about 8 percent. In Europe’s developed economies, government administrators could save more than €100 billion in operational efficiency improvements alone by using big data: they could make even larger savings if they were to use big data to reduce fraud and error and boost the collection of tax revenues. Additionally, users of services enabled by personal-location data could capture $600 billion in consumer surplus. So, how has MGI reached these sweeping conclusions? What evidence does it put forward to justify these claims?
MGI has offered 7 key insights as to why big data will change the business world over the next decade.
- Every industry and business function is now wholly reliant on data for information about production, labour and capital. MGI stated that as early as 2009,nearly every sector of the US economy had at least an average of 200 terabytes of stored data (twice the size of US retailer Wal-Mart’s data warehouse in 1999) per company with more than 1,000 employees. Data has grown exponentially since then, fuelled by our seemingly-unquenchable thirst for information.
- MGI argues that there are at least five ways in which using big data creates value.
unlocks significant value by making information transparent and usable at much higher frequency. If organizations create and store more transactional data digitally, they can collect more accurate and detailed performance information on everything from product inventories to sickness absence, and therefore expose variability and boost performance.
Leading companies are using data collection and analysis to conduct controlled experiments to make better management decisions; other smaller enterprises are using data for basic low-frequency forecasting.
Big data allows ever-narrower segmentation of customers and therefore much more precisely tailored products or services.
Sophisticated analytics can also substantially improve decision-making.
Big data can be used to improve the development of the next generation of products and services. For instance, some manufacturers are now using data obtained from sensors embedded in products to create innovative after-sales services like proactive maintenance: in other words, using preventive measures before a failure occurs or is even noticed.
- The use of big data will become a key basis of competition and growth for individual firms. Every enterprise that wants to remain competitive and fully capture potential value will need to take big data seriously.
- The use of big data will undoubtedly underpin new waves of productivity growth and consumer surplus. Retailer using big data effectively have the potential to increase operating margins by at least 60 percent. Consumers too can benefit from effective data mining: services enabled by personal-location data could allow consumers to capture $600 billion in economic surplus.
- Although big data will matter to every business sector, some sectors look set to gain more. MGI’s historical comparison of the productivity sectors in the U.S, viewed in conjunction an analysis of the potential of these sectors to capture value from big data, using an index that combined several quantitative metrics, found that the opportunities and challenges vary from sector to sector. The computer and electronic products and information sectors, as well as finance and insurance, and government look set to gain the most from the use of big data.
- Unless organisations plan effectively, they will be faced with a shortage of talent necessary to take advantage of big data. By 2018, MGI believes the United States alone could face a shortage of 140,000 to 190,000 people with deep analytical skills as well as 1.5 million managers and analysts with the know-how to use the analysis of big data to make effective decisions.
- Every enterprise will need to address several issues to capture the full potential of big data. Policies relating to privacy, security, intellectual property, and even liability will need to be addressed in the big data world. Organizations don’t just need to put the right talent and technology in place but they must also structure workflows and incentives to optimize the use of big data. Access to data will become critical: companies will increasingly need to integrate information from multiple data sources, often from third parties, and the incentives have to be in place to enable this.