Octofinder

Will ‘big data’ become your worst nightmare?

by Marc Sokol on October 12, 2011

Dinosaur

Image by shvmoz via Flickr

Could this happen to your company….

When the executive convened a group of senior leaders to dig into the competitor’s practices, they found that the challenge ran deeper than they had imagined. The competitor had made massive investments in its ability to collect, integrate, and analyze data from each store and every sales unit and had used this ability to run myriad real-world experiments. At the same time, it had linked this information to suppliers’ databases, making it possible to adjust prices in real time, to reorder hot-selling items automatically, and to shift items from store to store easily. By constantly testing, bundling, synthesizing, and making information instantly available across the organization—from the store floor to the CFO’s office—the rival company had become a different, far nimbler type of business.

Are you ready for the era of big data?
McKinsey Global Institute.

Big data results from enterprises that track everything along the customer and supplier value chain. It might even be the next strategic asset companies include in due diligence when considering an acquisition. Imagine increasing the valuation of another firm because it has first-rate analytics group and a technology infrastructure that is compatible with your own business.

The authors pose several questions for executives to consider, and below they are restated as propositions that will either help your company win or leave you helpless in the face of a more nimble, astute competitor.

1. As massive amounts of data become widely available, capturing every nuance of customer behavior across all parts of the value chain, competitive edge go those who figure out how to mine that data for practical value.

2. Those with an embedded organizational ability to test, to test often, and test well will more quickly leverage the data available. If you ever read Paco Underhill’s classic book, Why we buy, just imagine that capability to monitor, assess and predict customer behavior across all of your brands, across all customer segments, and in response to any marketing initiative. Now imagine being able to do it fast, really fast! Look for the rise of customer insight groups in companies that get this message in a big way.

3. Speed no longer just being faster than the other guy (you know that old joke – you don’t have to outrace the bear, just the guy next to you). Speed, in the world of big data, is the ability to create nearly real-time customization of offers that capitalize on pre- and post-purchase behavior. Consider how Amazon can quickly post a message, “Customers who bought this item also bought…” before you conclude your purchase. Now put that capability on data-driven steroids with an analytics team that knows how to leverage the data.

And now look at your own company:

How are the directors in Marketing, IT, Operations and Strategy working together to get a handle on the coming era of big data?

Is the customer analytics group celebrated as a resource to beat the competition or are they just considered geeks in the back room?

Who is leading the charge to leverage big data across your firm?

Oh, and if you think you can just wait until the era of big data finally arrives, then you might relate to the picture above. Big data is already here.

BestCustomerConnection, by Marc Sokol

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{ 7 comments… read them below or add one }

Daniel M. Wood October 13, 2011 at 7:38 am

We haev recently been increasing the amount of knowledge our database can capture, it has been interesting and a lot of work.
The problem for most businesses is to set up systems that capture that information and distill it into a readable result.

That is what we are working on at the moment.
Daniel M. Wood recently posted..We can be Heroes – We can be Great

James Lawther October 13, 2011 at 4:51 pm

Very interesting post Marc.

Personally I think big data is hard to deal with, manipulate, understand and gain insight from. It won’t take off

I am not alone in my prediction:

“I think there is a world market for maybe five computers.” — Thomas Watson, chairman of IBM, 1943.
James Lawther recently posted..I’d Rather Gnaw my own Leg Off

Marc Sokol October 13, 2011 at 8:15 pm

Agreed — it IS a lot of work to set up databases and processes to appropriately capture the data. This is why larger companies either build the capabilities to do so in-house or find themselves contracting with external parties to do this for them. OR….they watch with frustration as their competitors advance in these areas.

Thanks for visiting again, Daniel

Marc

Marc Sokol October 13, 2011 at 8:17 pm

Hi James,

Great quote! It is sometimes hard to see the future, even when it has already arrived.

Marc

maz iqbal October 15, 2011 at 4:15 am

Hello Marc
I spent two and half years immersed in customer analytics and related marketing solutions and this is what I learnt:

a) tons of data – all over the place;
b) lots of it garbage;
c) takes ages to extract, clean, integrate, transform the data’
d) very few people skilled in both the business and the data side to do the right things with the data;
e) only expert staticians (phD) have the knowledge and expertise to do data mining and build predictive models;
f) most of these staticians cannot communicate in the language of business and so cannot get their insights over to the business folks;
g) most managers prefer to use their gut feel to make decisions.

So whilst the promise is their (the big data marketing machine is firing on all cylinders) the reality (operations) is very different!

Maz
maz iqbal recently posted..Howard Schultz/Starbucks: 18 insights and lessons from a customer experience master

Marc Sokol October 15, 2011 at 9:21 am

Hi Maz,

To twist Einstein’s famous quote: The level of thinking required to leverage big data is greater than the level of thinking required to simply recognize its potential.

So to leverage big data, we need something of a dream team: start with an expert in marketing and analytics, as they will see both ends of the problem, add in the statisticians who will explore and tease out the data, carry over an IT expert who recognizes how to extract, transform, and load data from multiple sources so our statisticians can work on it. Now complement that team with a partner who sees organizational dynamics as they are unfolding – an organizational change agent if you will – as the use of big data is more of an organizational intervention than a magic trick.

And to your last point, work the culture – senior executives who respect evidence-based solutions to their business challenges become strong advocates of this type of approach, and shape a culture where big data can become a part of operations.

Best Buy is a perfect example of this. There are a number of consultancies that also follow the model – check out the MSquaredGroup Website as one example.

By the way, I much enjoyed the Howard Schultz quotes in your recent post – recommend others check it out as well!

Marc

Adrian Swinscoe October 18, 2011 at 1:50 am

Hi Marc,
I would tend to agree with a lot of what Maz in saying that there is a large gap between the realisation of what is needed or somethings potential and the ability to do anything about it.

Many companies will need help in this area and I hope that they don’t get oversold on it by consultancies looking to max out their fees. Otherwise we may end up with another CRM investment issue…lots of investment, know its the right sort of thing to do, disappointed in results but have little appetite to do anything about it.

Adrian
Adrian Swinscoe recently posted..Do you network to your strengths?

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