More information leads to better decisions, and big data is providing companies with enough background to take much of the guesswork out of decision making.
“The larger the data set, the greater the context. Big data promises the tools to make observations much sharper and guide decisions based on facts or highly likely predictions, as opposed to intuition or sheer courage,” says Satyendra Rana, vice president at HTC Global.
Smart Business spoke with Rana about how companies can take advantage of big data and its potential for improvement and innovation.
What is big data?
Big data is a paradigm shift in the way businesses view and use data. For a long time, businesses focused on people, process and technology; data was considered a pain rather than an asset or an opportunity. Companies need to innovate and can no longer do so with the old approach. The new triangle is people, process and data, with technology as a substratum enabling all of those.
The first step to using big data is to look at what business outcomes are desired, then work backward and determine what data needs to be captured to glean those insights. A lot of that data might be internal, but business is not conducted in a vacuum — it needs to be understood in the context of markets, customers and suppliers. So there may be a need to gather external data to be correlated with the internal data. People have conceptions that big data initiatives have to necessarily use outside data, or that it’s only about outside data such as social media. It’s really more about what is done with the data than the source.
There are opportunities to collect data through various applications and sensors. Historically, it was a problem to collect data because it wasn’t readily available. For example, surveys were the main mechanism for collecting market data; you would need to approach 100 people to get 10 to respond. Now, people are volunteering information through mobile platforms and social media. Data is also being collected through instruments such as sensors on cars. Technology has made it cheaper to collect and store data, but businesses still have to take another step and leverage that data.
What are some of the applications?
The applications are everywhere, even though the most frequent uses are seen in marketing. Understanding customers better leads to improved relationships and more cross-selling and upselling. But big data insights can also improve operational efficiencies. For example, supply chain decisions about what products to stock in the warehouse can be influenced by big data. Insights could also lead to entering into new lines of business that weren’t considered. Further, a consumer using his or her credit card at a large retailer might be sent an alert offering a coupon for lunch at a partnering restaurant. The credit card company knows from its data that the customer eats lunch at this time and one of its restaurant partners is nearby, so it tries to predict behavior in real time. When the person uses the coupon, the credit card company gets a share. That’s a new line of business based on information the company had and was not utilizing.
How can companies get started on big data initiatives?
That’s an issue companies are struggling with. A data governance strategy is needed to deal with the amount of data that is received. You have to understand what is coming in and how it can be used. The most important step is to realize that big data is not just a technology issue, which can be a difficult task internally. Big data requires the business and IT sides to work together more closely than in the past. If big data is approached as an IT issue, its full benefit will not be realized. If it’s a business process and IT is involved only in terms of what storage to buy or application to install, companies may not quite understand what is possible.
Big data is changing the way businesses approach the fundamental need to innovate and create differentiation. For the past 20 years, innovation was about streamlining processes such as supply chains. Big data provides a new field for innovation by providing insights quickly and in more creative ways. Eventually, businesses will not have a choice; they will have to deal with big data in order to innovate and survive.
Satyendra Rana, Ph.D. is vice president at HTC Global. Reach him at (512) 773-0357 or email@example.com.
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In the past 20 years, companies have been generating an increasing amount of data. The growth of social media has also created a massive pool of information that any company can access, mine and use.
“Utilizing big data can help a company uncover the relationships it has with consumers and businesses that perhaps it didn’t previously realize it had,” says Pervez Delawalla, president and CEO of Net2EZ. “In many ways, that data can help a company gain a better understanding of its clients’ needs and formulate its products to win more business.”
Smart Business spoke with Delawalla about big data and how to effectively store and utilize it to the benefit of your business.
Where can companies find big data, and how can they use it?
With the advent and proliferation of social media, there is information that companies can collect called ‘big data,’ which can be used to analyze, in a cost-effective and time-efficient way, the social habits of consumers. This information allows them to devise targeted marketing campaigns and develop products.
Data about consumers is being collected from social media outlets such as Facebook and Twitter, data about businesses can be collected from sources such as LinkedIn and Foursquare, and there is data contained in emails coming into a company.
Do all companies have access to big data?
In today’s world, any company that uses computers has a big data resource or is collecting it without realizing it. For example, most salespeople have a contact database that includes people they’ve met through work, in their personal lives and through networking. If you are going to meet with the CFO of a potential client company and you learn that someone on your sales team knows that CFO, that is an invaluable personal connection. Knowing about that relationship allows you to bring the person to the meeting and quickly establish a connection.
What challenges come with big data?
Storing big data was traditionally cost prohibitive, which is why only large companies could do it. However, solutions such as new, lower-cost hardware have recently hit the market, which has given smaller companies the ability to have large sets of storage devices to store big data. At the same time, cloud computing allows a company to rent storage on a monthly or short-term basis, meaning more companies can collect, store and mine big data.
Indexing this data so that it can be used to benefit the company is a challenge, but there are plenty of tools available from major software manufacturers that can be used to mine it.
What methods are available to companies to help store this data?
Big data can be stored privately or on servers that host multiple clients. Which option a company chooses depends on how important it is to keep information secure.
Private cloud services give companies a certain amount of secure storage on a server that only belongs to them. The type of data being stored determines which tools are applied to extract it, such as a dashboard through which a company can query or search its data. There are also data feeds that provide ticker updates as data comes in, giving fast access to information.
Public cloud services are available, but are less secure than private services.
How can companies efficiently navigate such large data sets to get the most use out of the information being retained?
It takes some time to understand which data is going to be useful and to learn which tools are available to store and sort it. For example, you could buy and deploy big data-mining tools to start collecting various sets of data from multiple sources, then create a dashboard that puts that information at your fingertips. However, you can’t simply keep storing information and expect results. You need to better understand your company’s demographics and understand what is going to help your company grow. You have to know your end result and employ the tools necessary to achieve it.
Many companies don’t realize what they have beyond their traditional database and that is sometimes where the treasure trove of data exists. Accessing that data will open a world of opportunities.
Pervez Delawalla is president and CEO of Net2EZ. Reach him at (310) 426-6700 or firstname.lastname@example.org.
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Business leaders often rely on intuition when making critical decisions, but according to The Economist Intelligence Unit, executives dramatically increase their chances of success when they bring facts and data into the decision-making process.
“Although beliefs and instincts help executives make expedient decisions, they aren’t always good decisions,” says Dr. Chongqi Wu, assistant professor of management for the College of Business & Economics at California State University, East Bay. “Business leaders become better decision makers when they take advantage of the facts derived from data analysis.”
Smart Business spoke with Wu about the benefits of incorporating big data and analytics into the decision-making process.
Why is fact-based decision making superior?
Although intuitive decision making is simplistic and quick, a lack of underlying data makes it hard for executives to diagnose and correct problems when something goes wrong. Instead of compounding the problem by making another bad decision, executives can drill down into the data to determine the cause of misfires and use factual analysis to set a new course. Actually, studies show that cumulative improvement is hard to obtain when executives react to problems instead of using facts to make prudent business decisions. And since most of your competitors are probably using data, companies that base decisions on gut feel or instinct are at a competitive disadvantage.
What types of decisions or problems are best solved by big data?
In general, data-driven decision making works better at an operational or tactical level since there are relatively fewer risks involved. In fact, when aided by technology, data makes it easy to automate rudimentary tasks and decisions.
Conversely, strategic decisions still require intuition and judgment, but injecting data analysis and modeling into the process can significantly improve the odds of success. Don’t think of gut-based and fact-based decision making as competing concepts because they actually complement each other. For instance, cross-functional teams often use data to project outcomes and validate the return on proposed programs or new products. It also helps diverse teams build consensus by using facts instead of politics and personal preferences to reach conclusions. Strategic decision making still requires risk taking, and success may hinge on market timing, execution and luck. Data just makes executives better gamblers.
What’s the best way to incorporate data into the decision-making process?
First, executives need to lead the way in supporting cultural change by acknowledging the importance of data in the decision-making process. Next, use data modeling to project probable outcomes and evaluate ideas, since facts and knowledge generated from analyzing big data provide a common ground on which ideas can be debated. Finally, force your team to analyze data by asking questions during the evaluation process so they learn how to marry facts and instincts.
Do executives need copious amounts of data to conduct modeling and analysis?
It’s hard to estimate, but simply put, gather as much relevant data as possible. However, there’s no reason to wait; start small and start immediately because there’s no need to invest in expensive systems or software. Purchase information from third parties, tap free sources to validate ideas, use economical cloud services and software as a service programs to analyze information, and begin collecting in-house data. Finally, run an experiment or test to see how much data you actually need to project the return on a small marketing project or idea.
How can executives gain the confidence to make data-backed decisions?
Even though great decisions don’t always produce great outcomes, you’ll gain confidence by realizing that great decision gives you the best chance to succeed. For example, it’s a great decision to have Kobe Bryant take the final shot when the Lakers are behind because, with a career field goal percentage of 45.4 percent, he gives the team the best chance to win. But data also shows he’ll miss about 55 percent of the time. Luck and timing still play a key role in determining success.
Dr. Chongqi Wu is assistant professor of management, College of Business & Economics, at California State University, East Bay. Reach him at (510) 885-3568 or email@example.com.
Event: See a calendar of upcoming seminars hosted by the Department of Economics.
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