Big data is out there. Data volumes, velocity and varieties have multiplied, in fact exploded. The big question is how to find the best ways to make all of it and how analyzed data is changing decision-making ways and management. Are big decisions based on analyzed evidence or intuition?
Many organizations are thinking how to drive the real business value behind big data. They are drowning with data and don’t know what to do with it. To drive competitive edge from big data, organizations need new competence and new management style. These are very big issues in today’s business environment and get accentuated all the time. For example, Gartner’s top 10 strategic technology trends for 2013 addressed strategic big data and actionable analytics. These two trends were number six and seven. And believe me, these two trends are raising top of that list the near future.
Ten years ago I created Intelligent Contact Management (ICM) concept at MicroMedia. It was holistic approach for sales and target marketing. The main idea was to translate inside and outside, online or offline data into information, information into deep knowledge, knowledge into action and action into measurable results. Action means in this case multichannel sales and marketing approach. Right and relevant message to right targets at the right time. Way of handling and managing touch points in customer journey. The concept of ICM presents in picture below.
Is there any significant changes in ten years. Nothing much, except tsunami of unstructured information has swept over. After ten years we are facing with information that comes in varieties and volumes we could ever imagine. That is not a threat, it is the big opportunity to handle and manage more precise information for predictions and decision-making.
Big data is a management revolution.
There was a very interesting article about big data and management revolution in Harvard Business Review, October 2012 issue by McAfee and Brynjolfsson. They wrote that “data-driven decisions are better decisions – it’s as simple as that. Using big data enables managers to decide on the basis of evidence rather than intuition. For that reason it has the potential to revolutionize management”. I could not agree more, using and analyzing data for evidence-based decision-making is the quantum leap from hunch and “super intuition”. This leap composes a big managerial challenge.
Are data-driven companies’ better performers?
There is a lot of buzz and skepticism about the real value of being data-driven organization. McAfee and Brynjolfsson made a research to find real evidence that using big data will lead to better business performance. They interviewed executives at 330 public North American companies about management practices, both organizational and technological and their annual reports. The major finding was that companies using big data and data-driven decision-making are performing better financially and operationally. In fact they are 5% more productive and 6% more profitable than their competitors. But, and this is a big but, 32% of respondents set their companies below 3 at 5-point composite scale when asking is your company data-driven. So, there is a lot of work to do in this field.
Destroy the empire of HiPPOs
Is your organization making decision HiPPO-style? McAfee’s and Brynjolfsson’s definition for HiPPO: the highest-paid person’s opinion. These executives are making decisions based on their experience and old intuitive patterns. The big question is are these executives ready to cancel their decisions if analyzed data is telling the opposite than their intuition and hunch. The answer is yes and no, but the big shift is happening. In today’s business world, executives can rely on data and predictions. The biggest factor is that they can ask the right questions. When the data-driven decision-making movement advances further, HiPPOs will mute and extinct. New data experts will arise. Future CMO will be this kind of expert in executive group.
Manage the big change
McAfee and Brynjolfsson picked up five management challenges when moving towards data-driven company and evidence-based decision-making.
- create leadership teams, set clear goals, define success and focus on asking the right question
- do not forget the human insight
- think creatively
- communicate clearly with employees, stockholders and stakeholders
- employ data scientists
- invest in technology
- update IT competence
- create cross-functional cooperation
- locate the big information and decision-making in the same place
- improve problem-solving techniques
- ask the right questions
- move actively away from hunches and instinct
- do not pretend be more data-driven than you really are
- forget the HiPPO-style decision-making
The big data will become a key basis of innovation, productivity and competition. According to research by MGI and McKinsey’s Business Technology Office there are five ways in which using big data can create value. First, big data can create value by making information transparent and usable widely inside the organization. Second, organizations can collect more accurate and detailed performance information, analyze it and drive performance. Companies are using big data and analysis to make better management decisions. Third, big data allows ever-narrower segmentation of customers and therefore much more precisely tailored products or services. Fourth, actionable analytics improve decision-making. Fifth, big data can improve the development of the next generation of products and services.
In the end, one rule of thumb to remember: Big data will never replace Big thinking!