The Business Case for Big Data … 20 mind-changing facts, and 6 practical examples
September 18, 2016
Every industry talks about the impact of big data. Yet few business leaders are clear on how big data can really give their business a commercial and competitive advantage. Maybe this is because of its complexity and expert analysis required to harness it, the language and granularity, which tends to be the preserve of IT teams and consultants, rather than common language in the C suite.
Here are 20 facts about big data to get you thinking:
- The data volumes are exploding, more data has been created in the past two years than in the entire previous history of the human race.
- Data is growing faster than ever before and by the year 2020, about 1.7 megabytes of new information will be created every second for every human being on the planet.
- By then, our accumulated digital universe of data will grow from 4.4 zettabyets today to around 44 zettabytes, or 44 trillion gigabytes.
- Every second we create new data. For example, we perform 40,000 search queries every second (on Google alone), which makes it 3.5 searches per day and 1.2 trillion searches per year.
- In August 2015, over 1 billion people used Facebook FB +1.25% in a single day.
- Facebook users send on average 31.25 million messages and view 2.77 million videos every minute.
- We are seeing a massive growth in video and photo data, where every minute up to 300 hours of video are uploaded to YouTube alone.
- In 2015, a staggering 1 trillion photos will be taken and billions of them will be shared online. By 2017, nearly 80% of photos will be taken on smart phones.
- This year, over 1.4 billion smart phones will be shipped – all packed with sensors capable of collecting all kinds of data, not to mention the data the users create themselves.
- By 2020, we will have over 6.1 billion smartphone users globally (overtaking basic fixed phone subscriptions).
- Within five years there will be over 50 billion smart connected devices in the world, all developed to collect, analyze and share data.
- By 2020, at least a third of all data will pass through the cloud (a network of servers connected over the Internet).
- Distributed computing (performing computing tasks using a network of computers in the cloud) is very real. Google GOOGL +1.28% uses it every day to involve about 1,000 computers in answering a single search query, which takes no more than 0.2 seconds to complete.
- The Hadoop (open source software for distributed computing) market is forecast to grow at a compound annual growth rate 58% surpassing $1 billion by 2020.
- Estimates suggest that by better integrating big data, healthcare could save as much as $300 billion a year — that’s equal to reducing costs by $1000 a year for every man, woman, and child.
- The White House has already invested more than $200 million in big data projects.
- For a typical Fortune 1000 company, just a 10% increase in data accessibility will result in more than $65 million additional net income.
- Retailers who leverage the full power of big data could increase their operating margins by as much as 60%.
- 73% of organizations have already invested or plan to invest in big data by 2016
- And one of my favourite facts: At the moment less than 0.5% of all data is ever analysed and used, just imagine the potential here.
Better data analysis enables companies to optimize everything in the value chain, from recruiting people to innovating products, managing operations to precision selling, building loyalty and maximising profitability.
Here are 6 real examples of the business impact of big data in action:
Innovation: better solutions, faster to market at Bristol Myers Squibb
Introducing new products or services involves many life cycle stages. Pharma companies have been using clinical trial simulations to speed learning, reduce costs, and limit unnecessary burdens on patients participating in the trials. Big data simulations receive time for trials from weeks to hours, and reduce participants – increase speed, reduce risk, and save lives.
Bristol Myers Squibb reduced the time it takes to run clinical trial simulations by 98% by extending its internally hosted grid environment into the Amazon Web Services Cloud. The company has also been able to optimize dosing levels, make drugs safer, and require fewer blood samples from clinical trial patients.
Talent: recruiting and retaining better people at Xerox
HR departments are using talent analytics and big data to reduce costs and effectively manage employee base. The data allows them to select new recruits that are a better fit for the company, reduce employee turnover, understand the skills and output of the existing workforce, and determine the talent the company needs moving forward.
Xerox, used big data to reduce the attrition rate in call centres by 20%. To do that, it had to understand what was causing the turnover, and determine ways to improve employee engagement.
Sales: targeted and intelligent selling at Kroger
Slight modifications to sales and marketing strategies can have a profound effect on the bottom line, especially when informed by big data.
Imagine a direct mail campaign with a coupon return rate of more 70% within six weeks of the mailing. According to DMA the average direct mail return rate is 3.7%. US grocery chain Kroger does this by personalising its direct mailings based on the shopping history of the individual customer.
Kroger also has a loyalty card program that is rated the industry leader. More than 90% of its customers use its loyalty card when they purchase products. Although there are many factors that have collectively enabled Kroger’s financial performance, at least part of its continued growth over 45 consecutive quarters has been attributed to its customer loyalty programs.
Operations: minimizing disruption at Pratt & Whitney
Businesses want to avoid unnecessary disruption. Now that sensors are being embedded into just about everything, companies are using the data to determine when maintenance is required for planes, trains, automobiles, and even household appliances. Ideally, when an issue has arisen, companies want to understand the issue, what caused it, and how it can be resolved, preferably before a maintenance professional or crew is dispatched.
Pratt &Whitney is attempting to reduce unplanned aircraft engine maintenance. Today’s engines collect about 100 parameters in multiple snapshots while a plane is in flight. By comparison, a new-generation engine is able to collect about 5,000 parameters continuously in flight. The process generates about 2 petabytes of data. Using the data, Pratt & Whitney and its partner IBM are trying to enable proactive maintenance.
Marketing: improving customer retention at Avis Budget
Today’s empowered customers are more demanding than ever. Satisfaction and retention demands that brands understand as much as possible about their customers, continually improve their products and services, and be willing to adapt their business models to reflect the actual needs of their customers.
Avis Budget has committed to doing all of this in the car rental business. It implemented an integrated strategy to performance, which has yielded hundreds of millions of dollars in additional revenue. The initiative involved determining the value of customers, segmenting them, and offering tiered incentives to improve customer loyalty. To do this, it applied a model that predicts lifetime value to its customer database, and then validated it using a multichannel marketing campaign and accompanying analytics.
The customer valuation data is now combined with other data, including rental history, service issues, demographics, corporate affiliation, and customer feedback. Avis Budget is also collecting and analysing social media data. It has a team of social media specialists who respond to brand mentions.
Finance: reducing risks and driving growth with IBM
Finance teams are moving beyond periodic reporting, using big data to reduce risks and costs, identify opportunities, and improve the accuracy of forecasts. Specifically, they’re using data to identify risky customers, monitor suppliers, thwart fraud, pinpoint revenue leaks, and inform new or more efficient business models.
A recent partnership between IBM and the Weather Company will allow companies to better manage the impact of weather on business performance. According to The Weather Company, weather has an economic impact of half a trillion dollars annually in the US alone. 100,000 weather sensors feed data, combined with other sources to create 2.2 billion unique forecast points, and an average of more than 10 billion forecasts on an active weather day.
Download a summary of my keynote Big Data + Big Ideas = Big Impact in Antibes, September 2016
Read more How companies are using big data and analytics by McKinsey, April 2016
Read more Industry 4.0: Building the Digital Enterprise by PwC, June 2016