Opportunities with Big Data?


McKinsey Global Institute
(MGI) produced a white paper in 2011 called "Big data: The next frontier for innovation, competition, and productivity." It proposes that analyzing large data sets will become "a key basis of competition, underpinning new waves of productivity growth, innovation, and consumer surplus."

MGI studied big data in five areas: U.S. healthcare, the public sector in Europe, U.S. retail, global manufacturing, and global personal-location data. It came up with the following conclusions:

  • U.S. healthcare could create more than $300 billion in value annually and reduce healthcare expenditures by about 8 percent by using big data to drive efficiency and quality.
  • European governments could use big data to save more than $149 billion in operational efficiency improvements.
  • Users of services enabled by personal-location data could capture $600 billion in consumer surplus.

The paper details four ways in which analyzing big data can create value:

  • Retailer using big data to the full could increase its operating margin by more than 60 percent.
  • U.S. healthcare could create more than $300 billion in value annually and reduce healthcare expenditures by about 8 percent by using big data to drive efficiency and quality.
  • European governments could use big data to save more than $149 billion in operational efficiency improvements.
  • Users of services enabled by personal-location data could capture $600 billion in consumer surplus.

According to the TCS 2013 Global Trend Study, manufacturers can use big data to detect product defects and boost quality, improve supply planning, and analyze sales trends. Determining which products and processes are most profitable can facilitate a shift to lean manufacturing.

Many other uses for big data have been suggested:

    • In call centers, CRM systems can review multiple data sources in real time, enabling representatives to suggest offers with the best chance of acceptance by the prospect.
    • Insurance companies can speed claims processing and help reduce fraud by using big data solutions to determine which claims are outside normal parameters. Those claims can be flagged for review, and the rest processed automatically.
    • Large companies with loyalty programs, such as airlines, hotels and credit card companies, use big data to identify their most valuable customers so they can be given special treatment, increasing customer retention.
    • A 2013 Wall Street Journal article gave some real-world examples of how companies are using big data to improve processes and strengthen their bottom line:
    • Caesars Entertainment Corp. analyzed health-insurance claims for its employees and discovered that a high percentage of them were using emergency rooms for treatment instead of less expensive urgent care facilities. By launching an educational campaign to remind employees of the high cost of ER visits and provide them with a list of alternatives, they were able to change behaviors and save $4.5 million.

Example: Using big data, Catalyst IT Services, a technology outsourcing company, screens more than 10,000 candidates a year. By speeding up the process and decreasing the likelihood that managers will make subjective choices, Catalyst reduced employee turnover to about 15% a year, compared with more than 30% for its U.S. competitors.

Example: Zynga Inc., the game maker that created FarmVille, uses the 25 terabytes of data it gathers each day from its games to improve customer service, quality assurance and products. For example, in the original version of the game, animals were only included as part of the scenery. By analyzing gamers’ responses, Zynga found that they liked interacting with them, so the next release gave animals a larger part in the game.

Example: In 2009, UPS began installing sensors in its 46,000 delivery vehicles to collect a wealth of data, including each truck's speed and location, whether the driver's seat belt was buckled, and how efficiently fuel was being utilized. UPS estimated that in 2011 it reduced fuel consumption by 8.4 million gallons and cut 85 million miles off its routes.

Example: InterContinental Hotels Group has gathered data about the 71 million members in its Priority Club rewards program for many years, such as income levels and whether they prefer family-style or business-traveler rooms. After consolidating all of its CRM information into a single data warehouse, the hotel company launched a customized marketing campaign in 2013 that was 35% more successful than its 2012 campaign.

It's Here to Stay

Big data is no longer the realm of huge companies with well-staffed IT departments. Even mid-sized organizations can use big data to their advantage by hiring experts to find and analyze the information they need to become more efficient and more profitable. While it's true that knowledge is power, it's the 

management  of knowledge that will be the key to business success in the Information Age.

Read Big Data Part 1