Via Forbes : Big Data is a buzzword amongst businessmen nowadays. Regardless of industry or company size, it manages to squeeze into every nook and cranny. There are at least three ways that Big Data has been impacting companies that everyone should understand moving forward.
- It has revolutionized old-school industries.
“Big Data has had a tremendous impact on businesses from customer relations to supply chain operations and will continue to do so” says Edwin Miller, CEO of 9Lenses. While many may not be aware of it, Big Data has indeed made a significant impact on many traditional businesses.
Capital One is a perfect example. In the 1990s, the credit card industry utilized a uniform-pricing model charging every customer the same price, with the exception of Capital One. The company used a statistical model based on public credit and demographic data to provide customers with “custom-tailored” products. The innovation was one of their cornerstone developments in earning 32% CAGR in net revenue (after provisions) from 1994 to 2003. Consequently, many banks have shifted focus towards Big Data analytics, but the pioneers seem to have maintained their edge. Their annual net revenue has increased by 17% compared with top banks in the US such as Citigroup C -0.30% at 11%, Bank of America BAC +0.00% at 11% and JP Morgan at 6% from 2009 to 2014.
Rolls Royce’s success in applying Big Data analytics has influenced the aircraft engine-manufacturing sector. The company consistently monitors approximately 3,700 engines, each of which has hundreds of censors installed, to predict when and where breakdowns may occur. Roll-Royce has transformed from selling only engines to selling packages of both engines and monitoring services and then charging customers based on usage, repairs and replacements. The service currently accounts for more than 70% of their annual revenue in their aircraft engine division.
Another perfect example is the world’s largest retailer, Walmart. Walmart is a well-known user of Big Data analytics today, but in the 1990s, it reformed the retail industry by recording every product as data through a system called Retail Link. The system provided a way for suppliers to manage their own products by allowing them to monitor their data, including sales and inventory volume, in-stock percentage, gross margin and inventory turnover. As a result, they could achieve low levels of inventory risk and associated costs. Walmart’s significantly low costs and high levels of efficiency were major factors that drove productivity of the merchandise retail sector over the period of 1995 – 2000 according to a 2001 McKinsey Global Productivity Report.
2. It has given birth to a new industry.
Historically, data was used as an ancillary to core business and was gathered for specific purposes. Retailers recorded sales for accounting. Manufacturers recorded raw materials for quality management. The number of mouse clicks on advertising banners was collected for calculating advertisement revenue. But as the demand for Big Data analytics emerged, data no longer serves only its initial purpose. Companies able to access huge amounts of data possess a valuable asset that when combined with the ability to analyze it, has created a whole new industry.
ITA Software is a private company that gathers flight price data from almost all major carriers with the exception of Jet Blue and Southwest that sells that information to travel agents and websites. Google GOOGL -1.37% acquired ITA in 2011 for $700 million. With Google’s expert analytics and more extensive data for processing, ITA today can provide predictions for prices for flights, hotels, shopping and more.
The success of companies like ITA has helped accelerate the boom of Big Data startups. According to the website angel.co, there have been 2,924 Big Data startups from November 2010 to the present. These companies often operate as data analytics companies, data providers or traders,are attracting a lot of attention frominvestors. In the second quarter of 2015, U.S. venture capital funding of Big Data startups reached $19.19 billion.
Another remarkable case in this emerging industry is last year’s strategic partnership between IBM IBM -0.68% and Twitter TWTR +0.00%. IBM and Twitter have partnered up for the purpose of selling analytical information to corporate clients. IBM analyzes Twitter data combined with other public and business sources, “helping businesses tap into billions of real-time conversations to make smarter decisions”according to Glenn Finch, Global Leader Data & Analytics, GBS The partnership has helped the two companies leverage their respective areas of expertise; IBM with their analytical skills and Twitter for their data.
Twitter’s massive data stockpile coupled with IBM’s analytic prowess makes for an interesting strategic partnership. (Photographer: David Paul Morris/Bloomberg)
3. It improves business regardless of company size.
It is obvious that big companies have advantages over smaller ones. By the word “big”, I mean companies that generate an enormous amount of data. Tech giants like Amazon and Google will continue to benefit from the sheer volume of data they generate. Amazon currently has approximately 270 million active users in 185 countries and 16 million listing units. Google has approximately 12 trillion monthly searches, which dominates the internet search engine market to the tune of approximately a 90% market share, including over one billion YouTube users and 500 million Google Plus users.
But that is not the end of the story; Big Data actually helps level the playing field. The breakneck-paced development of technology such as processing chips and data storage have reached a point in which companies can retain and utilize information at very low costs. Even with a limited IT budget, companies can still effectively store data. If there is not enough data available in-house, they can cheaply lease data from “data intermediaries”. Companies can also hire outside data analytics firms at affordable rates.
An example of successful application is recruitment company Riviera Partners’ process in selecting candidates. They cross reference candidates’ profiles in their database with public sources to cherry-pick the most appropriate skills and match them to each position. Another example is a restaurant chain that “was able to eliminate the need to live answer handle 60,000 phone calls to their restaurants, allowing employees to focus on in store customers” according to Michael Bremmer, CEO of Telecomquotes.com.
New projects also benefit from Big Data innovation, as described by Kristina Roth, CEO & Founder of Matisia Consultants, “with big data, businesses can learn to improve faster, better, and at lower costs by learning lessons from each improvement project and incorporating them into the next project.”
In fact, Big Data applications are bound only by the human imagination. Businesses such as car manufacturers can improve operational efficiency, hospitals can improve patient services and fast food companies can better manage food deliveries. The list goes on and on. Any business that can successfully apply Big Data creates a competitive advantage.
Notably, successful players in Big Data are recognized well by the market. Companies that utilize Big Data are highly valued by investors. Below is a selected list of companies engaged in Big Data business; they have relatively high multiples. Investors may not only value their growth but also their intangible assets, such as data volume and analytical skills.
I leave you with some telling quotes from the CSC Global CIO Survey: 2014–2015. The survey questioned 590 executives with IT or technology-related titles between August 22 and September 11, 2014. Participants in the study work in 23 countries on five continents for private and public sector organizations with at least 250 employees. The results were quite clear:
- 64% of IT leaders in all industries are investing heavily in Big Data.
- 75% of the surveyed CIOs say that Big Data positively impacts productivity and efficiency overall.
- 69% of survey participants cite Big Data as critical or high priority.
- 70% of the respondents state that their Big Data investments impact business innovation positively.
In short: Big Data is making a huge impact and will continue to do so as a key driving factor in business performance in years to come.