The big impact from big data
Data and analytics could provide
an injection of transparency and efficiency that spurs commerce and builds more
inclusive economies
One piece of information may be
insignificant, but billions of data points can illuminate. That’s the
underlying promise of big data and analytics, which observers have been calling
a revolutionary development for several years now. But it’s difficult to know
where a revolution is headed while it’s still unfolding. New research from the
McKinsey Global Institute (MGI), The Age Of Analytics: Competing In A
Data-driven World, takes stock of the rapid technology advances being made
in the field of analytics as well as the disruptions they are setting off
across various industries.
On the technology side, several
developments have converged to radically expand what analytics can do. The volume
of available data has continued to double every three years as information
pours in from transactions, social media, sensors in the physical world, and
billions of mobile phones. Data storage capacity has increased, while its cost
has plummeted. Data scientists now have unprecedented computing power at their
disposal, and they are devising ever more sophisticated algorithms that can
instantly sift through troves of data to find patterns and reveal insights. The
upshot of all this innovation is that decisions no longer have to be based on
gut instinct, or subject to human error. Algorithms can make them instantly and
consistently, drawing on a mountain of evidence. Systems enabled by machine
learning can provide customer service, manage logistics, analyse medical
records, or even write news stories.
The companies at the forefront of
these trends are capturing enormous opportunities. Some are introducing
radically new business models that are reshaping entire industries. “Fintech”
firms are providing financial services without building bank branches, while
Airbnb has become a major player in the hospitality sector virtually overnight
without building a single hotel. Online streaming services use recommendation
engines to shape the way billions of people consume TV, movies and music.
Ride-sharing services such as Uber have disrupted once-inefficient taxi markets
in cities around the world by using geospatial mapping technology to match
passengers with the nearest available driver in real time. Even some legacy industrial
companies are using data gleaned from the Internet of
Things to make their
equipment, plants and supply chains more efficient.
Analytics capabilities are now
the basis of corporate competition. In many industries, a small group of
technology leaders are consolidating major advantages. Daunted by the speed of
technological change, many companies are hesitating. Still others have invested
in data systems but are struggling to realize the returns they expected. But
continuing to lag behind leaves companies vulnerable to being disrupted.
So how should a management team
approach this challenge? It’s important to recognize that embracing data and
analytics is not a tactic; it’s a transformation. Simply purchasing new
technology systems and layering them on top of existing operations is not
enough. The process has to start with mapping out a strategy vision for how
analytics will be used to generate value. To make that vision into a reality,
it is critical to identify a handful of high-impact projects for initial
implementation, setting concrete milestones for gauging progress along the way.
In addition to selecting the right data architecture and technology tools for
their needs, organizations also need to establish processes and policies for
handling and evaluating data.
Then comes the truly hard part:
helping people adapt to a new way of working. Most organizations will need to
rethink existing roles and develop new types of talent to take full advantage
of data and analytics. This goes well beyond adding a data science team or
finding the right external analytics provider. They also need to attract or
develop “business translators” who combine a basic understanding of analytics
with industry, organizational and functional expertise. These are the key personnel
who can ask the data team the right questions and apply data-driven insights to
practical business problems. Executives, middle managers, and employees at all
levels may need ongoing training to develop new skills and become more
comfortable with incorporating data and algorithms into day-to-day workflow.
All of this requires careful change management. Some organizations may need to
designate a team that is charged with pioneering new ways of working—and it
also helps if senior leadership visibly embraces the change.
Data and analytics could
transform multiple sectors in the years ahead. Banking and insurance could
dramatically improve their risk assessments by building massive data
integration capabilities. Digital platforms that offer large-scale, real-time
matching with dynamic pricing could make labour and energy markets more
efficient. Granular data about individual characteristics and behaviour can be
used to customize products and services—and even more intriguingly, to
re-imagine the way healthcare and education are delivered. Above all, data and
analytics can improve the accuracy and transparency of decision making, a
capability with far-ranging potential in everything from managing complex urban
environments to making public policy decisions.
The big data revolution is not
just a story of Silicon Valley. It represents a major shift in the way business
is done globally. Developing nations with fewer deeply entrenched legacy
systems to overhaul can take advantage of this moment. Data and analytics could
provide an injection of transparency and efficiency that spurs commerce, builds
more inclusive economies, and makes government services more effective. The age
of analytics is already beginning to unleash creative destruction—and that may
open the door for young, tech-savvy companies from anywhere in the world to
propel themselves into the ranks of the new global giants.
Regards
Pralhad
Jadhav
Senior
Manager @ Library
Khaitan
& Co
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