Big data versus quality information
‘Big Data’ is the new buzzword of today’s business world. Management consultants, corporate strategists and IT executives all ask the question: what to do differently in this new era of data abundance? As in the case of all buzzwords, there is a grain of underlying truth in the hype. Technological development and the Internet have created an environment where large amounts of data are easily available and so are the new tools to analyze it. As a result, for many, ‘Big Data’ is readily associated with the sophisticated execution of various data-mining techniques, usually carried out on the firm’s own transaction data. The hope is that such data-mining will uncover some hidden insights that can then be exploited for superior profits.
There are many examples of successful ventures that support this view. Google comes to mind immediately because, in some sense, it is purely about data mining. It consists of proprietary algorithms that process over 20 petabytes of data every day. Some of the algorithms organize – in real time – the structure of the vast amount of content available on the Internet. Some others run position auctions for thousands of advertisers bidding on millions of keywords. One of Google’s key strengths is that its algorithms evolve over time based on the feedback coming from its users’ behaviour while they are using Google’s services. This fuels a positive feedback loop. As a result, Google’s core competitive advantage resides in its mastery of data mining on vast amounts of transaction data. While Google is probably the purest information business on Earth, many other companies from retailers, banks, telecom companies and airlines have the opportunity to learn about their customers, markets and operations from the vast amount of transaction data that they process every day.
But is it really the abundance of data that poses the key challenge (and opportunity) for businesses? While ‘Big Data’ is certainly a headache for the IT department, I would argue that the question top management should really ask is: how should the company be run in an environment where, increasingly, it is information and knowledge (and not traditional material resources) that represents the scarce input for value creation. The question to ask is: what do I need to know to create more value than my competitors? Once I know the answer to this first question, then I can ask: where can I acquire the necessary information to get it? The answer might very well be in data-mining but under this new perspective the firm can search for information in a much broader ‘market,’ combining very different information sources. In fact, this is what Google does. Its algorithms rely on a variety of insights and information sources. What guides their development is a simple question focused on Google’s core value creation process: how can one provide the most relevant link(s) to a given search word?