Some companies have already raced ahead in their use of Big Data – with robust results – and others need to catch up, write three Bain & Co partners, who set out a road map for tackling the challenge.
Using Big Data can yield big results for companies
Samsung uses it to power the content recommendation engine on its newest smart televisions. Progressive Insurance relies on it to capture driving behaviour and determine customer risk profiles. LexisNexis Risk Solutions uses it to identify individuals and family relationships, thus helping financial institutions and other clients reduce fraud.
It, of course, is Big Data – the mining and processing of petabytes’ worth of information to gain insights into customer behaviour, supply chain efficiency and many other aspects of business performance. Industry analysts and media observers are hyping Big Data as the next big thing for every enterprise, and many companies have been rushing to climb on board. But is building an advanced analytics capability really worth the investment?
A recent Bain & Company study should put that question to rest. Early adopters of Big Data analytics have gained a significant lead over the rest of the corporate world. Examining more than 400 large companies, we found that those with the most advanced analytics capabilities are outperforming competitors by wide margins. The leaders are:
• Twice as likely to be in the top quartile of financial performance in their industries.
• Five times as likely to make decisions much faster than market peers.
• Three times as likely to execute decisions as intended.
This may explain why so many companies are now asking where they stand on Big Data vis-à-vis their rivals – and whether they’re missing out on a new and essential competitive tool.
To get in the Big Data game, a company needs three kinds of table stakes: large quantities of information in a format allowing for easy access and analysis; advanced analytical tools, such as Hadoop and NoSQL; and people capable of putting those tools to work.
But table stakes alone would not help you win, because Big Data is not just one more technology initiative. Rather, the analytics leaders embed Big Data deeply in their organisations. It is the only way to ensure that information and insights are shared across business units and functions, and that the entire company recognises the synergies and scale benefits that a well-conceived analytics capability can provide.
Let’s look at what’s involved.
• Ambition. Leading companies begin the embedding process by spelling out their ambition. For instance, we will incorporate advanced analytics and insights as key elements of all critical decisions. They also answer the question: to what end? How is Big Data going to improve our performance as a business? There are four areas where analytics can be relevant: improving existing products and services; improving internal processes; building new product or service offerings; and transforming business models. For example, Humana, the insurance provider, is using Big Data to transform its business. Using claims data, the company can determine who is likely to end up in a hospital for preventable reasons then intervene early.
• Horizontal analytics capability. With ambition defined, Big Data leaders work on developing a horizontal analytics capability. They learn how to overcome internal resistance, and to create both the will and the skill to use data throughout the organisation. It is a big job. Leading companies typically define clear owners and sponsors for analytics initiatives. They provide incentives for analytics-driven behaviour, thereby ensuring that data is incorporated into processes for making key decisions. They create targets for operational or financial improvements, and they work hard to trace the causal impact of Big Data on the achievement of these targets.
• An organisational home. Big Data leaders then create an organisational home for their advanced analytics capability. Companies with deep analytics skills and an emphasis on experimentation and innovation, such as Google and Progressive, can rely on a generally decentralised approach. Many others have found that a Centre of Excellence (CoE) offers the most advantages and the fewest limitations. A well-functioning CoE enables cross-business-unit access and sharing of data. It takes responsibility for supporting and coordinating every initiative from a business unit, thus providing synergies and scale benefits. On the corporate level, the CoE serves as the go-to organisation for analytics strategy and insight support. It sets the road map, and it establishes and maintains privacy policies.
How to get started in Big Data? A good first step is to benchmark your industry and determine your company’s current position in analytics compared with that of your chief rivals. This exercise will help you determine the investment necessary to improve your position. If you are significantly behind the competition, you will have the kind of burning platform that is often required to create and sustain change.
You can then begin experimenting, testing hypotheses to learn where and how your business is most likely to benefit from advanced analytics. This type of review will help you determine your Big Data ambition, embed a culture of analytics and decide where Big Data’s organisational home should be.
Travis Pearson, Rasmus Wegener and Abdulrahman Addas are partners at Bain & Company. They are based respectively in the firm’s San Francisco, Atlanta and Dubai offices