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Big data analytics today lets businesses play moneyball

Thor Olavsrud | Aug. 24, 2012
Hype continues to surround big data analytics. But hype or not, data-driven decision-making is becoming central to management decisions at most enterprises.

The answer appears to be 'Yes.'

In 2011, Prof. Erik Brynjolfsson, an economist at the Sloan School of Management at the Massachusetts Institute of Technology (MIT), set out to find the answer to this question.

"Companies that use this type of 'data-driven decision making' actually show higher performance," Brynjolfsson wrote. "Working with Lorin Hitt and Heekyung Kim, I analyzed 179 large publicly traded firms and found that the ones that adopted this method are about 5 percent more productive and profitable than their competitors.

Furthermore, the study found a relationship between this method and other performance measures such as asset utilization, return on equity and market value. There is a lot of low-hanging fruit for companies that are able to use big data to their advantage."

Enterprises are taking those findings to heart. Avanade's study found that 57 percent of respondents say their firms added technology options for analyzing and managing data in the past 12 months. A further 75 percent say their company will make additional investments to improve their capability to analyze data within the next 12 months.

"Big data is reaching a tipping point where it is becoming much more mainstream," says Steve Palmer, Business Intelligence Leader for North America at Avanade. "We are beginning to see companies on a much broader basis derive both financial and competitive advantage from data."

Obstacles to Managing and Analyzing Data

That said, there's a long way to go. While the majority of firms say they are leveraging their data, 85 percent of Avanade's respondents say they face obstacles in managing and analyzing data. These obstacles range from the sheer volume of data to data security to a lack of dedicated staff.

The Economist Business Unit and Capgemini found that organizations are struggling with the enormous volumes of data coming in. But perhaps more important, they are struggling with poor quality data and siloed data.

"It is the complexity of the data they have, not the sheer volume, that is really slowing down their ability to make decisions," says Scott Schlesinger, vice president and head of Business Information Management for Capgemini U.S. "You've got to get your arms around data quality. Garbage in is garbage out."

While the majority of respondents in the study say their firms are data-driven, they also say their organizations do not have enough of a 'big data culture': 55 percent say that big data management is not viewed strategically at senior levels of the organization.

When it comes to these obstacles, there is a split between C-level executives and IT decision-makers about which constitute the biggest hurdles. The majority of C-level executives (58 percent) believe finding the right technology is a bigger challenge than finding the right staff. However, 56 percent of IT decision-makers disagree: They believe finding the right staff is a bigger challenge than finding the right technology.

 

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