Naturally, anytime an article’s headline is about Big Data I take notice. And especially so when it claims to tell my why Big Data is inadequate.
So after digesting this information, please allow my a couple of minutes to discuss why the author totally missed the mark on, and the point of, big data.
He makes three main points. As he puts it, “Here are three reasons why a lot of investments in big data fail to deliver ROI.“
- Most companies don’t know how to use big data for strategic decisions.
Companies need to learn how to manage information, analyze it in ways that advance their understanding of its customers, and then act intelligently in response to new insights.
“Companies don’t magically develop those competencies just because they’ve invested in high-end analytics tools. They first need to learn how to use the data already embedded in their core operating systems, much the way people must master arithmetic before they tackle algebra,” information science academics Jeanne W. Ross and Anne Quaadgras from MIT and Cynthia M. Beath from the University of Texas at Austin wrote in the Harvard Business Review.
One reason that companies are unable to benefit fully from their investments in big data is that “management practices haven’t caught up with their technology platforms,” according to Ross and Quaadgras. For example, companies that have installed digital platforms, such as enterprise resource planning (ERP) systems and customer relationship management (CRM) systems over the past 10 to 15 years, haven’t yet taken full advantage of the information they make available. A cultural change is needed within companies so that “all decision makers have performance data at their fingertips every day,” Ross and Quaadgras write.
As an example of a company that uses data effectively, Ross, Quaadgras and Beath cite 7-11 Japan, which provided its employees with daily sales reports and supplemental information such as weather forecasts, what sold on the last day the weather was similar, what sold the previous day, what sold on the last the same date a year prior, and what was selling in other stores. Importantly, clerks were connected to suppliers “to encourage the development of items that would suit local customers’ tastes.”
The 7-11 Japan story was not about big data or investments in data, but about a lot of little data. “It’s about betting your business success on the ability of good people to use good data to make good decisions,” the authors wrote. “Empowering employees in this way, and arming them with the data they need, helps them make better operating decisions on a daily basis. It can also lead to a constant stream of innovation.”
Big data, as it’s described today, is not the answer to all questions—and it’s no replacement for the on-the-ground decision-making of real people interacting with real customers.
First, no one in the “big data” arena, that I have read has suggested that any technology develops competencies for anyone – only people can develop competencies. But this reminds us of a common theme this week – a CPG category or sales manager must have a marketing strategy, which then drives questions, that dictates the data to be mined.
Second, he writes, “The 7-11 Japan story was not about big data or investments in data, but about a lot of little data.” Hello?! Here’s where he doesn’t understand big data – big data is a LOT of little data. The ability to pull in unstructured data with the existing structured data and rapidly blend the data (i.e. data blending) to draw new insights. That is the purpose of the technology and why it exceeds the capabilities of rigid DSRs built with old data warehouse style databases.
Finally (on this point), he writes, “—and it’s no replacement for the on-the-ground decision-making of real people interacting with real customers.” He is correct – no technology is sufficient to replace real people – that characteristic is not unique to “big data.” People, whether they are consumers in your retailer’s store or the buyer you deal with at the retailer home office, do business with people – not technology. We use technology to facilitate fast, and sometimes global, interactions. He criticizes this technology for sharing the common characteristic of all technologies – what’s the point?
- Big data doesn’t provide a complete picture.
Another telling example of the danger of relying on big data alone comes from the world of social media analytics. Seen widely as a holy grail for companies seeking insight on their customers, social media analytics falls short on several fronts. Consider this: 85 percent of social media updates come from so-called “enthusiasts”, but only 29 percent of a typical company’s audience are enthusiasts.
The vast majority of social media users are in fact relatively quiet. Companies can’t hear them, although they’re listening to you. That means that social media analytics can mislead companies about what matters to customers as a whole, when in fact what they’re seeing is only a very thin slice of their audience.
Colin Strong, a leading consumer researcher in the U.K. emphasizes this point in his 2015 book Humanizing Big Data. “Since Twitter users make up only about 10 per cent of the U.S. population,” he notes, “some demographic or social groups won’t be represented. The result? More data … does not necessarily mean more insight as it does not necessarily reflect real life.”
People who spend a lot of time online are typically younger, better educated and more affluent than the overall population—again, offering many companies a limited view of existing and potential customers.
Note: He makes this argument by coming to a false conclusion about big data from the flaws he sees in social media data. Social media data != big data. Social media data is a subset of big data. One thread in the fabric creating a complete customer tapestry. Not understanding the definition of something will inevitably result in false conclusions.
Premise: Ducks are birds.
Premise: Ducks swim in the water.
Premise: Chickens are birds.
False Conclusion: Chickens swim in the water.
- It lacks the “why.”
Big data can reveal much about what’s going on, when it happens and where it happens. But we haven’t really arrived at the day when big data can reliably tell us why customers behave in a certain way.
See my final point on issue #1. No technology does our thinking for us. What technology delivers, especially big data technology, is the data (information) much faster – allowing CPG marketers to analyze that data (again with BI technology), so to develop actionable insights much sooner (a human function).
As computing advances and analytical tools progress, we may get to that point. But for the foreseeable future, big data is only one tool in the marketer’s toolbox. Market research that involves more direct human-to-human interactions with consumers will still be vital. Big data will only take us so far, and at some point a human perspective needs to join the effort.
For marketing departments to derive value from big data, they have to get better at leveraging social science, data analytics and consumer insights. Understanding the nuances of customer behavior—the motivations, or the “why” behind behaviors—gives us true insights. And those cannot come from a centralized and isolated big data department.
Big data surely has a role to play in gaining insights into the behavior of these empowered customers. That’s why enterprises are pouring billions of dollars into the big data industry.
But big data doesn’t have all the answers—at least not yet, and perhaps never. Companies need to respond quickly to identify changes in customer behavior and take action to address their concerns.
In short, the emergence of big data doesn’t change the fact that people matter. A human touch is still integral in business today. Big data can offer some answers but continual human-to-human connections are also needed to fully understand rapidly evolving marketplace.
While in agreement with his statement, “the emergence of big data doesn’t change the fact that people matter. A human touch is still integral in business today.” That has always been, and will forever be, true – regardless of the technology used to gain insight into the consumer’s behavior. People do business with people. Relationships always matter.
The author lacks an understanding of “big data,” doesn’t know the definition of “big data,” and criticizes the characteristics of “big data” that all technologies share.
This article reaches the wrong conclusions for all the wrong reasons.
If you are interested in finding out how big data can really give you the tools you need to outpace your competition please contact us today.