Data Revolution. Michael Toedt
It is hard to believe but 90% of all data available worldwide has been generated in the past two years. By the end of 2020, the available data will have increased by the factor 50, compared to 2009. 16 Looking at these numbers one thing is for sure: the current development of Big Data cannot be stopped and Big Data is not just hype.
Figure 4: Exponential Growth of Data Volume17
We are still in the early stages of the Big Data Revolution and companies and managers still have some time to prepare themselves. This will be completely different in five years from now. Consumers will have the choice and there will be a natural clearing of the market.
Existing global players will disappear and new ones will take over. Like Kodak denied the role of digital photo´s may companies will loose the change process. Big Data will act like a catalysator for managers who are not willing to adapt the necessary changes.
2. Big Data Stories
The following true stories will help to get a glimpse of what data is able to deliver and will lift any doubts that we already live in a digital Big Data world. Schoenberger and Cukier wrote in their NY Times Bestseller, “Big Data refers to things one can do at a large scale that cannot be done at a smaller one, to extract new insights or create new forms of value, in ways that change markets, organizations, the relationship between citizens and governments, and more.“18
2. 1. The Google Flu Map
Google is the dominant search engine. Data is their core business. A good example for what Big Data is able to deliver is the so-called Google Flu Map. By analyzing search queries Google realized that they are able to predict where a flu breakout will occur. Based on the number of search queries Google is able to calculate the flu activity worldwide almost in real-time.
Data analysts at Google compared query counts with traditional flu surveillance systems and found that certain search queries are popular exactly during the flu season. By counting how often these search queries occur, Google can estimate the flu frequency in different countries and regions around the world.
Figure 5: Goolge Flue Map19
Governments, phycicians, and pharmaceutical companies can react much faster on a flu breakout by using the Google Flu Map. Traditional flu surveillance systems look at the past and are therefore always behind the current situation.
2. 2. Selling Without Owning
Walmart is the largest retail company worldwide. Its annual revenue of approx. $450 billion is higher than the GDP of four-fifths of the world’s countries. The idea of Walmart was to record each single product through a system called Retail Link. With this tool, the suppliers of Walmart were able to monitor each sales transaction. Based on this knowledge Walmart forced the suppliers to take care of the stockage, i.e. they were able to outsourc the maintenance of the stockage for certain products. In that case, the supplier owns the product until the point-of-sale. This brought the financial risks down to a minimum.20 The smart usage of data is one of the reasons for Walmart’s success.
2. 3. Pregnant Without Knowing
The following is a true story from outside the hotel industry and shows the power of Big Data. “Target” is a US reseller for all kinds of commodity consumer goods such as baby supplies, furniture, electronics, toys, etc. Like other companies, Target faces the challenge that customers usually only come to the store when they need a certain item they associate with Target. In order to increase revenues the customers had to be convinced that Target is the only store they need. This is hard to achieve through classical advertising, as shopping habits are engrained and difficult to change. Therefore, Target started to analyze the available customer data (everything is stored under a so-called guest ID which enables the link between the customer and the purchased products) in order to create individualized marketing campaigns. The project started in 2002. Revenues had skyrocketed from US$ 44 billion in 2002 to US$ 67 billion in 2012. Of course, not all of the success can be attributed to the direct marketing activities using Big Data, but Target is definitely doing something extremely right.21
Analysts at Target found out that women who purchase about 25 different products are potentially pregnant. This led to the creation of a pregnancy prediction model.
Figure 6: Traget - A “Big Data“ Success Story
“Take a fictional Target shopper named Jenny Ward, who is 23, lives in Atlanta and in March bought a cocoa-butter lotion, a purse large enough to double as a diaper bag, zinc and magnesium supplements and a bright blue rug. There’s, say, an 87 percent chance that she’s pregnant and that her delivery date is sometime in late August. What’s more, because of the data attached to her Guest ID number, Target knows how to trigger Jenny’s habits. They know that if she receives a coupon via Email, it will most likely cue her to buy online. They know that if she receives an ad in the mail on Friday, she frequently uses it on a weekend trip to the store. And they know that if they reward her with a printed receipt that entitles her to a free cup of Starbucks coffee, she’ll use it when she comes back again.”22 This is quite scary and the following true story a result of it:
“A man walked into a Target outside Minneapolis and demanded to see the manager. He was clutching coupons that had been sent to his daughter, and he was angry, according to an employee who participated in the conversation. “My daughter got this in the mail!” he said. “She’s still in high school, and you’re sending her coupons for baby clothes and cribs? Are you trying to encourage her to get pregnant?” The manager didn’t have any idea what the man was talking about. He looked at the mailer. Sure enough, it was addressed to the man’s daughter and contained advertisements for maternity clothing, nursery furniture and pictures of smiling infants. The manager apologized and then called a few days later to apologize again. On the phone, though, the father was somewhat abashed. “I had a talk with my daughter,” he said. “It turns out there’s been some activities in my house I haven’t been completely aware of. She’s due in August. I owe you an apology.”23
As a result Target has shifted to a more subtle marketing approach. Promotions for products pregnant women would never buy are now added to the mailings. This makes the baby ads look more random.24
2. 4. $750.000 for No Reason
In order to drive value from the available data, managers have to be able to ask the right questions, but also to understand the limitations. Analysts can provide beautiful charts, which suggest a highly valuable conclusiveness. Managers have to be aware that not the beauty of a chart should drive the decision, but the quality of the data and the analysis behind.
Like online stores, most hotels nowadays send so-called post-stay messages asking the guests for feedback. In many cases, the used tools collect data anonymously. When reviewing the reports provided by the web-based questionnaire tool, a hotelier saw the need to enhance his spa area and thus budgeted $750. 000 for an upgrade. He did this although the spa had been rated as one of the best spas in the country. During the annual strategy meeting an external data analyst questioned that budget decision. He tooks the anonymous data and linked the results to the individual guest profiles. Structured data has a much higher value and quality than unstructured data. It is curcial to link the guest profile to the feedback results, in order to generate sustainable results and to be able to draw the correct conclusions. This “obvious” requirement is, however, almost unknown and most managers lack the skills to question the delivered reports. In most companies there is