“You know,” said a good friend of mine last week, “there’s really no such thing as big data.”
I sighed a bit inside. In the past few years, cloud computing critics have said similar things: that clouds are nothing new, that they’re just mainframes, that they’re just painting old technologies with a cloud brush to help sales. I’m wary of this sort of techno-Luddism. But this person is sharp, and not usually prone to verbal linkbait, so I dug deeper.
He’s a ridiculously heavy traveler, racking up hundreds of thousands of miles in the air each year. He’s the kind of flier airlines dream of: loyal, well-heeled, and prone to last-minute, business-class trips. He’s is exactly the kind of person an airline needs to court aggressively, one who represents a disproportionally large amount of revenues. He’s an outlier of the best kind. He’d been a top-ranked passenger with United Airlines for nearly a decade, using their Mileage Plus program for everything from hotels to car rentals.
And then his company was acquired.
The acquiring firm had a contractual relationship with American Airlines, a competitor of United with a completely separate loyalty program. My friend’s air travel on United and its partner airlines dropped to nearly nothing.
He continued to book hotels in Shanghai, rent cars in Barcelona, and buy meals in Tahiti, and every one of those transactions was tied to his loyalty program with United. So the airline knew he was traveling — just not with them.
Astonishingly, nobody ever called him to inquire about why he’d stopped flying with them. As a result, he’s far less loyal than he was. But more importantly, United has lost a huge opportunity to try to win over a large company’s business, with a passionate and motivated inside advocate.
And this was his point about big data: that given how much traditional companies put it to work, it might as well not exist. Companies have countless ways they might use the treasure troves of data they have on us. Yet all of this data lies buried, sitting in silos. It seldom sees the light of day.
When a company does put data to use, it’s usually a disruptive startup. Zappos and customer service. Amazon and retailing. Craigslist and classified ads. Zillow and house purchases. LinkedIn and recruiting. eBay and payments. Ryanair and air travel. One by one, industry incumbents are withering under the harsh light of data.
Big data and the innovator’s dilemma
Large companies with entrenched business models tend to cling to their buggy-whips. They have a hard time breaking their own business models, as Clay Christensen so clearly stated in “The Innovator’s Dilemma,” but it’s too easy to point the finger at simple complacency.
Early-stage companies have a second advantage over more established ones: they can ask for forgiveness instead of permission. Because they have less to lose, they can make risky bets. In the early days of PayPal, the company could skirt regulations more easily than Visa or Mastercard, because it had far less to fear if it was shut down. This helped it gain marketshare while established credit-card companies were busy with paperwork.
The real problem is one of asking the right questions.
At a big data conference run by The Economist this spring, one of the speakers made a great point: Archimedes had taken baths before.
(Quick historical recap: In an almost certainly apocryphal tale, Hiero of Syracuse had asked Archimedes to devise a way of measuring density, an indicator of purity, in irregularly shaped objects like gold crowns. Archimedes realized that the level of water in a bath changed as he climbed in, making it an indicator of volume. Eureka!)
The speaker’s point was this: it was the question that prompted Archimedes’ realization.
Small, agile startups disrupt entire industries because they look at traditional problems with a new perspective. They’re fearless, because they have less to lose. But big, entrenched incumbents should still be able to compete, because they have massive amounts of data about their customers, their products, their employees, and their competitors. They fail because often they just don’t know how to ask the right questions.
In a recent study, McKinsey found that by 2018, the U.S. will face a shortage of 1.5 million managers who are fluent in data-based decision making. It’s a lesson not lost on leading business schools: several of them are introducing business courses in analytics.
Ultimately, this is what my friend’s airline example underscores. It takes an employee, deciding that the loss of high-value customers is important, to run a query of all their data and find him, and then turn that into a business advantage. Without the right questions, there really is no such thing as big data — and today, it’s the upstarts that are asking all the good questions.
When it comes to big data, you either use it or lose.
This is what we’re hoping to explore at Strata JumpSsart in New York next month. Rather than taking a vertical look at a particular industry, we’re looking at the basics of business administration through a big data lens. We’ll be looking at apply big data to HR, strategic planning, risk management, competitive analysis, supply chain management, and so on. In a world flooded by too much data and too many answers, tomorrow’s business leaders need to learn how to ask the right questions.