Big Data Analytics: An Impending Key Differentiator for Midsize Businesses
You may believe Big Data is an ill-defined catch-all term that is irrelevant to midsize business. You may believe the same about Analytics. However, it is the intersection of these two worlds that just may define the successful midsize businesses of the next decade.
Today’s technology includes sensor-reading, detailed web analysis and social media. These generate data at granularities and volume not dreamed about a handful of years ago. The accumulation of this data can grow quickly to be some of the largest data sets in a business. This data also tends to have wildly divergent patterns as opposed to the consistent pattern of data the midsize business is based on today. These are new dynamics.
While this big data may not be as important as core financial, customer and product data, it will nonetheless play an important role in the ecosystem of the midsize business of the near future. Effective technology use levels the playing field and perhaps surprisingly, the big data tools are accessible (with the proper discipline behind their use) and cost-effective if done right.
*** When it comes to data, today’s alpha-numeric, transaction-oriented data will become passé. It is big data that will form the competitive advantages of the future. ***
The data capture would make little sense without the ability to turn the stream of data into profit ultimately. The skillset needed here is one of analytics, which is a key enabler of business today and the place to start the journey. You would not simply hang up a store front, declare you are open and begin to let it run on auto-pilot from there.
*** Analytics is the “killer app” for big data. ***
Today, you need to analyze your business constantly and from multiple perspectives or dimensions. There is the perspective of the customer. What makes a good customer? How do we groom them cost-effectively? What characteristics should we look for in people or companies to size them up as high potential? What is the best custom approach of outreach?
Products, services, locations and all other major dimensions of the business have similar analysis needs, but the higher value analysis comes from the perspective of analyzing multiple dimensions at once. Some of those dimensions of the future, even for midsize business, are going to be big data dimensions – for example, juxtaposing and triangulating people’s granular movements (perhaps on your website) with the immediate surrounding stimuli.
Analytics are undoubtedly done today in the midsize business. They are woven inside of many existing undertakings. However, is it acknowledged as analytics? Is the data voluminous enough to support the desired analytics? Is the data clean enough? Do the basics require an extensive amount of effort?
*** High-value customers – the “whales” – far outstrip the other customers in terms of value provided to the midsize business. Do you know who are your whales and why? How long can you afford to put equal energy towards low-value and low-potential customers and prospects? ***
Leading midsize businesses are embracing analytics as a necessary discipline. They are saving all their data, ensuring that data is brought to a standard for cleanliness, carefully selecting helpful tools and investing in individuals who consider analytics their career.
Once this analytical foundation is laid within the company, the clamor, and the competitive requirement, is to add big data.
To demonstrate an example of big data analytics, let’s start with the “money shot” of analytic data – customer lifetime value (CLV). How much is an individual customer worth? It’s a projection of his profit into the forseeable future. We estimate this by looking at a regression of his profit over past years. If that data is not available (i.e., for a new customer), we have to impute something here. That comes smartly from analyzing customers with similar characteristics.
CLVs, as future-facing metrics, play into the smart resource allocation efforts of the midsize company. Now that we know the customers worth going the extra mile for due to their potential, let’s utilize big data to see if any are in a pattern that requires intervention to stay on track or even improve their standing with the company.
*** Intervention can either be to encourage a positive move, such as more purchasing than would otherwise happen, or discouraging a negative move, such as churning or committing fraud. ***
For example, customers physical locations might be (willingly) tracked by their smartphone or incentivized frequent shopper card. Upon reaching a proximity to the store, or other important physical location, the right offer at that right time could be made.
Being successful with analytics requires being agile. It requires trial-and-error, fair measurement of results and a feedback loop into business processes. It requires personalization. Some customers are creatures of habit and will respond in predictable ways according to past behavior. To predict others behaviors, more data, such as from analysis of a representative group, is needed to be brought to bear.
*** Analytics plus big data equals less business uncertainty and more control. ***
Big data is used for analytics in the auto industry where sensor devices are placed in cars, in personalizing products for customers by offering customized recommendations for purchases based on buying habits, in energy companies that offer personalized energy management alerts and recommendations based on smart meters, in compaies with supply chains to record product movement and reduce inventory costs and by medical care companies correlating granular statistics about patient conditions to outcomes. The examples are increasingly coming from the midmarket.
Listening to the market and adapting today for the midmarket leader means analytics and, increasingly, big data. Treat analytics as a discipline. Big data extends analytics, is a game changer and will eventually be the area of competitive differentiation, even for the midmarket.
This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet. I’ve been compensated to contribute to this program, but the opinions expressed in this post are my own and don’t necessarily represent IBM’s positions, strategies or opinions.