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MIT Management Executive Education

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Big Data Shouldn’t Mean Business As Usual

If you’re going to use big data, you’ve got to think big... as in external

Published: Tuesday, May 27, 2014 - 00:00

The big data gold rush has become a stampede. Technology vendors are racing to bring big data solutions to the market, and companies with a never-ending flow of data are looking to big data to make better sense of their business—and to generate better value as a result.

The challenge is that amidst all this hype, the true value of leveraging big data may be lost as companies continue to operate as “business as usual.” As Tom Davenport, a fellow of the MIT Center for Digital Business, shared in a strategy+business article, “A lot of [companies] aren’t really thinking differently about what to do with big data. Instead, they’re simply asking, ‘How can we use these technologies to save money?’”

Davenport makes the argument that the true value of big data is in its ability to help companies harness, analyze, and actualize external data. “One of the great advances is that so much of the data now comes from external sources: from social media, or macroeconomic data, or weather data, for instance,” says Davenport. “The fact that companies are becoming able to incorporate it into their planning and decision-making processes is a healthy development. If companies can include this kind of data in their models, they’ll have a much better idea of how successful they might be with a particular product or marketing campaign.”

How would that change of viewpoint play out in industry today? Think about the airline industry. Nearly every business student has heard the story of American Airlines removing one olive from each dinner salad, resulting in an annual savings of $40,000. Yes, taking that action made an impact on the bottom line, but it wasn’t business innovation. It was simply looking inward to see what could be cut.

Today’s airlines still struggle with profitability. They try to increase profitability by analyzing their routes, optimizing loads, reducing the number of flights and other “internal” activities. This is all well and good, but what benefits could airlines see if they used big data technologies and analysis on external data? The possibilities are endless. In fact, just turning big data to “crunch” the information available on Twitter could be very interesting. Many airlines conduct sentiment analysis on Twitter: mining the platform to determine how their customers feel and what they can do to respond to or change those sentiments. But what if, instead, they used big data to analyze consumers’ tweets about the competition, and then asked a product strategy group to come up with offerings that would capitalize on a competitor’s unhappy customer base?

“It still strikes me how few companies pay attention to such data in terms of looking at their markets and their customers and their competitors,” adds Davenport. “I think the external focus is a great idea, and it’s the direction in which a lot of big data analysis is going. The ability to analyze the external environment is going to be a real point of differentiation from one company to another.”

So, as you begin to incorporate big data into your company strategies, make sure you are not simply using a new tool in an old way.

Tom Davenport teaches in MIT Sloan’s upcoming Executive Education program, Big Data: Making Complex Things Simpler, occurring July 9–10, 2014.

First published on the innovation@work blog.


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MIT Management Executive Education

MIT Management Executive Education’s nondegree executive programs are led by senior MIT Sloan faculty and provide business professionals from around the world with a targeted and flexible means to advance their career development goals and position their organizations for future growth. MIT’s cutting-edge leadership training includes more than 40 short courses, executive certificates, online courses, custom programs for organizations, and its flagship program, the five-week Advanced Management Program.