1. Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
Harvard Business Review

2. Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
Big Data:
The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson Harvard Business Review, October 2012
What, exactly, is big data? How does it differ from the information companies have relied on for decades? How can they use it to their benefit? What about the skeptics who say it’s just hype?
MIT professors Andrew McAfee and Erik Brynjolfsson tackle these questions in a 2012 HBR article.
Their conclusion? Big data is here to stay. The trick is finding ways to make it work for us.
Harvard Business Review

3. Big Data Solves a Big Problem
Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
Big Data Solves a Big Problem
“You can’t manage what you don’t measure.”
“You can’t manage what you don’t measure.”
Whether you attribute these smart words to Deming or Drucker, they explain why the recent explosion of digital data is so important.
Simply put, managers can now measure—and therefore know—more about their businesses than ever before.
And they can directly translate that knowledge into improved decision making and performance.
Harvard Business Review

4. Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
The Amazon Story
Big Data
Industry Transformatio n
Consider the classic example of Amazon.
The story is so familiar, we almost forget how revolutionary it is.
Before Amazon, booksellers could track which books sold and which did not. They could tie some of those purchases to individual customers—but that was about it.
When people began buying books online, it became possible to track what other products they looked at, how much they were influenced by promotions, and so on.
Armed with this data, Amazon was able to predict what customers might like to buy next.
Traditional retailers couldn’t access this kind of customer information, let alone act on it in a timely manner.
Harvard Business Review

5. The Opportunity for Competitive Advantage
Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
The Opportunity for Competitive Advantage
Data-driven decisions increase productivity and profitability.
Of course, we expect companies that were born digital to compete using big data.
But traditional businesses have just begun to tap its potential for driving competitive advantage.
Research shows that those benefits are significant.
In a study of more than 300 North American companies, those that were the most data-driven in their decision making were 5% more productive and 6% more profitable than their competitors.
Harvard Business Review

6. What’s Different About Big Data?
Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
What’s Different About Big Data?
volume
velocity
variety
So what exactly do we mean by “big data”?
Is it just another way of saying “analytics”?
The two are certainly related: Both glean intelligence from data and translate that into a business advantage.
But big data has three distinct characteristics: Volume, velocity, and variety.
Harvard Business Review

7. Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
What’s Different About Big Data?
Volume
Massive data sets
First, let’s look at the sheer volume.
More data crosses the internet every second than was stored in the entire web just 20 years ago.
In 2012, Walmart was collecting about 2.5 petabytes of customer data— enough to fill 50 million filing cabinets—per hour.
With big data, companies have a lot more information to work with—and a lot more to handle.
Harvard Business Review

8. Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
What’s Different About Big Data?
Velocity
Information in real time
The second difference is velocity, which is perhaps even more important than volume.
By gathering information in real time, a company can be much more agile than its competitors.
Harvard Business Review

9. What’s Different About Big Data? Velocity
Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
What’s Different About Big Data? Velocity
GPS Data
Early Sales Estimates
Consider this experiment: The MIT Media Lab used location data from mobile phones to estimate how many people were in Macy’s parking lots on Black Friday—the start of the Christmas shopping season in the U.S.
Using that data, MIT analysts were able to estimate sales for that critical day before Macy’s had recorded them.
Rapid insights like that can provide an obvious competitive advantage.
Harvard Business Review

10. Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
What’s Different About Big Data?
Variety
Unstructured and unwieldy data
The third difference with big data is variety.
Think about just some of the forms big data can take:
Messages, videos, and images posted to social media
Passive readings from sensors
GPS signals from cellphones and satellites
Online shopping data
Many of the sources of big data are relatively new: Facebook was launched in 2004 and Twitter in 2006, for instance.
And unlike information generated from traditional systems, much of the data is unstructured and unwieldy to store and process.
Harvard Business Review

11. Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
What’s Different About Big Data? How Passur Improves Airline ETAs
CHALLENGE Minutes matter.
Let’s look at one company that harnesses the volume, velocity, and variety of big data to differentiate itself in an established industry: airlines.
It’s no secret that even small disparities between estimated and actual arrival times for flights can really drive up costs.
Traditionally, arrival estimates have been made by pilots as they approach an airport, while they have many competing demands on their time and attention.
PASSUR Aerospace, a decision-support consultant to the aviation industry, relies instead on big data.
Harvard Business Review

12. Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
What’s Different About Big Data? How Passur Improves Airline ETAs
RESULTS Improved accuracy saves airports millions.
Every 4.6 seconds, PASSUR collects information about all the planes that it “sees” in the local sky.
It uses publicly available data on weather feeds and flight schedules along with real-time data from its network of passive radar stations.
It combines that information with historical data, allowing sophisticated analysis and pattern matching.
The technology essentially works by asking “What happened all the previous times a plane approached this airport under these conditions? When did it actually land?”
Using this service, airlines are able to close the gaps between estimated and actual landing times—and that’s worth several million dollars a year at each airport.
Harvard Business Review

13. Big Data: The Management Revolution5
Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
Big Data Challenges
Leadership Talent Management Technology Decision Making Company Culture
Big data brings vast opportunities—but also serious managerial challenges.
Let’s look at the challenges in five key areas—leadership, talent management, technology, decision making, and company culture.
Harvard Business Review

14. Leadership Set clear goals and decide what success looks like.
Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
5 Big Data Challenges
Leadership Set clear goals and decide what success looks like. 1
The first area we’ll discuss is leadership.
Big data’s power does not erase the need for vision or human insight, of course.
But leaders must be disciplined about consistently asking “What does the data say?” and “How confident are we in the results?”
Just as important, they should allow themselves to be overruled by the data. Few things are more powerful in establishing a data-driven organization than seeing a senior manager concede when evidence disproves a hunch.
Harvard Business Review

15. Talent Management You need data scientists and domain experts.
Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
5 Big Data Challenges
Talent Management You need data scientists and domain experts. 2
The second area to focus on is talent.
To use big data effectively, companies need both data scientists and domain experts.
Let’s look first at data scientists.
These people know how to:
clean and organize unstructured data,
find patterns in very large data sets,
and design experiments that generate useful business insights.
They’re comfortable speaking the language of business and helping leaders reframe challenges in ways that big data can address.
These skills are rarely taught in traditional statistics courses.
People who have them are hard to find and in great demand.
Harvard Business Review

16. Talent Management You need data scientists and domain experts.
Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
5 Big Data Challenges
Talent Management You need data scientists and domain experts. 2
Even with data scientists on board, domain experts remain critical, because they’re the people who can identify which problems the business should tackle.
With their deep knowledge of a particular area or industry, they understand where the biggest opportunities and challenges lie.
PASSUR, the aviation tech firm we discussed, obviously needs data scientists to make sense of the vast amounts of data it collects—but it also highly values people with extensive knowledge of U.S. airport operations.
Harvard Business Review

17. Technology Develop new skills in IT.
Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
5 Big Data Challenges
Technology Develop new skills in IT. 3
Technology, of course, is a central challenge in using big data.
The tools available to handle volume, velocity, and variety have improved dramatically in recent years—and for the most part, they’re not prohibitively expensive.
But technology isn’t sufficient on its own. IT groups will need to develop new skills to integrate, store, and process all the data that’s coming in so fast and from so many sources.
Harvard Business Review

18. Decision Making Base decisions on evidence.
Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
5 Big Data Challenges
Decision Making Base decisions on evidence. 4
Another critical aspect of big data is its impact on how decisions are made and who makes them.
For important decisions, companies usually rely on the intuition of senior managers, or they bring in expensive outside experts.
And when data is scarce or expensive to obtain, it does makes sense to let the judgment of seasoned professionals guide decision making.
But data-driven firms try to avoid acting on instinct.
They focus on connecting people who understand the problems with those who can mine the data for solutions.
Harvard Business Review

19. Company Culture Don’t ask “what do we think?”
Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
5 Big Data Challenges 5
Company Culture Don’t ask “what do we think?”
Ask “what do we know?”
The last management challenge is to change company culture, which can be extremely hard to do.
Companies must move away from acting on instinct.
They should be asking “What do we know?” instead of “What do we think?”
And they have to stop pretending to be more data-driven than they actually are.
Having people at the top make decisions and then send underlings off to find numbers that justify them does NOT make an organization “data-driven.”
Harvard Business Review

20. Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
The Payoff
Smarter predictions, decisions, and interventions
It’s very clear by now that big data is not just a flashy new trend. It represents a fundamental shift in the economy.
It has transformed many industries and functions.
Carmakers apply it to supply chain management, to understand why their defect rates have suddenly gone up or down.
Hospitals use it in customer service, to monitor and improve health care practices for millions of people.
Businesses from a wide range of industries rely on big data in product development and marketing, to better forecast sales.
The bottom line is that data-driven decisions are better decisions—and companies that realize this have a true edge.
Harvard Business Review

21. Big Data: The Management Revolution
Based on the article by Andrew McAfee and Erik Brynjolfsson
HBR Magazine and Web Articles
Data Scientist: The Sexiest Job of the 21st Century
Thomas H. Davenport and D.J. Patil
Making Advanced Analytics Work for You
Dominic Barton and David Court
Why IT Fumbles Analytics
Donald A. Marchand and Joe Peppard
How Smart, Connected Products Are Transforming Competition
Michael E. Porter and James E. Heppelmann
Why Your Analytics Are Failing You
Michael Schrage
Can Your C-Suite Handle Big Data?
Brad Brown, David Court, and Paul Willmott
HBR Press Books
Keeping Up with the Quants: Your Guide to Understanding and Using Analytics
Thomas H. Davenport and Jinho Kim
Big Data at Work: Dispelling the Myths, Uncovering the Opportunities
Thomas H. Davenport
Learn More
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Harvard Business Review