Perspective   Ramesh Nair              Andy NarayananGetting Resultsfrom Big DataA Capabilities-DrivenApproach to the Stra...
Contact InformationAtlanta                        Florham Park, NJAjay Nayar                     Ramesh NairPrincipal     ...
EXECUTIVE        The world is facing a data deluge never seen before.                 Unstructured data—from online behavi...
THE STRATEGIC                              operations, employees, and other                                           asse...
THE CIO’S                                                 Concerns about privacy are lower                                ...
1                                                                                                                         ...
WHERE AND        Where can you find the most value                 in big data? It is relevant in several                 ...
WHAT TOOLS                                processing, machine learning–based                                          anal...
WHAT ASPECTS      Successful execution of a big-data                  road map requires an operating                      ...
CONCLUSION   The next decade of competitive             advantage and productivity improve-                               ...
About the AuthorsRamesh Nair is a partner inBooz & Company’s financialservices practice, based inFlorham Park, N.J. He lea...
The most recent             Worldwide Officeslist of our officesand affiliates, with        Asia                          ...
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Booz co getting-results-from-big-data


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September 25, 2012

Nair, Ramesh; Narayanan, Andy

The world is facing a data deluge never seen before. Companies are positioning themselves to compete based on their access to and use of big data. Many of them start with technology, but that won’t serve you well. Instead, take a capabilities-driven approach. Look first at your company’s overall strategy; then at the categories of data that will be valuable to you; then how you can put it to use; and finally at the tools, skills and practices you need.

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Booz co getting-results-from-big-data

  1. 1. Perspective Ramesh Nair Andy NarayananGetting Resultsfrom Big DataA Capabilities-DrivenApproach to the StrategicUse of UnstructuredInformation
  2. 2. Contact InformationAtlanta Florham Park, NJAjay Nayar Ramesh NairPrincipal Partner+1-404-271-3890 ramesh.nair@booz.comBeirut FrankfurtRamez Shehadi Olaf AckerPartner Partner+961-1-985-655 olaf.acker@booz.commChicago Volkmar KochTom Casey PartnerPartner +49-69-97167-412+1-312-578-4627 New YorkKumar Krishnamurthy Corey YulinskyPartner Partner+1-312-578-4613 corey.yulinsky@booz.comAndy Narayanan Gary WangPrincipal Principal+1-312-578-4781 Booz & Company
  3. 3. EXECUTIVE The world is facing a data deluge never seen before. Unstructured data—from online behavior, purchases, mobileSUMMARY devices, location tracking, sensors, and other sources—has been growing at a rate of more than 50 percent per year. By 2015, it is expected to reach close to 8,000 exabytes, which is about the equivalent of 500 billion fully loaded iPads. Companies are positioning themselves to compete based on their access to and use of big data. Many of them start with technology, but that won’t serve you well. Instead, take a capabilities-driven approach. Look first at your company’s overall strategy and the capabilities system that can help it reliably and sustainably outpace its competitors. Then look at the categories of data: external (outside your business) versus internal sources, and structured versus unstructured forms. Different types of information will be valuable to dif- ferent companies, based on the purpose of the enterprise. Third, consider where and how you can put big data to use— which parts of the business will gain the most from the added insight about customers or processes. Then, and only then, look at the tools you need to buy, build, and implement for your new approach. Finally, explore the skills, practices, and other aspects of your operating model that need to be in place to achieve your objectives with these tools.Booz & Company 1
  4. 4. THE STRATEGIC operations, employees, and other assets; and apply that knowledge in hastily, without a well-thought- out strategy. That means not justUSE OF BIG DATA new decisions and automated actions. an IT strategy, but a focus on the overall strategic priorities and value Leaders in many industries are propositions of your company, and an looking to gain valuable insights awareness of how these tools might through big data. They believe it will fit. Investing for future growth should lead to more intelligent decisions involve a lot more than buying open-The amount of data available to about which customers to target, how source file system infrastructure,businesses has grown significantly to target them, how to price, what installing off-the-shelf software, andover the last few years. CIOs, products and services to launch, how hiring analytic experts to make sensetechnology evangelists, consultants, to manage risk, whom to recruit, of the incoming data. All too manyvendors, and many executives and more. companies have started down thatfrequently use the term “big data” to data- and technology-centric pathrefer to various possibilities. Strictly But despite the growing wave of without much success.speaking, the phrase refers to the interest and the dramatic potential ofhuge amounts of information from the concept, very few enterprises have The answer is in applying athe world at large—from sensors, found a way to embrace big data in capabilities-driven approach to bigaccumulations of digital text and a manner that actually yields better data. This means working with yourvideo, electronic transactions, business results within a practical company’s overall strategy—and, inobserved online behavior, and other time frame. This gap between concept particular, the capabilities system thatforms of recorded activity—that and practice reflects the fact that big can help it reliably and sustainablycan be used to analyze and predict data is still a relatively new functional outpace its competitors—to see whatwhat people and systems do. More specialty, and there is much to learn contribution big data can makegenerally, the term refers to the about its real-world use and value. to enable specific capabilities thattools, processes, and procedures that will help you win and differentiateorganizations use (generally on a If you are a CIO, wondering if big yourself in the marketplace. Thenreal-time, minute-by-minute basis) data represents the next answer to put in place the processes andto gather big data; develop better supporting growth in your industry, practices that best fit the purposeknowledge about their customers, you should resist the urge to move of your enterprise.2 Booz & Company
  5. 5. THE CIO’S Concerns about privacy are lower than ever before, and the data from repackaging their traditional business intelligence and data mining efforts PERSPECTIVE location-aware mobile devices has under a new buzzword. exacerbated the amount of data, and the types of data, to be gathered. We Hence, most CIOs are torn. Should are truly looking at a data deluge they embrace the big-data trend never seen before. by spending money to build new As recently as 2005, there was an capabilities? Or should they wait estimated 130 exabytes (about 130 It is understandable that many CIOs for the hype to settle down and risk billion gigabytes) of data in the entire and business executives resist jumping losing competitive edge to other digital universe. Since TEN-YEAR ANNUALIZED CHANGE IN ENTERPRISE VALUE, RELATIVE TO ANNUALIZED CHANGE then, the in to make major investments in industry players? In making that amount has been growing at a IN BENCHMARKS, OF COMPANIES WITH $1 some OR MORE IN REVENUE rate of this opportunity. After all, BILLION decision for your enterprise, there are more than 50 percent a year, and in Frequency industries have dealt with terabytes four fundamental questions to ask, 2015 it is expected to reach close to of information for years. In financial Negative Positive and largely in this order: 70 8,000 exabytes—about the equivalent services, 83 percent of the industry’s of 500 billion fully loaded iPads huge technology expenses come from 1. How does this technology fit with (see Exhibit 60 A significant part of 1). acquiring, managing, and extracting our strategy, and especially with this data growth is unstructured; it value out of data. Healthcare, retail, our capabilities system? consists of material including Web 50 telecom, and other industries are content, news and social feeds, not very far behind. They see no 2. Where and how can we put big message board postings,Sample set: 40 video clips, reason to raise these investments data to use? Capex and other data that cannot easily be bottom performers higher. Moreover, many past (adjusted annualized return Opex grouped into recurring fields. When <= -10%) initiatives aimed at gathering business 3. What tools do I need to buy, build, 30 people create this type of material intelligence have not realized the and implement? Accumulated on the Web, they share information expected benefits. CIOs and business 20 about their interests, attitudes, and executives are wary of adopting 4. What aspects of our operating buying habits, among other things. another “intellectual” initiative or model need to be in place? 10 0 -35% -30% -20% -10% 0% 10% 20% 30% 40% 50% 56% Annualized Changection in steady state Exhibit 1 Total Global Data Storage in Exabytes Storage Cost per GB ($) 68% of all unstructured 130 By 2010, 90% data in 2015 will be (approximately created by consumers US$20.00 1,227 1,100 exabytes) 7,910 of all data in the digital universe was unstructured All Digital Data $10.00 Unstructured Digital Data $0.50 1 exabyte = 1 billion gigabytes (GB) Rapid decreases in storage costs have enabled the enterprise to store ever more data 2005 2010 2015 Source: IDC’s Digital Universe Study, sponsored by EMC, June 2011 Booz & Company 3
  6. 6. 1 CURRENT Voice of the Cu Time and Motio Value Stream M TEN-YEAR ANNUALIZED CHANGE IN ENTERPRISE VALUE, RELATIVE TO ANNUALIZED CHANGE IN BENCHMARKS, OF COMPANIES WITH $1 BILLION OR MORE IN REVENUE Identifying Was Frequency Workload Profil Negative Positive 70 HOW60 DOES type (from tightly structured to loose and unstructured) and data source business-to-business (B2B) world, inter- nal unstructured data (the bottom right IT FIT WITH (from internal to external). quadrant) is a prime learning ground for Risk Assessme OUR 50 STRATEGY? Different organizations have differ- enterprises to understand how to mine value from unstructured data formats. ent information needs. If your biggest 40 Sample set:x bottom performers areas of growth and strategic focus are Some companies, in either B2C or B2B (adjusted annualized return linked to the two right quadrants— markets, may have more opportunities 30 <= -10%) The first step toward building a winning for instance, if you glean significant with their current framework of struc-mulated strategy is to clearly articulate if big data opportunities from social media, online tured data management and business is the right20 for your company. To call postings, and sensor-driven informa- intelligence tools and solutions. For Guid define big data in an actionable way, it tion—then pursuing a big-data strategy example, big-data analysis is not effec- 11.0 is critical to understand what data sets 10 may be right for you. For business-to- tive in managing traditional issues with are relevant to your enterprise—and consumer (B2C) companies, the top structured data—such as the reconcilia- aölkd especially to the drivers of its capa- right quadrant offers the largest area tion of customer records or accounts of 0 bilities, and thus its profitability and -35% -30% -20% of opportunity for firms to discover -10% 0% 10% 20% financial transactions—where ineffective 30% 40% 50% 56% 32.8% growth. There is a universe of possible new consumer insights and ultimately Annualized Change data management practices and lack of data to consider (see Exhibit 2). It can transform products, marketing, and data governance have led to problemstate be divided along two dimensions: data customer engagement strategy. In the over time. Exhibit 2 Four Dimensions of Data A4 fo - widt - widt Public surveys Google+ Facebook Mobile phone/GPS Lette Twitter - widt Purchase history Credit history Instagram - widt External Pinterest Travel history Life event records Personal life events Blogs Real estate records Foursquare Lines Census data External sensor data Lines Data Source Customer relationship Web profiles Online company forums Web feeds management (CRM) Sales records Note: SharePoint Internal Pleas Expense records other HR records Sensor data file. Customer profiles Financials Text documents These Structured Unstructured Appr Data Type Source: IDC’s Digital Universe Study, sponsored by EMC, June 2011; Booz & Company analysis 4 Booz & Company
  7. 7. WHERE AND Where can you find the most value in big data? It is relevant in several example, time of day, miles driven, and number of hard brakes) overHOW CAN WE functional areas including, but not a period of time. Then, based onPUT BIG DATA limited to, customer and marketing analytics, electronic media analytics analysis of the data, Progressive offers a discount on the individual’sTO USE? (covering web pages, mobile devices, insurance premium. Allstate has and social media), operational effec- started providing a similar solution, tiveness, performance management, offering premium discounts to and fraud and risk management. To customers who regularly drive unlock the value of big data, you safely. This plays well into Allstate’s should focus on the business needs distinct competitive offering of of your company and customers. customized products to meet the needs of the individual consumer. For example, are you looking internally, at your practices, Similarly, Amazon and PayPal structures, and processes? Can you use their big-data capabilities for transform your business processes fraud detection in line with their or create new business models reputations as secure e-commerce by embracing next-generation and payment platforms. American analytics? Or are you looking Express, by contrast, is working on externally, at your market? Can you a separate analytics-based business bring customer insights to a more line for B2B clients—using the granular level, monetizing them by proprietary data it holds to create transforming your offerings, often new services to enhance customer on a real-time basis? acquisition and retention programs for marketers and merchants. For example, the Progressive Casualty Insurance Company, Though identifying the right use as part of its “pay as you drive” for big data is critical, equally program, offers drivers the chance important is to clearly define to lower their insurance premiums expected outcomes and benefits from based on real-time analysis of pilot initiatives in a quantifiable and their driving habits. Drivers plug verifiable manner. Pilots launched in a device called Snapshot, which can then be expanded or fine-tuned collects a large volume of data (for based on outcome. To unlock the value of big data, you should focus on the business needs of your company and customers.Booz & Company 5
  8. 8. WHAT TOOLS processing, machine learning–based analytics, business-process man- (voice-to-text or video-to-text), security, and niche analytics. ThereDO WE NEED TO agement software with embedded are several choices in the marketplaceBUY, BUILD, AND analytics, bi-directional real-time data provisioning to channels and interac- for investing in the rapidly evolving big-data technology stack. EachIMPLEMENT? tions, full population analytics, and of these technologies and related so on. This is a paradigm shift in the products can be adopted in different way information should be managed ways depending on your business to make big data useful and fully needs and the capabilities that will be integrated into internal information supported, and the solutions have to environments. It is also important to be used flexibly to address functionalResponding to the challenge and realize that there is no single standard- requirements. Executives shouldopportunity of big data by investing in ized big-data software stack and that also be careful not to invest heavilyIT infrastructure without the proper the technology is still maturing. in any one particular solution untilcontext and solution definition will technologies mature.only result in added complexity to the New distributed technologies such asIT infrastructure and architecture, and MapReduce (developed by Google) However, the speed and uncertaintycould even lead to failure. Virtually and Hadoop (an open-source Apache of technological change should notevery type of information from your platform) process large volumes dissuade you from making targetedcustomers and operations can be of unstructured data, and import investments that will help your organi-collected and stored, but doing so the results for a broad range of zation develop a better understandingwithout a clear purpose is costly in business functions. There are vendors of what the technology offers whilethe long run. such as Cloudera, Hortonworks, delivering against ROI expectations and MapR, among others, that for business transformation. For mostWhen looking for big-data tools to distribute open-source Hadoop companies, the best way to start isimplement, a CIO must first transform platforms; in the database space, with a small, niche-oriented, andthe enterprise’s information manage- MongoDB, Cassandra, and HBase are flexible approach. That way, you canment technology stack to include prominent. Some other products in prepare to engage with customers andnon-relational databases, new data the technology stack include programs business functions in a selective way atdistribution architecture, in-memory for unstructured data conversion first, and then be ready to scale up.6 Booz & Company
  9. 9. WHAT ASPECTS Successful execution of a big-data road map requires an operating in complementary capabilities and build out their teams.OF OUR model that incorporates the rightOPERATING skills, practices, processes, and funding patterns. The business Interestingly, big data could also mean the beginning of a shift in theMODEL NEED leaders need to understand the role, or the expansion in remit, of aTO BE IN PLACE? value of data and how it can enable the strategy and winning CIO (see “Does the Company CIO Have a Future?” by Mike Cooke, capabilities system. There should Financial Times Online, February be technology experts who know 15, 2012). For a long time now, how to collect, organize, structure, CIOs have focused the majority of and store data for use; and “usage” their time and effort on managing experts, sometimes known as “data technology. Slowly, more and more scientists,” who bridge the business technology executives are realizing and technology areas and know that their firm’s success is dependent how to architect big data, use the on the analyses of the information data, create required insights, and the company collects and manages, embed the insights into operational while the technology management business processes that enable part gets commoditized or the target business capabilities. outsourced. In the future, the The skill sets required are highly role of a CIO could get bifurcated specialized and sometimes scarce, into the role of a chief strategic both within the typical enterprise information officer (responsible for and in the marketplace. CIOs managing information assets) and a should balance recruitment of chief technology officer (responsible external new hires (data experts) for technology assets). Big data and internal resources (IT and presents an excellent opportunity business requirements experts) with to transition to a new model that selective use of service providers includes both of these positions for high-end data analytics to bring within an enterprise. Slowly, more and more technology executives are realizing that their firm’s success is dependent on the analyses of the information the company collects and manages, while the technology management part gets commoditized or outsourced.Booz & Company 7
  10. 10. CONCLUSION The next decade of competitive advantage and productivity improve- technology-driven growth strategy for their organizations. But this ments will increasingly involve requires having a clear understanding highly “intelligent” technologies and about the relevance and complexity processes that digitize, analyze, and of data in their organization and how assimilate the ever-growing realm it can transform business processes of data at speeds never seen before. or help build the winning capabilities Enterprises that embrace this fact needed to provide value. The margin early on will have a head start over for error in this highly competitive their rivals to drive newer growth market landscape is small, and CIOs opportunities. would be well advised to craft a win- ning big-data agenda that is aligned CIOs have a tremendous opportunity with their enterprise’s capabilities- with big data to be champions of a driven strategy and core strengths.8 Booz & Company
  11. 11. About the AuthorsRamesh Nair is a partner inBooz & Company’s financialservices practice, based inFlorham Park, N.J. He leadsthe firm’s information and ana-lytics offerings and specializesin IT transformation. Andy Narayanan is a principalwith Booz & Company basedin Chicago. He specializes inlarge-scale IT transformationengagements for financialservices, high tech, andconsumer packaged goodscompanies.Booz & Company 9
  12. 12. The most recent Worldwide Officeslist of our officesand affiliates, with Asia Middle Eastaddresses and Beijing Canberra London Abu Dhabi Detroittelephone numbers, Delhi Jakarta Madrid Beirut Florham Parkcan be found on Hong Kong Kuala Lumpur Milan Cairo Houstonour website, Mumbai Melbourne Moscow Doha Los Seoul Sydney Munich Dubai Mexico City Shanghai Paris Riyadh New York City Taipei Europe Rome Parsippany Tokyo Amsterdam Stockholm North America San Francisco Berlin Stuttgart Atlanta Australia, Copenhagen Vienna Boston South America New Zealand & Düsseldorf Warsaw Chicago Buenos Aires Southeast Asia Frankfurt Zurich Cleveland Rio de Janeiro Bangkok Helsinki Dallas Santiago Brisbane Istanbul DC São PauloBooz & Company is a leading global managementconsulting firm focused on serving and shaping thesenior agenda of the world’s leading institutions.Our founder, Edwin Booz, launched the professionwhen he established the first management consultingfirm in Chicago in 1914. Today, we operate globallywith more than 3,000 people in 58 offices aroundthe world.We believe passionately that essential advantage lieswithin and that a few differentiating capabilitiesdrive any organization’s identity and success. Wework with our clients to discover and build thosecapabilities that give them the right to win theirchosen markets.We are a firm of practical strategists known for ourfunctional expertise, industry foresight, and “sleevesrolled up” approach to working with our clients.To learn more about Booz & Company or to accessits thought leadership, visit Our award-winning management magazine, strategy+business,is available at©2012 Booz & Company Inc.