July 20, 2014

Assessing Big Data Maturity – The Key to Building your Organization’s Competitive Advantage

With research indicating that companies that have managed big data are more likely to be productive and profitable, organizations need to imperatively reshape their internal decision-making culture – so that executives base their judgments on data insight

The total volume of structured and unstructured data generated by individuals, enterprises, and public organizations is multiplying exponentially; 90 percent of the total data stored today is less than two years old. In truth, big data has the potential to improve or transform existing business operations and reshape entire economic sectors. It can also pave the way for disruptive, entrepreneurial companies and allow new industries to emerge. Although the technological aspect is necessary, it is not sufficient to enable big data to be fully exploited. According to management consulting firm Strategy&, formerly Booz & Company, organizations must instead remold their decision-making culture so that senior executives make more judgments based on clear data insights. They must build the necessary internal capabilities – deploying the technical and human resources needed to interpret data in an astute manner. Moreover, because they rely on governments to provide the requisite environment, they must ask policymakers to create the regulatory framework and information and communications technology (ICT) infrastructure to remove external obstacles.

The Evolution of Big Data

The big data phenomenon is characterized by the “three Vs” – large data volumes, from a variety of sources, at high velocity (i.e., real-time data capture, storage, and analysis). Besides structured data (such as customer or financial records), which is typically kept in organizations’ data warehouses, big data builds on unstructured information from sources such as social media, text and video messages, and technical sensors (such as GPS devices) – often originating from outside the organization itself.

“Despite the rapid growth of big data, organizations should keep its influence in perspective,” said Bahjat El-Darwiche, a Partner with Strategy&. “Although remarkable, the big data phenomenon is merely the continuation of a journey in which ever-more-elaborate data has influenced decision-making. Executives must focus on carefully formulating the business questions that enable the swift and accurate identification of those nuggets of data that they believe can improve their organization’s performance or allow them to gain access to new revenue pools.”

He also added, “At the same time, they must encourage governments to nurture an environment conducive to the exploitation of big data.”

The Maturity Stages

The big data maturity stages depict the various ways in which data can be used, from selective adoption to large-scale implementation.

“Depending on the maturity of an organization’s capabilities, big data can significantly increase top-line revenues and markedly reduce operational expenses,” explained Walid Tohme, a Partner with Strategy&. “The path to business model transformation, the highest level of maturity, promises potentially high returns but often involves major investment over many years.”

The first maturity stage, performance management, enables executives to view their own business more clearly through, for example, user-friendly management information dashboards. This stage typically relies on internal data, with an organization establishing key performance indicators (KPIs) to evaluate its success at achieving stated goals.

During stage 2, functional area excellence, organizations start to experiment with internal and external data to improve selected facets of their business. This may involve sales and marketing techniques such as customer segmentation and targeting, or entry-stage analytical methods for product recommendations.

At the value proposition enhancement stage (stage 3), organizations start to monetize big data, positioning it as a value driver of the business that offers a new source of competitive advantage beyond the mere improvement of operations or services. In many instances this involves obtaining data from external sources and deriving related insights. This may include innovations such as customized, real-time recommendations or the personalization of services to augment the customer experience.

In the final maturity stage, business model transformation, big data permeates the whole organization. It becomes deeply embedded within the operation, determining the nature of the business and the mode of executive decision-making. This stage can be reached by both product and services organizations alike.

Key Challenges: Despite widespread interest in data-driven decision-making in one form or another, companies face many potential pitfalls in extracting the maximum commercial benefit from big data usage. Some of these relate to their own internal systems and culture; others are tied to the external environment.

“The most prominent obstacle is the shortage of available talent specializing in data analytics — data scientists with an advanced education in mathematics or statistics who are also able to translate raw data material into exploitable commercial insights,” said El-Darwiche. “Although many educational institutions have now started to establish courses to address this scarcity, the market demand is already considerable.”

Many organizations also suffer from poor-quality data that is fragmented across various systems, geographies, and functional silos. Embracing the potential of big data as a concept will take organizations only so far. First and foremost they must get the basics right. Internal data has to be of high quality – consistent, accurate, and complete – and available across the organization.

The prevailing decision-making culture presents a major internal obstacle – the one that is the least straightforward to identify and then overcome. To complicate matters, changing this culture may impinge on personal concerns relating to status. Companies and public institutions typically rely on the intuition of senior managers for important decisions. As the big data concept extends its reach, executive instinct is challenged by the facts of hard data. However, although data can be of great assistance in solving an actual problem, it still holds true that senior management has to ask the right questions.

Many of the external challenges that companies face revolve around data privacy considerations. Such concerns about privacy will strengthen demands for tighter regulatory control, potentially limiting companies’ ability to exploit big data opportunities or exposing them to threats of legal and regulatory intervention.”

A Maturity Framework

Organizations need to understand where they are in terms of big data maturity, an approach that allows them to assess progress and identify necessary initiatives.

“Assessing maturity requires looking at environment readiness, how far governments have provided the necessary legal and regulatory frameworks, and information and communications technology (ICT) infrastructure,” said Tohme. “It is important to also assess an organization’s internal capabilities, how ready it is to implement big data initiatives and the many and more complicated methods for using big data, which can mean simple efficiency gains or revamping a business model. The ultimate maturity level involves transforming the business model to be data-driven, which requires significant investment over many years.”

Policymakers should pay particular attention to environment readiness. They should present citizens with a compelling case for the benefits of big data. This means addressing privacy concerns and seeking to harmonize regulations around data privacy globally. Furthermore, policymakers should establish an environment that facilitates the business viability of the big data sector (such as data, service, or IT system providers), and they should take educational measures to address the shortage of big data specialists. As big data becomes ubiquitous in public and private organizations, its use will become a source of national and corporate competitive advantage.

To conclude, big data is poised to have significant impact in public and business spaces alike. Large-scale investment is flowing into establishing big data capabilities in many organizations, despite the limited number of cases in which the big data phenomenon has been successfully used in completed projects and initiatives. Policymakers and organizations in general still have much to do if they want to realize the full potential of big data. Still, within the next five years, big data will become the norm, enabling a new horizon of personalization for both products and services.