We’ve been hearing about big data for the past few years. But how many of us have taken the time to learn exactly what it is? Or how it is likely to affect our customers, and their businesses? And even our own banks?
In his Data Crush: How the Information Tidal Wave is Driving New Business Opportunities, Christopher Surdak argues that if companies hope to remain relevant over the next several years they must not only understand big data but take decisive steps to harness its power for themselves.
As a technology consultant and “technology evangelist” for Hewlett Packard, Surdak has extensive experience incorporating data analysis into business processes. With Data Crush, he strives to convince business owners that they must embrace the changes that are occurring as a result of big data and immediately begin to incorporate them into their own business strategies.
What is big data?
Big Data analysis incorporates data from multiple sources in ways that were impossible before recent technological advances.
Such techniques can include joint analysis of structured and unstructured data from within a company. An example of the latter: cross-referencing customer order volumes against internal email communications that reference that customer.
Big data can also include analysis of internal and external data to find meaningful connections. An example of that: Purchasing Facebook data to compare a customer’s social network activity with their order history.
While many consumers are shocked to learn that their data is being bought and sold, Surdak reminds readers that if you aren’t paying for a product, then you are the product.
“Free” services often make money by selling user data and usage information, which is then used by the buyers to create an astonishingly accurate customer profile that can be used to track and predict a wide variety of consumer preferences and behaviors.
Why should businesses care about big data?
Surdak argues that big data provides the opportunity for companies to increase their understanding of their businesses and customers. The detailed information that big data provides can help them meet the needs of the customer and anticipate rapid changes to demand.
But Surdak says big data goes beyond just being a helpful tool that a business might choose to utilize or not. He believes that the effective use of big data is necessary for businesses to remain vital. If a company does not embrace changes in the marketplace as quickly as its competitors, it can very quickly be left out in the cold. Surdak cites the sudden loss of market share experienced by Nokia and Research In Motion, makers of the Blackberry.
Surdak imagines that by the end of this decade successful businesses will have adopted and fully integrated big data tools into their business models. Such dramatic changes are occurring at a faster pace than ever before, and businesses must position themselves to be able to anticipate, recognize, and adapt to changes that will affect their customers and products in real time.
Big data re-forms business landscape
Outcomes generated by big data typically operate behind the scenes.
So, customers may notice that advertisements sent to them seem more relevant. Or that a coupon was emailed to them about a product they’ve been shopping for—at just the right time. But they are usually unaware that these events signify that the company has developed a vast, specific profile of them based on their search histories, brand preferences, demographics, and much more.
Most of the major retail players in the country are already utilizing big data in this way. Amazon uses predictive marketing based on user profiles to generate personalized recommendations that its customers see as soon as they log in. Amazon has also initiated a subscription service for many items that anticipates when a user will run out of the product and need to reorder based on their history.
Target has credited better understanding of its customers for its impressive revenue growth in recent years, and many of us have heard one famous example of Target’s big data use in marketing. Target’s automatic data systems recognized that a customer was likely pregnant based on her purchases and sent coupons for baby products to her home. As it turns out, she was a teenager, and the ads alerted her parents to her pregnancy.
These are perfect examples of changes that are occurring in advertising as a result of big data—ads are targeted to individual consumers based on real, relevant data rather than to a target demographic as a whole.
Big data is also changing customers’ expectations, as it is used successfully in new ways. The advent and popularity of apps—small-scale applications typically developed for mobile devices—has created a new normal in software development. Today users will tolerate partial solutions, but they expect a low initial cost for the product as well as a steady stream of updates and improvements based on customer reviews. Such a data-driven, incremental approach is a common denominator for how businesses are able to stay ahead of customer demand in such a rapidly changing marketplace.
Aside from direct customer engagement, automation is another key impact of big data. Termed “thingification” by Surdak, technology is enabling inanimate objects to gather, interpret, and even act on data from their environments.
With wide-scale wireless internet availability, these various objects can even communicate among themselves and coordinate activities. The communications in the “internet of things” is expected to surpass person-to-person communications soon.
Sound like science fiction? Perhaps. But is it that hard to imagine, as does Surdak, that one day very soon our refrigerators will send us a text message to alert us that we are out of milk?
Already soda vending machines are monitoring their own inventory and emailing their offices when supplies are getting low. Surdak believes this trend will continue and imagines several likely uses for such inter-device communication that may be common in the near future.
How can businesses adapt?
Most companies don’t have the resources to take full advantage of big data immediately. However, Surdak encourages businesses to consider how such analysis can be used in their processes and to develop plans to act as quickly as they can.
Surdak includes six recommendations for how to manage the information generated by big data and put it to use:
• Polarize: Determine your business goals and how big data could help.
• Accelerate: Set the goal of cutting the time of any business cycle that impacts your customer by half. Accomplish this within 12-18 months.
• Data enable: Implement metrics and measurement for all your business processes.
• Quantification: Implement controls for critical metrics and incorporate statistical analysis, exception handling, and predictive analysis.
• Gamify: Incorporate positive feedback mechanisms to improve business process performance.
• Crowdsource: Gather and utilize outside input for continued efficiency and improvement.
A chapter is devoted to each of these strategies, and the reader is left with a sense that even the smallest business can successfully take a more data-driven approach to improve their business operations and stay relevant as the big data trends continue.
How is big data use affecting banks?
Not only are the trends associated with big data affecting our markets and our customers, they are affecting our banks. Internal process automation at the largest banks has been creating redundancies and initiating layoffs for years as manual reviews, reports, and monitoring are abandoned in favor of automatic controls.
Big data use has also created a wave of concern over consumer privacy. If this results in new regulations, banks could be impacted.
Earlier this year, the White House conducted a study of the privacy implications of the increasing use of big data in the public and private sectors, Big Data: Seizing Opportunities, Preserving Values. The report was released in May, and the authors made recommendations to the President based on their findings, which include enhanced privacy protection regulation.
The report’s authors noted some opportunities presented by the use of big data:
• Big data may be saving lives through the early detection of medical conditions.
• Big data is improving the economy. For example, utility companies tap it to monitor power grid usage, anticipating demand spikes and avoiding outages.
• Big data saves taxpayer money by detecting and preventing Medicare fraud. In the first year of the program, $115 million in fraudulent claims were identified.
The report also identified some potential problems that may develop from the wide- scale use of big data:
• Big data has the potential to alter the balance of power between the government and its citizens.
• Big data can reveal intimate personal details by the accumulation of seemingly anonymous information.
• Big data’s production of such individualized information profiles could lead to discrimination.
The banking industry responded to this report. ABA and the Consumer Bankers Association sent a joint comment letter to the National Telecommunication and Information Administration. The associations supported use of big data in the financial sector. The associations identified fraud prevention and enhanced customer service as the primary benefits of big data use by banks.
The associations also insisted that current banking regulations adequately protect consumer privacy, citing various legislation. This included the Gramm-Leach-Bliley Act, Fair Credit Reporting Act, Foreign Account Tax Compliance Act, and the Dodd-Frank Act.
Data Crush as a resource
Data Crush provides a valuable introduction to big data and its importance. Surdak sells his point that data integration is not only possible for all types of businesses but imperative if they hope to remain competitive.
Readers who are already well-versed in technology can safely skip the majority of Part One. That’s where Surdak makes his case that vast amounts of data are generated every day, particularly by our online activities, and that this data is collected, sold, and monitored. If you need no convincing that YouTube is popular and lots of people shop online, you can jump to the brief summary found at the end of each chapter for a quick look at the major points of this section.
With its timely and constructive recommendations, Surdak’s analysis of big data can be valuable for bankers and our business customers alike, but be sure to read it soon.
One of the necessary results of the rapidly changing environment that the book depicts is that Data Crush will likely to have a short shelf life before it is obsolete.
- The Deutsche Bank-Commerzbank Teaching Moment: Learn From History or Risk it All
- How Dutch Bank ABN AMRO Describes Strategy and How it Differs from US Banks
- Compliance Automation to Increase Consumer Protection and Enhance Customer Experience
- Predict Illicit Transactions Faster, Meet Regulators’ Expectations Earlier
- Fending Off Tech Giants Through Digital Transformation