THE BLOG

Can Big Data Save the World?

02/24/2015 04:29 pm ET | Updated Apr 26, 2015

It's no secret that big data is a critical driver of success in business today. But what exactly is big data? According to Wikipedia, it is "a broad term for data sets so large or complex that they are difficult to process using traditional data processing applications. Challenges include, capture, analysis, curation, search, sharing, storage, transfer, visualization, and information privacy." So what does that mean to us?

According to an article by David Court in the January 2015 McKinsey Quarterly, retailers who leverage the full power of big data and predictive analytics could see increases in their operating margins as high as 60%. Who wouldn't want that? So if big data is that powerful, why aren't more companies realizing its benefits? The answer is--because the effective use of big data often requires a total realignment of the organization. And that's good news for all of us.

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To understand this phenomenon more fully, let's look at the history of the retail industry. Back in the '50s and '60s, shopping was a very personal experience. Stores were small and many store owners and staff cared about their employees, customers, and communities. They often knew their customers by name and had intimate knowledge of their personal preferences. This connection may still exist today at your favorite locally-owned coffee shop, boutique, or booth at the farmer's market. But on a larger scale, things were about to change.

Following World War II, the United States experienced an economic boom. Excess manufacturing capacity and burgeoning families created a huge demand for new products. Television advertising fueled demand through mass marketing. Consumers wanted every new gadget and machine. They weren't choosy about colors and features. New products generated new markets, and drove the demand. New companies sprang up or expanded to meet the demand. A majority of purchases were now going to large retailers who reaped huge profits with minimal connection to their employees, their customers, or the communities they served.

Eventually saturated markets and competition began to erode profit margins for these large retailers. To survive, they began to vary product colors and styles, add new features, and expand into new product lines. As they grew, many companies divided their organizational structure into silos around their product lines. Initially, this worked quite well. But eventually, these nationally-owned retailers became so large that all personal connection with their customers was lost. And as markets tightened, internal competition between product silos intensified. Product managers were competing against their peers for the same customer. This lack of cooperation often led to poor employee morale, lower customer satisfaction, and eventually declining profits.

Enter the Age of Information. Advances in computer technology allowed tech-savvy companies to develop programs and systems to capture immense amounts of data about their customers. Technology also gave birth to online shopping that led to an explosion of even more data. Today, companies are able to track customer behavior from variety of sources.

This new ability to collect and analyze big data enabled companies to better understand their customers. But another shift was happening at the same time. The Internet gave the customer the ability to buy from virtually anywhere in the world and whenever it was convenient for them. So for the first time in recent history, customers, not companies, were driving the shopping experience. This shift in power created the need for retailers to move from a product focus to a customer focus. Savvy companies quickly got the memo that the customer was in control. They embraced customer focused systems such as Customer Relationship Management (CRM) and the 360° Customer view which often gave them a competitive advantage.

Consider this - if you go shopping at a large store, pay cash, and do not supply any personal information such as your email address or loyalty card, you remain anonymous to that company. However, if you pay by credit card, use a loyalty card, provide an email, or more - your purchase can be tracked, merged with other data, and a profile of your unique shopping behavior can be created. Online shopping takes this to a new level. Online retailers not only know what you bought, they know what you considered buying (viewed); where you came from (prior URL); what path you took through their site; what you finally bought; and how you paid for it. They can even suggest products that appeal to your personal tastes and interests. In other words, they now have the information to create a unique shopping experience just for you. But after several decades, many companies are still failing to adopt this new customer-centric approach. So why is this so difficult?

Success in a customer-focused organization requires nothing short of a total transformation of leadership style and organizational structure. Legacy structures like product silos are no longer functional. Key management roles are changing as well. For example, the position of product manager is all but obsolete. The role has been replaced by a customer segment manager who leverages big data to offer customers the right product - at the right time - through the right channel - for the right price.

In other industries, big data is having a similar disruptive effect on business in a myriad of ways. Big data is now used to monitor and improve manufacturing processes, track and measure employee satisfaction, manage HR decisions, control security, assess financial risk, and more. As a result, companies need to find employees with advanced skills who are also adept at learning and critical thinking. These same employees need higher emotional intelligence to navigate the complexity and diversity inherent in their new interconnected environment. This has given birth to a whole new type of analytics called Human Capital Analytics or People Analytics.

This paradigm shift demands that leaders evolve along with their organizations. To be successful, leaders must learn the skills to connect, empower, motivate, mentor, train, and inspire their valuable human capital. They must become conscious leaders, i.e. leaders with self-awareness and high emotional intelligence who can lead from the heart as well as the head. And this is where I see the greatest potential for big data to have a positive impact on our world.

It's no secret that many large organizations wield great power around the globe. Imagine for a moment that these large organizations are managed by heart-centered leaders who embrace conscious business practices because they have determined that it's the only strategy for success in our high-tech, data-driven economy! This could have to have a positive impact on their customers, their employees, their families, their communities, and the planet at large. I expand on these concepts in my book Business Intelligence Success Factors: Tools for Aligning Your Business in a Global Economy (Wiley and SAS Business Series, 2009) and through interviews on Quantum Business Insights - Voice America Business radio.

In upcoming blogs, I will share powerful and inspiring stories and case studies about companies that are leading the way to a more conscious business. I look forward to connecting with you.