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December 2012




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Big Data, Bright Future: MIT's Andrew McAfee About the Coming Management Revolution

In a recent Webcast as well as an article in the Harvard Business Review (cowritten with Erik Brynjolfsson), MIT's Andrew McAfee argues that big data will dramatically redefine business management as decision-makers embrace the power of evidence-based decision-making that big data makes possible.

The Three V’s: From Traditional Analytics to Big Data
According to McAfee, principal research scientist at MIT’s Center for Digital Business and author of Enterprise 2.0, the sheer volume, velocity, and variety (the three V’s) of data is driving a fundamental change in traditional analytics. These days, some 2.5 exabytes (or a billion gigabytes) of data are created each day. And that number is expected to double approximately every 40 months.

The velocity of data creation is just as important as sheer volume, argues McAfee, since real-time access to information can make one company much more agile than its competitors.

Finally, there is a huge increase in data variety, especially in the age of mobile and social computing. "The data available is often unstructured—not organized in a database—and unwieldy, but there’s a huge amount of signal in the noise, simply waiting to be released," write McAfee and Brynjolfsson.

Outperforming Competitors with Data-Driven Strategies
To measure the benefits among organizations harnessing big data, McAfee helped lead a study that included structured interviews with 330 North American companies, coupled with performance data from annual reports as well as independent sources.

While attitudes toward big data varied widely, the research revealed clear patterns. "The more companies characterized themselves as data-driven, the better they performed on objective measures of financial and operational results," the authors write.

Specifically, companies in the top third of their industry in terms of data-driven decision-making were 6 percent more profitable than their competitors.

Changing the Culture of Decision-Making
While there are major technical challenges in harnessing big data, McAfee and Brynjolfsson argue that the bigger challenges are managerial, beginning with the need to transform role of the senior executive team.

"To be sure, a number of senior executives are genuinely data-driven and willing to override their own intuition when the data doesn’t agree with it," the authors write. "But we believe that throughout the business world today, people rely too much on experience and intuition and not enough on data."

Specifically, McAfee and Brynjolfsson identify five key management challenges that companies must address in order to successful harness big data, including

  • Leadership that embraces data-driven decision-making
  • Technology to handle the volume, velocity, and variety of big data
  • Talent management (particularly the need to cultivate a new generation of data scientists)
  • Effective decision-making, including putting information and the relevant decision rights in the same location
  • Company culture that asks not “What do we think?” but “What do we know?”

Watch the Big Data, Bright Future Webcast replay with Andrew McAfee.

Read the Harvard Business Review article “Big Data: The Management Revolution” by Andrew McAfee and Erik Brynjolfsson.

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