This is part 2 of 10 from the 2013 Data & Analytics Global Executive Study and Research Project.
Increasingly, top thinkers in academia and business believe that analytics, especially analytics connected with big data, is going to be a driving force in our economy and society in the next 10 to 20 years. This belief is being matched with action in the public and private sectors.
In February 2013, MIT Sloan launched a digital economy initiative to explore how digital technologies are influencing both productivity and employment, declaring, “The digitization of the economy is one of the most critical issues of our time.”1 The broad use of analytics is an important factor in the development of the emergent digital economy.
This view is supported by General Electric Company executives Peter Evans and Marco Annunziata, who argue that the “industrial Internet” — a system of machine-to-machine sensors — will add $10 trillion to $15 trillion in economic benefit to the global gross domestic product through 2030.2 GE is putting its money where its mouth is, investing $1 billion in developing the talent, software and analytic tools to better identify when machines need fixing or replacement.3
A recent study of senior executives at Fortune 500 companies found that 85% of those organizations had launched big data initiatives.4 Intel announced a five-year, $12.5 million partnership with MIT to create a research center that will focus on big data. The state of Massachusetts, host to more than 100 companies that employ more than 12,000 people in big data-related businesses, has launched a public-private Big Data Consortium to grow its innovation economy.5 In 2011, big data companies received more than $350 million in venture capital.6
Alex “Sandy” Pentland, director of the Human Dynamics group at the MIT Media Lab, argues that as we move into a society driven by big data, “most of the ways that we think about the world change in a rather dramatic way”:
This is the first time in human history that we have the ability to see enough about ourselves that we can hope to actually build social systems that work qualitatively better than the systems we’ve always had. … We can potentially design companies, organizations, and societies that are more fair, stable and efficient as we get to really understand human physics at this fine-grain scale. This new computational social science offers incredible possibilities.7
While much of the promise of data and analytics is couched in terms of “big data,” some suggest that today’s big data will likely become just tomorrow’s data.8 If we are to achieve anything close to the promise of big data (or data), it will need to become, as one research report says, “a key basis of competition, underpinning new waves of productivity growth, innovation, and consumer surplus.”9
And this is precisely what our research team and others are beginning to see in the market. Companies that are leading the analytics revolution are already making data and analytics a source of competitive differentiation. In 2012, the MIT Center for Digital Business, along with research sponsor Capgemini Consulting, completed a two-year study with more than 400 companies to determine which companies were achieving a “digital advantage” over industry peers through their use of analytics, social media, mobile and embedded devices. The study found that companies that do more with digital technologies — and support their digital investments with leadership and governance capabilities — are 26% more profitable than their industry peers, and outperform average industry performance by 6% to 9%.10
Companies that many of us deal with every day are already making use of data to advance a variety of business goals and to help consumers:
- Kaiser Permanente collects petabytes of health information on its 8-million-plus members, a fantastic amount. Some of this data was used in an FDA-sponsored study to identify risks with Vioxx, Merck’s pain medication, which was pulled shortly after the research identified a greater risk of heart attack in a subset of the patient population.
- Southern California Edison is collecting hourly (rather than monthly) data on customer usage from new digital smart meters in millions of residences. It will soon be monitoring and giving frequent feedback to customers about their energy use, a significant benefit for energy grid management and customer service.
- Pepsi has an ordering algorithm that lowers the rate of inventory out-of-stocks. The company shares information from this application with partners and retailers, improving its relationships with key stakeholders.