Analyzing large data sets will become a key basis of competition, underpinning new waves of productivity, growth and innovation, says a new report published last week by the McKinsey Global Institute. But they caution that managers must grasp the principles of data analytics and be able to ask the right questions if they are to benefit from the global data revolution. The report claims that the value to Europe’s public sector could be €250 billion a year with almost half of this coming from operation efficiency improvements. The report also suggests that retailers could increase their operating profit margins by up to 60 percent if only they were able to use their data effectively. The sectors poised to make the most gains include information, finance, insurance, government, manufacturing and healthcare, and the report points to five key ways the effective analysis of data can improve value:
- Creating transparency by making data more easily accessible to stakeholders;
- Enabling experimentation to discover needs, expose variability and improve performance;
- Segmenting populations to tailor products and services;
- Replacing or supporting human decisions making with automated algorithms; and
- Innovating new business models, products and services.
The report points to the need for a new way of managing and making decisions that relies more on data analysis. “Every manager will really have to understand something about statistics and experimental design going forward,” says Michael Chui, a senior fellow at the McKinsey Global Institute. The report concludes that a significant constraint on realizing value from data will be a shortage of talent, particularly of people with deep expertise in statistics. In the same way that they have always sought professional accounting and legal advice, many industries now see statistical consultancy firms as crucial partners in driving growth and stimulating innovation. Big Data: The next frontier for innovation, competition and productivity Read the executive summary (PDF – 924 KB) Read the full report (PDF – 1.91 MB).
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- Decision Management, Big Data and McKinsey (iianalytics.com)