From one day to the next, Big Data is discussed on LinkedIn and
other business sites. Articles focus on large, international
companies and their use of data to make money. Big Data creates
value when it is used with analytical analysis – the process
of analyzing data and information to discover meaningful
performance patterns to describe your business processes, predict
your future results or improve your operations.
Big Data is the latest in business buzzwords because using
information well can give you a competitive advantage and with the
current changes in technology your business has access to
information like never before.
Information Was Difficult to Obtain
Technology has changed the value of information. Back in the
1980's and previous decades information was locked in books.
The first step in obtaining knowledge was not researching your
topic of interest, but finding books to research. Remember card
catalogues anyone? Information was scarce and highly valuable as
documented in common saying such as "Knowledge is
The Change Over Time
People still see value in information, but there has been a
shift from information is valuable to the right information has
value. I picture Big Data like the stuff at someone's garage
sale. Sitting amidst all of that junk could be a valuable antique
if you only had the knowledge and skills necessary to identify
Common Examples of Big Data Used by the Media
There are a number of case studies on Big Data including Money Ball documented in a movie with Brad
Pitt. Moneyball describes the use of computer based analytics to
create a winning baseball team. One of them was made into a movie.
Most examples such as MasterCard or The Weather Network are large
national or international organizations implying that Big Data and
analytics require significant financial resources. This type of
analysis is about using pattern recognition to make better
decisions, and a business of any size can do this.
If You Can Identify the Valuable Information...
Most business have computers, an internet presence and some
ability to collect and store information including financial
information which can be can be analyzed to identify patterns. Once
patterns have been identified, you can start using analytics to
make better business decisions.
Big Retail Using Big Data
Big grocery retailers decide what goods to sell through annual
product gross margin analysis which calculates the gross margin of
a product by how many times its sold during the year.
If we look at two products, one sells for $100 and the other for
$10. The $100 product has a $30 profit margin, the $10 product a $1
profit margin. Customers purchases the $100 product 4-6 times a
year making the company $150. The $10 product sells 10-15 times a
week making the store $520-$780 a year.
Large retail stores monitor product turnover and purchase
inventory to maximize the store's gross margin. If you have
ever been standing in an aisle frustrated when you realize the
store no longer carries your favorite brand of chocolate, gross
margin analysis is the likely culprit.
Inventory stocking decisions aren't always as simple as
maximizing gross margin: a grocery store wouldn't stay in
business if it didn't keep certain basic staples in stock, but
outside of other constraints, most big retailers use gross margin
to leverage the returns on their inventory investments.
In the past, only large corporations could afford perpetual
inventory systems, bar code scanners and the programmers needed to
create and maintain inventory records. These tools are now
available at an affordable cost (a cost benefit analysis should be
performed if you are deciding to invest in these tools). The easy
availability of these tools means that every business can use
analytics to make inventory purchasing decisions.
Large retailers use Big Data to increase their profits. Crowe
MacKay is not a business that offers Big Data analytical services,
but we can help owner managed businesses analyze their financial
information for growth opportunities. If you have any questions
about using analytics to improve your business performance we are
happy to help.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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