UNC Kenan-Flagler Business School

Shaping Leaders, Driving Results

UNC Kenan-Flagler Business School

UNC KENAN-FLAGLER NEWS


Let's get personal

5/11/2015

UNC Kenan-FlaglerImagine you’re walking through a shopping center and a person standing near a language learning software kiosk calls out.

“Would you be interested in learning French?”

You are. In fact, you mentioned on Facebook recently that you’re planning a vacation to Paris and wanted to refresh your rusty high school French.

You realize, as you approach the kiosk, that this isn’t a real person, but a digitally projected image.

“Well,” the animated image says, “I can give you a quick free lesson right now to show you how our learning program works.”

A few minutes later, after learning how to order a beer in French, you purchase “Conversational French 101.”

The scenario, which might seem like something out of a science fiction film, isn’t particularly far-fetched – and it could be coming soon to a mall or airport near you.

PRSONAS Inc., led by chief executive officer David Rose (EMBA ‘11), is already selling hardware and software to create live interactions between a person and a computer, powered by artificial intelligence. Other companies now provide software that will scan social media for brand mentions and keywords, and facial recognition software already exists. When companies tie these data streams together, the power of big data is unleashed – and it poses a huge challenge for traditional retailers.

“Physical retailers are really struggling against the online retailers,” says Rose. “We believe a big part of that is the data component.”

Rose is among many who think that these kinds of interactions could become commonplace over the next few years – no more unusual than a personalized recommendation on Amazon.com or a pay-per-click ad on Google is today.

And big data is leading the charge.

What is Big Data?

Big data is a catchall term that refers to the confluence of advanced analytical techniques, massive computing power and almost unimaginable volumes of information generated by digital systems in every aspect of business and life.

In some respects, big data is simply the evolution of using data analysis in business, a practice that goes back decades and used heavily in industries such as financial services and direct marketing. But big data is more than just a “bigger” version of what many businesses have done for years.

Murali Nori (MBA ’08), senior product manager of business intelligence at SAS, says big data is often discussed in terms of the “three Vs:”

  • Volume. Companies can potentially collect massive amounts of information. That includes all of the things businesses have tracked for years, such as sales and inventory, plus new information — mentions of the brand on social media, information about how shoppers move around the store, online marketing data and information about demographics, and behavior and spending habits.
  • Velocity. Companies can collect much more information than in the past, and the fast speed that information moves at means an increasing amount of information is being generated and shared. Social media updates, for example, change minute by minute.
  • Variety. Information doesn’t come from one source or in one consistent form. Some of it is collected in highly structured forms from company databases – financial information or inventory records, for example – while other data, such as social media updates, may have very little structure.
Nori adds that executives’ perception of what big data means often depends on how adept their companies are in terms of how they collect and use information. Many executives use the term “big data” in reference to data that’s bigger, more complex and being used in more sophisticated ways than what their organization is currently using. And that’s where corporate leaders are challenged.

“‘How can we use big data?’ may be the wrong question for CEOs to ask,” says operations professor Adam Mersereau. “Many companies that are successfully using big data began by identifying a business opportunity, then collected the data and built the systems to achieve it.”

“It’s the strategic use of data, as opposed to the tactical use, that I think is the big challenge today,” adds Jan Davis (MBA ’79), a retired CEO, active board member and angel investor who started her career in direct marketing.

Davis, Nori and others say that in the era of big data, companies must shift their thinking. Executives need to start asking “How do we know this?” and “What information do we have to base this decision on?”

“Does the management of the company believe in actually analyzing the data and asking the business questions and using the information from the analysis to make the business decisions?” Nori asks.

New opportunities in aisle 1

Though virtually every industry has potential opportunities in big data, brick-and-mortar retailers could be on the leading edge.

“They’re being pushed by the e-commerce retailers,” Mersereau says.

For instance, when was the last time you walked into a store and were offered a display of specials tailored to you? Go to Amazon.com and you’ll probably see a list of items you might want to purchase, based on what you’ve ordered in the past and what people similar to you have bought. Amazon and other e-commerce companies also know how much time you spend on their websites and which products you look at.

In-store sensor technology, smart phone apps and other innovations are helping brick-and-mortar retailers collect the kind of information their online competitors have long held, such as how long a consumer spent in the store, what products they looked at and how they responded to various offers. But with access to this data, traditional retailers are faced with the challenge of making sense of the information collected and connecting it to other data to see meaningful results.

The winners, Davis says, will be retailers that pull together online and offline data to gain a complete picture of interactions between the consumer and the merchant, no matter what the channel. And once that picture is built, successful companies will give consumers more control in how they interact with the brand.

Windsor Circle, a Durham-based startup that aggregates and analyzes data to help drive digital marketing, does this for online retailers now.

“In today's world, the amount and range of data is growing rapidly, presenting a key challenge to businesses,” says Andrew Pearson (MBA ’09), Windsor Circle’s vice president of marketing. Companies must determine how to adequately analyze this data and how to take specific action based on the insights, he says.

And while their goals might be different, business leaders can learn from industries in which similar analytical processes are successfully being used. In the health care field, for instance, some insurance companies and large health care systems use data to track patient care and treatment plans. They can use this data to determine information, such as whether a patient has refilled a prescription. If the data indicates that they have not, a nurse could be signaled to call the patient to remind them.

And while the first wave of big data applications are consumer-focused, industries like manufacturing are not far behind. “Soon machines will be streaming real-time factory floor data to production managers – and even to other machines – to boost efficiency and improve product quality,” says operations professor Noel Greis, director of the Frank Hawkins Kenan Institute of Private Enterprise’s Center for Logistics and Digital Strategy.

With big data, big challenges

None of this is as simple as hiring a consultant or buying software.

Using big data strategically may require in a shift in how company leaders and middle managers make decisions. And it usually also will require new capabilities – new technology to collect more data, new IT infrastructure to compile it and data scientists to analyze it.

Most importantly, companies need data leaders – managers and executives who are not only fluent in data and understand what it can deliver, but can also communicate that value to the rest of the company and channel it into smart strategy.

Every business has an opportunity to rethink its existing decision making processes and strategy, Nori says. “What are the business questions being asked? How does that translate into a value proposition for your business?”

“Decision-making is becoming more evidence-based,” agrees Greis. “Executives are increasingly asking ‘what does the data say?’”

Getting personal

In addition to applying data to business goals and objectives, companies also must be mindful of public expectations. Showing consumers that you know too much about them creates risk of a negative backlash, which in turn can lead to more regulations and new compliance requirements. “You can use segmentation, but you don’t want to freak your prospects out,” Davis says.

And the freak-out line changes over time. Davis points out that plenty of teenagers, college students and 20-somethings are publishing personal information on the Internet that their parents and grandparents never would have made public. Will the Gen-Y and Millennial generations – most who have never known a world without technology – become more protective of their privacy as they grow older? Or do they believe there is no such thing as privacy in today’s digitally connected society? We don’t know. But we do know that attitudes change over time.

“Personalized ads and emails have revealed to consumers how much data retailers are collecting on them,” says Pearson. “Initially, there was surprise and consternation. Now, consumers are resoundingly ‘approving’ this new paradigm, interacting with personalized ads at a rate three times higher than before. Essentially, consumers are saying ‘I’d rather be shown relevant, personalized, data-driven content than mass marketing campaigns.’”

There are many other instances where consumers reap the benefits of companies who put big data to use. For example, Davis points out that in countries that have credit reporting, the collection and use of that data helps keep rates for mortgages and car loans lower.

But executives take note: The laws and regulations governing the collection and use of data vary from country to country, making it essential to stay up-to-date on policy changes. In 2014, for instance, a European court ruled that people have the “right to be forgotten,” forcing Google to remove personal information and web pages from its search engine results upon request. And Canada has implemented a strict anti-spam law that promises huge fines – up to $10 million for businesses – for sending unsolicited commercial email.

For companies who can navigate these challenges to successfully harness the power of big data, the potential benefits for businesses, individuals and society are immense. “It’s all about making more efficient use of resources,” says Davis.

This article originally appeared in the Fall 2014 issue of UNC Business magazine. Access interactive content and read more by downloading our free app for iPad or Android tablets, or view the full issue online.