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Commentary

The Data Analytics Boom

John Jordan, 11.05.10, 1:22 PM ET

In "Analytics Goes Mainstream" I explained why numbers-driven decision making is being used so widely now. Perhaps as
interesting as the range of its application are the many converging reasons for the rise of interest in analytics. Here are nine,
from perhaps a multitude of others.
1. Total quality management and six-sigma programs trained a generation of production managers to value rigorous application
of data. That six-sigma has been misapplied and misinterpreted there can be little doubt, but the successes derived from a
data-driven approach to decisions are, I believe, informing today's wider interest in statistically-sophisticated forms of analysis
within the enterprise.
2. Quantitative finance applied ideas from operations research, physics, biology, supply chain management and elsewhere to
problems of money and markets. In a bit of turnabout, many data-intensive techniques, such as portfolio theory, are now
migrating out of formal finance into day-to-day management.
3. As Eric Schmidt said in August, we now create in two days as much information as humanity did from the beginning of
recorded history until 2003. That's measuring in bits, obviously, and as such Google's estimate is skewed by the rise of
high-resolution video, but the overall point is valid: people and organizations can create data far faster than any human being or
process can assemble, digest or act on it. Cellphones, seen as both sensor and communications platforms, are a major
contributor, as are enterprise systems and image generation. More of the world is instrumented, in increasingly standardized
ways, than ever before: Facebook status updates, GPS, ZigBee and other "Internet of things" efforts, and barcodes and RFID
on more and more items merely begin a list.
4. Even as we as a species generate more data points than ever before, Moore's Law and its corollaries (such as Kryder's
Law of hard disks) are creating a computational fabric which enables that data to be processed more cost-effectively than ever
before. That processing, of course, creates still more data, compounding the glut.
5. After the reengineering/ERP push, the Internet boom and the largely-failed effort to make services-oriented architectures a
business development theme, vendors are putting major weight behind analytics. It sells services, hardware and software; it
can be used in every vertical segment; it applies to every size of business; and it connects to other macro-level phenomena:
smart grids, carbon footprints, healthcare cost containment, e-government, marketing efficiency, lean manufacturing and so on.
In short, many vendors have good reasons to emphasize analytics in their go-to-market efforts. Investments reinforce the
commitment: SAP's purchase of Business Objects was its biggest acquisition ever, while IBM, Oracle, Microsoft and Google
have also spent billions buying capability in this area.
6. Despite all the money spent on ERP, on data warehousing and on "real-time" systems, most managers still cannot fully trust
their data. Multiple spreadsheets document the same phenomena through different organizational lenses, data quality in
enterprise systems rarely inspires confidence, and timeliness of results can vary widely, particularly in multinationals. I speak to
executives across industries who have the same lament: for all of our systems and numbers, we often don't have a firm sense
of what's going on in our company and our markets.
7. Related to this lack of confidence in enterprise data, risk awareness is on the rise in many sectors. Whether in product
provenance (think of Mattel), recall management (Toyota, Safeway or CVS), exposure to natural disasters (Allstate, Chubb),
credit and default risk (anyone), malpractice (any hospital), counterparty risk (Goldman Sachs), disaster management or fraud
(Enron, Satyam, Societe General), events of the past decade have sensitized executives and managers to the need for
rigorous, data-driven monitoring of complex situations.
8. Data from across domains can be correlated through such ready identifiers as GPS location, credit reporting, cellphone
number or even Facebook identity. The "like" button, by itself, serves as a massive spur to inter-organizational data analysis of
consumer behavior at a scale never before available to sampling-driven marketing analytics. What happens when a "sample"
population includes 100 million individuals?
9. Visualization is improving. While the spreadsheet is ubiquitous in every organization and will remain so, the quality of
information visualization has improved over the past decade. This may result primarily from the law of large numbers (1% of a

8/10/2012 1:54 AM

Forbes.com - Magazine Article

2 of 2

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boatload is bigger than 1% of a handful), or it may reflect the growing influence of a generation of skilled information designers,
or it may be that such tools as Mathematica and Adobe's Flex are empowering better number pictures. In any event, the
increasing quality of both the tools and the outputs of information visualization reinforce the larger trend toward sophisticated
quantitative analysis.
John Jordan is a clinical professor in the department of supply chain and information systems at Penn State University,
where he teaches IT Strategy in the M.B.A. and undergraduate business programs.
See Also:
Data Driven
A Wealth Of (Visual) Information
In Pictures: 10 Coolest Uses Of Data Visualization

8/10/2012 1:54 AM