This article was adapted from Tilt: Shifting Your Strategy from Products to Customers, by Niraj Dawar. Reprinted by permission of Harvard Business Review Press, 2013. Copyright 2014 by Niraj Dawar.
For thousands of years, farmers, ranchers, herdsmen, and hunters seemingly failed to notice that cattle and deer align in the same direction when grazing in a field, or at least, if they did make this observation, they did not proclaim it very loudly. In 2008, Czech and German zoologists decided to look at Google Earth images of 308 cow pastures and 241 deer localities around the globe.
What they noticed was startling: cattle tend to align in a North-South axis, orienting themselves to the earth's magnetic North.[i] After follow-up studies to rule out alternative explanations including that the animals were merely maximizing their exposure to the sun, or that wind direction would influence the cows' orientation, the scientists confirmed the animals aligned according magnetic orientation. Yet the alignment phenomenon had apparently gone unnoticed for so long, and only gained traction when the scientists were able to look at the phenomenon from above, using large numbers of observations from around the world.
Big data is having a similar effect on business. We're now able to look at our customers and the marketplace to examine patterns in their behavior.
Big data is not just for big companies. Any company with more than one customer can use the information it handles to add value to its customers. Much of the value of big data comes from seeing patterns that others can't see of haven't seen. And this ability to see patterns is a matter of ingenuity, not size.
No matter what business you are in, you know things about your customers that they don't know and can't find out on their own – but that they would value immensely if you would share with them. This unexploited knowledge may be your firm's greatest and most undervalued asset.
Regardless of how competent and smart they are, your customers operate within one big constraint: they find it difficult to transcend the narrow boundaries of the range of their own experience. If they are business-to-business customers, they rarely see what happens beyond the confines of their own business, the limits of the relationships with their own suppliers and customers, and transactions in their own markets. If you are in a business-to-consumer industry, your customers rarely get a glimpse of the entire marketplace. In either case, customers almost never see the big picture or patterns that emerge when you can simultaneously see an entire industry, an entire customer base, or an entire market. They are lost in the weeds, while you have a bird's eye view.
Imagine that you have 500 customers, each one of whom holds one of the pieces of a 500-piece jigsaw puzzle. While each piece is unique, when assembled, the pieces reveal a larger meaning.
Each of your customers possesses information that is akin to a piece or a few pieces of a jigsaw puzzle. They just don't know what to do with it – it is meaningless unless assembled. In most instances that piece of the puzzle remains forgotten in a drawer, in a database, un-accessed and unused because customers fail to realize its possible role in the larger context. Insights from those data never see the light of day. Often, it takes someone from the outside to come in and see the potential of piecing together the puzzle. That outsider could be you in your industry. And once you find a way to bring together the 500 or a thousand, or several million pieces of information that lie dispersed with customers, you can see patterns you've never seen before, patterns that can help your customers make different and better choices that add value to them, and to you.
A new big picture can have widespread impact on customer behavior as well as on industry dynamics. The book publishing industry was changed to the core when, in 1895, the now defunct literary magazine The Bookman introduced a monthly ranking of fiction sales that became the first national bestseller list in the history of the United States.[ii] Today, the New York Times bestseller list aggregates book purchases through many distribution outlets and reflects this big picture ranking back to readers. It turns out that customers value knowing what others are reading: the lists are powerful drivers of individual reader behavior, boosting sales of books. But before The Bookman's list, they had no way of seeing the big picture. There are now more than 40 national best-seller lists in the fiction category alone, each with its own unique methodology and perspective as well as hundreds of best-seller lists, for every book category, music category, and for that matter, just about any mass consumed product. There are daily lists of the top search terms on the search engines such as Yahoo and Google, the list of the most e-mailed articles in the New York Times, and websites such as Reddit that record and disseminate the most popular web pages, the most tweeted tweets, the most liked Facebook posts. In each of these cases, information about a group of customers is aggregated and fed back to individual customers, who then alter their behavior in light of the big picture. The view of the group is unavailable to the individuals until it is aggregated, but once they know of it, it changes how they behave.
Unlike each one of your customers, you have access to the big picture and can see different things in the marketplace than any one of them can. You can see problems that are likely to arise, because they have arisen elsewhere; you can see solutions to problems that plague a particular customer or sub-group of customers, because you have seen solutions successfully implemented elsewhere. Just as importantly, you might know what won't work because you have seen it fail elsewhere. And finally, you can see patterns they can't see because you're looking at all of them at once; and this different perspective yields unique insight. That is the potential of big data for small business.
Niraj Dawar is a professor at the Ivey Business School and author, most recently, of Tilt: Shifting Your Strategy from Products to Customers, Harvard Business Review Press, November 2013
[i] Begall, Sabine, Jaroslav Červený, Julia Neef, and Oldȑich Vojtȅch, and Hyneck Burda (2008), "Magnetic Alignment in Grazing and Resting Cattle and Deer," Proceedings of the National Academy of Sciences, September 9, vol. 105 no. 36 13451-13455
[ii] Korda, Michael (2001) "Making the List: A Cultural History of the American Bestseller, 1900-1999" Barnes and Noble Books – Imports.