We are witnessing a transformation of our economy, with data becoming one of the key drivers of every business. Increasingly, everything we do is digital, leaving a data trail that can be analysed to gain new insights and power innovative business ideas.
This offers opportunities for entrepreneurs and startups that we have not seen since the rise of the dotcoms. And many believe that the shift towards a data economy will have an even bigger impact than the internet.
Think, for example, how Silicon Valley entrepreneurs Travis Kalanick and Garrett Camp used data collected from smartphones, pinpointing their user’s location, to create Uber, challenging the global taxi industry.
Or more unusually, there’s a startup called ShotSpotter which installs sensors to detect gunfire. Analysing the soundscape of the city, it uses algorithms to isolate the sound and triangulation to pinpoint the exact time and location. Police forces can now subscribe to a service that allows them to monitor and respond to any gun incident in real time – even before they have been called.
Today, every two minutes, we are generating the same amount of data that was created from the beginning of time until the year 2000. Big data – the digital trace we all leave – offers huge opportunities for entrepreneurs to challenge traditional industries, yet many businesses still believe that it is something only the big tech companies do.
Entrepreneurs who are able to put data at the centre of their business model will quickly outsmart traditional players in any industry, but most businesses have no idea what to do with it. Many are terrified by its sheer scale. Less than 10 per cent of the data held by companies is used to inform decision-making, despite the fact that it is the best way of predicting customer behaviour.
As in every revolution, there will be winners and losers. But it’s not as simple as saying that those with the largest volumes of data – companies such as Amazon and Google – will automatically win, and that those which have little will lose.
Whether you already have access to unfathomable amounts of information, or your data collection systems have been a little sketchy up to now, you can transform your business. The key is to focus on smart data, not big data.
Don’t start with the data, start with your strategy. What are your business objectives? If you begin with data, you will find yourself lost in an impossible rabbit warren of options. Instead, be clear about what you need to know and why. By starting with strategy and not data, you will immediately focus on your important information requirements and what’s needed, rather than being overwhelmed by what’s possible.
Today, successful companies understand where their customers are, what they are doing and where they are going. They allow that knowledge to guide their strategy and inform their decision-making.
I worked with a small fashion retail company that wanted to increase sales but had no smart data to help. We worked out the smart questions to which they needed answers: how many people pass our shops; how many stop to look in the window and for how long; how many come into the shop and how many of those buy? We installed a device into the store windows that tracked mobile signals to tell us how many people were stopping and how many of those were coming in. By combining this data with transaction data, we were able to measure the conversion ratio, and test window displays and various offers to see which ones increased the conversion rate.
Not only did this firm massively increase sales by getting smart about its data requirements and combining small traditional data with untraditional big data, but it also used the insights to make a significant saving by closing one of its stores. The sensors revealed that the footfall reported by the market research company prior to opening was wrong, and that the passing traffic was insufficient to justify keeping the store open.
Companies that won’t embrace the smart revolution will be left behind.