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m c k i n s e y

g l o b a l

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Are you ready for the era of ‘big data’?
Brad Brown, Michael Chui, and James Manyika Radical customization, constant experimentation, and novel business models will be new hallmarks of competition as companies capture and analyze huge volumes of data. Here’s what you should know.

The top marketing executive at a sizable US retailer recently found herself perplexed by the sales reports she was getting. A major competitor was steadily gaining market share across a range of profitable segments. Despite a counterpunch that combined online promotions with merchandizing improvements, her company kept losing ground. When the executive convened a group of senior leaders to dig into the competitor’s practices, they found that the challenge ran deeper than they had imagined. The competitor had made massive investments in its ability to collect, integrate, and analyze data from each store and every sales unit and had used this ability to run myriad real-world experiments. At the same time, it had linked this information to suppliers’ databases, making it possible to adjust prices in real time, to reorder hot-selling items automatically, and to shift items from store to store easily. By constantly testing, bundling, synthesizing, and making information instantly available across the organization— from the store floor to the CFO’s office—the rival company had become a different, far nimbler type of business. What this executive team had witnessed first hand was the gamechanging effects of big data. Of course, data characterized the information age from the start. It underpins processes that manage employees; it helps to track purchases and sales; and it offers clues about how customers will behave.

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But over the last few years, the volume of data has exploded. In 15 of the US economy’s 17