From one day to the next, Big Data is discussed on LinkedIn and other business sites. Articles focus on large, international companies and their use of data to make money. Big Data creates value when it is used with analytical analysis – the process of analyzing data and information to discover meaningful performance patterns to describe your business processes, predict your future results or improve your operations.

Big Data is the latest in business buzzwords because using information well can give you a competitive advantage and with the current changes in technology your business has access to information like never before.

Information Was Difficult to Obtain

Technology has changed the value of information. Back in the 1980's and previous decades information was locked in books. The first step in obtaining knowledge was not researching your topic of interest, but finding books to research. Remember card catalogues anyone? Information was scarce and highly valuable as documented in common saying such as "Knowledge is Power."

The Change Over Time

People still see value in information, but there has been a shift from information is valuable to the right information has value. I picture Big Data like the stuff at someone's garage sale. Sitting amidst all of that junk could be a valuable antique if you only had the knowledge and skills necessary to identify it.

Common Examples of Big Data Used by the Media

There are a number of case studies on Big Data including Money Ball documented in a movie with Brad Pitt. Moneyball describes the use of computer based analytics to create a winning baseball team. One of them was made into a movie. Most examples such as MasterCard or The Weather Network are large national or international organizations implying that Big Data and analytics require significant financial resources. This type of analysis is about using pattern recognition to make better decisions, and a business of any size can do this.

If You Can Identify the Valuable Information...

Most business have computers, an internet presence and some ability to collect and store information including financial information which can be can be analyzed to identify patterns. Once patterns have been identified, you can start using analytics to make better business decisions.

Big Retail Using Big Data

Big grocery retailers decide what goods to sell through annual product gross margin analysis which calculates the gross margin of a product by how many times its sold during the year.

If we look at two products, one sells for $100 and the other for $10. The $100 product has a $30 profit margin, the $10 product a $1 profit margin. Customers purchases the $100 product 4-6 times a year making the company $150. The $10 product sells 10-15 times a week making the store $520-$780 a year.

Large retail stores monitor product turnover and purchase inventory to maximize the store's gross margin. If you have ever been standing in an aisle frustrated when you realize the store no longer carries your favorite brand of chocolate, gross margin analysis is the likely culprit.

Inventory stocking decisions aren't always as simple as maximizing gross margin: a grocery store wouldn't stay in business if it didn't keep certain basic staples in stock, but outside of other constraints, most big retailers use gross margin to leverage the returns on their inventory investments.

In the past, only large corporations could afford perpetual inventory systems, bar code scanners and the programmers needed to create and maintain inventory records. These tools are now available at an affordable cost (a cost benefit analysis should be performed if you are deciding to invest in these tools). The easy availability of these tools means that every business can use analytics to make inventory purchasing decisions.

Analytical Tools

Large retailers use Big Data to increase their profits. Crowe MacKay is not a business that offers Big Data analytical services, but we can help owner managed businesses analyze their financial information for growth opportunities. If you have any questions about using analytics to improve your business performance we are happy to help.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.