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by Yaniv Vardi
The industrial revolution occurred in the 18th century, ushering in the industrial age, which continued through the 20th century. On its heels, began the information age, which is ongoing, according to most experts. While the industrial age focused on automation and mass manufacturing, the information age is based on today’s extensive communication infrastructure, which has enabled access to virtually endless information.
The Evolution of Data
Historically, products were classified into tangible products and non-tangible services. Marketing theories have narrowed this distinction (tangible and non-tangible goods), to what is known as the “goods and services continuum,” a model in which some products are an obvious combination of purely tangible goods and associated services.
Until recently, information was considered too abstract a commodity to be classified as either a good or a service. Even intangible services were thought to require some physical presence, whether in their delivery or effect, to actualize their utility. Platonic information – or data as we so commonly refer to it today – was generally reserved for matters of education, statecraft or religious studies.
Yet, as businesses and technologies evolved, the data produced on sales, profit margins and trends began to influence corporate decisions, bringing information to the enterprise. While this general connection became clear, the specific connection between any specific parcel of information and its impact on business decisions remained as nebulous as ever.
Still, confident in the belief that within the knot of data there was somewhere a thread connecting information to decision, prospectors became convinced of incredible latent value. What the California Gold Rush was physically, the Silicon Valley Data Rush was virtually. The treasure was there, simply waiting to be mined.
The Data Rush was further enabled by the proliferation of connectivity, giving birth to the “always on” culture, which, when combined with social networks, GPS, digitization, online searches and ecommerce transactions, has created a mass of information, commonly coined “Big Data.”
Big Data has become so big and so pervasive that it’s spun an entirely new economic market. Many argue that while Wall Street rushes to confer enormous valuations upon Big Data enterprises, the information they collect has no inherent value. (If you think back to Facebook’s IPO, consider the massive disparity in analyst valuations.)
Whether you’re an advocate of the data economy or a detractor, one thing is certain – it has broken the status quo for physical goods and services. Today abstract data – most of it with no direct claim to any sort of utility – has become a commercialized product, with companies shelling out incredible sums of money for nothing more than dislocated datasets.
With the rise of information as a product, it’s worth asking “Are we witnessing a fundamental rearrangement of the global economy? Is data replacing physical goods and services as the premier engine of economic growth?”
While some may disagree, I respond uncompromisingly in the negative. The value of the data economy must come in its potential to enhance conventional markets, even if it’s a long and windy road from A to Z. Any value claimed beyond this, I contend, is nothing more than hot air – a bubble pumped up on animal spirits and undisciplined speculation.
Mark my words, the real engine of tomorrow’s global economy will be where Big Data and physical markets meet.
Enter the Internet of Things
Today, we are beginning to understand the incredible value that can be realized by coupling highly contextualized data with existing products and processes. The Internet of Things (IoT) – wherein traditionally non-responsive objects become dynamic interfaces constantly collecting, communicating and adjusting to data – has opened the path for organizations to zero in on the hidden points of micro-friction in their processes and thus improve efficiencies.
The Internet of Things is the paradigm of the type of value-generating convergence of Big Data and physical markets to which I refer. At the heart of the Internet of Things, are (weight, temperature, energy, etcetera) sensors and increasingly agile, quick, and sophisticated data processing techniques and tools.
Smart sensors provide real time data that when paired with advanced processing software – often in the form of machine learning algorithms – can nearly instantly extract needles of relevant and actionable information from the haystack of data noise.
Increasingly, every human and machine act is being catalogued and examined for any and all useful revelations. Consider transactional data, which provides customer insights and purchasing trends, or social data taken from social media. These datasets are being leveraged to evermore successful effect by enterprises looking to create real value throughout their operations – from internal efficiencies through commercialization and marketing strategies.
Deloitte has highlighted key trends in analytics that will influence the business world in the coming years, in what they coin “the next evolution”. The growth of IoT will similarly have a high impact on businesses in the coming years, affecting consumer products and business models.
Aggregation of data and data analysis will facilitate the creation of new products, markets and services. Analytics will expand across all facets of enterprise, with businesses increasingly investing in Big Data infrastructure and technologies. Such data-driven insights will support decision-making processes.
What we’re witnessing is not the replacement of physical markets with digital markets, but the perfection of physical markets through digital markets.
According to BI Insider, while there were 10 billion devices connected to the internet as of 2015, the volume of connected devices will grow to reach 34 billion by 2020. Fueling this bonanza is the nearly $6 trillion expected to be spent on IoT solutions through 2020.
Big Data Explodes
So how big exactly is this data?
According to IBM, we create 2.5 quintillion (a quintillion has 18 zeros) bytes of data each day. Sales of Big Data and business analytics applications, tools, and services reached $122 billion in 2015 and are projected to increase over 50% to reach $187 billion by 2019, according to IDC.
Services related revenues are projected to account for over half of this market, followed by software and business analytics. The manufacturing industry will be the largest consumer of Big Data and associated technologies, accounting for close to $23 billion of the aforementioned Big Data sales.
The immenseness of the data produced daily creates challenges, as enterprises and organizations scramble to translate the data into value and data-driven business models. Data scientists and analysts are in such demand that analysts are warning of talent gaps in the near future. A similar demand is projected for managers who know how make data-driven decisions on processes and strategies.
Harness the Power of IoT and Big Data
The Big Data created and stored in an enterprise is unstructured. Rapid analytics are required in order to create the practical insights, which can improve margins and efficiencies. Platforms such as the open source Hadoop or IBM’s Watson offer data processing and analytical tools, which can identify trends, predict behaviors, detect patterns and enhance responsiveness – forging new opportunities for businesses, and improving relationships with customers.
Similarly, IoT-enabled operations analytics platforms identify trends in operations and manufacturing, enabling companies to improve their efficiencies, more accurately manage controls, better track inventory and ultimately pad their bottom lines. Intelligent energy monitoring and analysis, for example, can detect anomalies and automatically generates actionable energy insights to reduce consumption and machine downtime while eliminating failures altogether.
New Economic Model
Put simply, Big Data and physical markets meet through the Internet of Things, and this convergence drives profit. Integration of data-driven decisions and processes as part of an enterprise’s physical operations creates remarkable value via improved efficiencies, increased productivity, and novel product offerings.
While physical markets aren’t going anywhere and the rise of the data economy does not signal a new world order, there can be no doubt that the Data Rush has altered the face of the commercial landscape forever, for the better.