McKinsey: Big data one of top five catalysts for US economy growth

McKinsey Global Institute published a report that identifies the top 5 catalysts of growth for the US economy:

The US economy is struggling to find a new formula for vigorous growth. But all growth opportunities are not created equal. New McKinsey research pinpoints five catalysts—in energy, trade, technology, infrastructure, and talent development—that can quickly create jobs and deliver a substantial boost to GDP by 2020. An animated video below also runs the numbers on these game changers and frames the challenge for business and government to make the most of the opportunity.

Big data and advanced analytics have the potential to raise efficiency and create value in large swaths of the economy. In the digital age, the world is awash in data, gleaned from sensors, transactions, GPS trackers, medical and legal records, videos, and much more. Data sets have grown exponentially with the arrival of electronic payments, online ordering, social technologies, and the so-called Internet of Things, the ubiquitous network of sensors, cameras, and transmitters embedded in physical objects in the world around us. Thanks to advances in computing power and the development of software that can extract useful information, this sea of data can now be transformed into insights that provide economic and societal benefits.

Highlights of the report

Enterprises across the board will exploit big data and advanced analytics to significantly raise efficiency and cost effectiveness – and market share, creating a cumulative boost to sector productivity – and to GDP

• Big data and advanced analytics offer the ability to quantify, track, and predict economic activity, the operation of complex systems, and customer behavior
• Big data speeds up processes and makes R&D more productive thereby enabling new business models, products and services
• Data generation, computational power and analytical techniques are growing exponentially – expected to reach more than 40,000 exabytes by 2020
• Although companies have collected data such as customer purchases for many years, only recently has the computational power been developed to gather, store, and analyze huge troves of unstructured data in useful ways

Big data’s potential has dramatically increased thanks to its convergence with several major advances in computing and analytics

• Emergence of cloud computing
• New software tools and database systems for large, unstructured data sets
• Algorithms and approaches such as clustering, neural networks, hidden Markov models, and Bayesian networks that can help process vast quantities of data in near-real time

Macro-economic impact of big data in three routes:

• Cost efficiencies and productivity gains by adoption of data-driven decisions
• Shifts in market share towards companies that are most adept at identifying insights from marketing and customer service data and translating them into business strategies
• Consumer surplus due to availability of tools to instantly find the best prices for goods and services, and access to niche products and services that better suit consumer needs

Big data could create upto $610 billion of economic value for the US economy in four sectors – retail, manufacturing, health care, and government services

• Companies at the forefront of utilizing big data are typically in sectors in which data are readily generated, and they own or can obtain much of the information themselves – such as retail, financial services, information (e.g., publishing and data processing), and manufacturing
• Public and quasi-public sectors lacking competitive dynamics or with barriers to data sharing will be less likely to adopt big data without additional incentives or actions
• Quasi-public sectors such as health care and education could create tremendous economic and social benefit through the use of big data analytics, but in many cases the value is not captured because stakeholders’ interests are not aligned – incentives will have to be fundamentally redrawn for these entities to fully exploit the potential of big data.

Capturing the full economic value of big data will require concerted steps

• Privacy, cybersecurity, and data ownership issues will have to be resolved
• Major IT investments and new organizational models are needed to realize big data’s potential across sectors
• The United States needs to develop more specialized talent
• Integrating big data into an organization’s daily operations requires new operating models and a new mindset