You Don’t Need Big Data — You

Need the Right Data

 Maxwell Wessel
NOVEMBER 03, 2016

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You Don’t Need Big Data — You Need the Right Data
Marion Barraud for HBR

The term “big data” is ubiquitous. With exabytes of information flowing across broadband pipes, companies compete to claim the biggest,
most audacious data sets. And businesses of all varieties — old and new, industrial and digital, big and small — are getting into the game.

Masses of social, weather, and government data are being leveraged to predict supply chain outages. Enormous amounts of user data are
being harnessed at scale to identify individuals among a sea of website clicks. And companies are even starting to leverage huge quantities
of text exchanges to build algorithms capable of having conversations with customers.

But the reality is that our relentless focus on the importance of big data is often misleading. Yes, in some situations, deriving value from data
requires having an immense amount of that data. But the key for innovators across industries is that the size of the data isn’t the most
critical factor — having the right data is.

It’s Not About Big or Small

Uber is often referred to as a big-data success story. There is no doubt that Uber captures a wealth of information. Using the applications it
has running in both its drivers’ cars and its users’ pockets, it has mapped the real-time logistics flows of human transportation.
But Uber’s success isn’t a function of the big data it collects. That big data has enabled the company to enter new markets and fulfill new
jobs in the lives of its customers. Uber’s success results from something very different: the small, rightdata it needed to do something very
simple — dispatch cars.

In an era before we could summon a vehicle with the push of a button on our smartphones, humans required a thing called taxis. Taxis,
while largely unconnected to the internet or any form of formal computer infrastructure, were actually the big data players in rider
identification. Why? The taxi system required a network of eyeballs moving around the city scanning for human-shaped figures with their
arms outstretched. While it wasn’t Intel and Hewlett-Packard infrastructure crunching the data, the amount of information processed to get
the job done was massive. The fact that the computation happened inside of human brains doesn’t change the quantity of data captured
and analyzed.

Uber’s elegant solution was to stop running a biological anomaly detection algorithm on visual data — and just ask for the right data to get
the job done. Who in the city needs a ride and where are they? That critical piece of information let the likes of Uber, Lyft, and Didi Chuxing
revolutionize an industry.

Getting to the Right Data for the Job

Sometimes the right data is big. Sometimes the right data is small. But for innovators the key is figuring out what those critical pieces of
data are that drive competitive position. Those will be the pieces of right data that you should seek out fervently. To get there, I’d suggest
asking the following three questions as a process for drilling down to the right data.

Question 1: What decisions drive waste in your business? Most businesses have large sources of waste. Consider the world of floral
retailing. The average retail florist can sustain spoilage rates of more than 50% of their inventory. More thanhalf of their flowers simply
become refuse. So for innovators like UrbanStems and the Bouqs, the data that makes their businesses so disruptive is the data that
enables them to eliminate that spoilage. (Disclosure: I invested in UrbanStems.)

In the words of the Harvard Business School’s Ben Edelman, “waste makes for opportunity.” Whether it’s in industrial production, retailing, or
legal investigations, figuring out your sources of wasted effort and resources should guide the way toward the right data. Whether it’s as
simple as identifying predictions you know you make (how much inventory to stock) or whether it requires you to think about the decisions
implicit in your business model (how a cab drives around the city at 10 PM), charting out the decisions will point you toward sources of
waste.

Question 2: Which decisions could you automate to reduce waste? Once you have your decisions, the hypothetical becomes what
you can actually change. Humans are wonderful at making certain types of decisions. When it comes to deciding which campaigns will elicit
the most irrational reactions of other humans to branding and marketing materials, humans can be brilliant. These types of decisions should
stay (for now) in the hands of people.

But when it comes to making simple, repetitive, operational decisions (like where to send a cab, how to price a product, or how many
flowers to order to a floral shop), machines tend to be much better than people. And although many business models of the 20th century
are predicated on human control of these decisions, today we can identify the data to automate more of these decisions than you’d imagine.

Amazon, for instance, is rumored to have eliminated almost all of its pricing team, pushing most pricing decisions toward algorithmic
control. For most retailers this would be blasphemous. But if Amazon’s algorithm works, it would translate to far less spent on discounts, far
less inventory piling up in warehouses, and better predictability of new product introductions — each of which would yield enormous
competitive advantage.

Question 3: What data would you need to do so? Once you have an understanding of the waste in your legacy system and you’ve
charted out the decisions that result in that waste, the last step is asking a simple question. If you could have any piece of information,
however unbelievable, to make the perfect decision, what would it be?

In Uber’s case, it needed to know exactly where all the potential riders in the city were in order to automate decisions surrounding where to
send drivers and reduce the waste associated with human drivers searching for the next fare. In the case of General Electric’s Predix
Industrial Internet software, the company aspires to know exactly when a machine is going to break down, helping to automate decisions
about maintenance visits and reduce the waste from unplanned downtime. For health insurers seeking to cut costs, they’d love to know the
moment that a diabetes patient’s blood sugar dips dangerously low, helping to automate decisions around patient interventions and reduce
waste surrounding disease mismanagement.

Those are the right pieces of data to seek out. If you arrive at them by crunching a mass of information, that’s wonderful. If you arrive at
them by building a new app to sense them directly, even better.

Most companies spend too much time at the altar of big data. And not nearly enough time thinking about what the right data is to seek out.

Maxwell Wessel is the general manager of SAP.io, a business unit

pursuing disruptive growth at software giant SAP.

STRATEGIC THINKING

How to Make Better Decisions

with Less Data
  Tanya Menon

 Leigh Thompson
NOVEMBER 07, 2016

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Maria, an executive in financial services, stared at another calendar invite in Outlook that would surely kill three hours of her day. Whenever
a tough problem presented itself, her boss’s knee-jerk response was, “Collect more data!” Maria appreciated her boss’s analytical approach,
but as the surveys, reports, and stats began to pile up, it was clear that the team was stuck in analysis paralysis. And despite the many
meetings, task forces, brainstorming sessions, and workshops created to solve any given issue, the team tended to offer the same solutions
— often ones that were recycled from prior problems.

As part of our research for our book, Stop Spending, Start Managing, we asked 83 executives how much they estimated that their companies
wasted on relentless analytics on a daily basis. They reported a whopping $7,731 per day — $2,822,117 per year! Yet despite all of the data
available, people often struggle to convert it into effective solutions to problems. Instead, they fall prey to what Jim March and his coauthors
describe as “garbage can” decision making: a process whereby actors, problems, and possible solutions swirl about in a metaphorical
garbage can and people end up agreeing on whatever solution rises to the top. The problem isn’t lack of data inside the garbage can; the
vast amount of data means managers struggle to prioritize what’s important. In the end, they end up applying arbitrary data toward new
problems, reaching a subpar solution.
YOU AND YOUR TEAM SERIES

Thinking Strategically

How to Create an Exponential Mindset

o Mark Bonchek

5 Strategy Questions Every Leader Should Make Time For

o Freek Vermeulen

Games Can Make You a Better Strategist

o Martin Reeves and Georg Wittenburg

To curb garbage-can decision making, managers and their teams should think more carefully about the information they need to solve a
problem and think more strategically about how to apply it to their decision making and actions. We recommend the data DIET approach,
which provides four steps of intentional thought to help convert data into knowledge and wisdom.

Step 1: Define
When teams and individuals think about a problem, they likely jump right into suggesting possible solutions. It’s the basis of many
brainstorming sessions. But while the prospect of problem solving sounds positive, people tend to fixate on familiar approaches rather than
stepping back to understand the contours of the problem.

Start with a problem-finding mindset, where you loosen the definitions around the problem and allow people to see it from different angles,
thereby exposing hidden assumptions and revealing new questions before the hunt for data begins. With your team, think of critical
questions about the problem in order to fully understand its complexity: How do you understand the problem? What are its causes? What
assumptions does your team have? Alternately, write about the problem (without proposing solutions) from different perspectives — the
customer, the supplier, and the competitor, for example — to see the situation in new ways.

Once you have a better view of the problem, you can move forward with a disciplined data search. Avoid decision-making delays by holding
data requests accountable to if-then statements. Ask yourself a simple question: If I collect the data, then how would my decision change? If
the data won’t change your decision, you don’t need to track down the additional information.

Step 2: Integrate
Once you’ve defined the problem and the data you need, you must use that information effectively. In the example above, Maria felt
frustrated because as the team collected more and more pieces of the jigsaw puzzle, they weren’t investing the same amount of time to see
how the pieces fit together. Their subconscious beliefs or assumptions about problems guided their behavior, causing them to follow the
same tired routine time and time again: collect data, hold meetings, create strategy moving forward. But this is garbage-can decision
making. In order to keep the pieces from coming together in an arbitrary fashion, you need to look at the data differently.

Integration lets you analyze how your problem and data fit together, which then lets you break down your hidden assumptions. With your
team, create a KJ diagram (named after author Kawakita Jiro) to sort facts into causal relationships. Write the facts on notecards and then
sort them into piles based on observable relationships — for example, an increase in clients after a successful initiative, a drop in sales
caused by a delayed project, or any other data points that may indicate correlated items or causal relationships. In doing this, you can
create a visual model of the patterns that emerge and make connections in the data.

Step 3: Explore
At this point in the process, you may have some initial ideas or solutions based on your KJ diagrams. Now’s the time to develop them. To
facilitate collaborative exploration, one of our favorite exercises (often used in art schools) is what we call the passing game. Assign distinct
ideas to each team member and give each individual five minutes to develop it by drawing or writing in silence. Then have them pass their
work to a teammate, who continues drafting the idea while they take over a teammate’s creation.

Discuss the collaborative output. Teammates recognize how it feels to give up “ownership” of an idea and how it feels to both edit and be
edited; they also recognize their implicit assumptions about collaboration. The new perspective forces them to confront directions that they
didn’t choose or never would have considered. Indeed, you can add multiple sequential passes (like a telephone game) to demonstrate the
idea’s unpredictable evolution as three or four teammates play with the initial ideas. After allowing people this space for exploration, discuss
the directions that are most fruitful.

Step 4: Test
The last dimension requires team members to use their powers of critical thinking to consider feasibility and correct for overreach. Design
tests to see if your plan forward will work. Under which types of situations will the solution fail? Select a few critical tests and run them.
While people often over-collect data that supports their priors, people under-collect disconfirming data. By running even a single test
that fights confirmation biases, you can see what you need to see, even if you don’t want to.

The solution to garbage-can decisions isn’t cutting out data entirely. Thinking strategically about your data needs pushes you to do more
with less — widening, deepening, integrating, extending, and testing the data you do have to convert it into knowledge and wisdom. In
practicing the mental exercises above with your team, you can curb your appetite for data while getting better at digesting the data you
have.

Tanya Menon (menon.53@osu.edu) is an associate professor of

Management and Human Resources at the Ohio State University’s
Fisher College of Business. She is the coauthor of Stop Spending,
Start Managing: Strategies to Transform Wasteful Habits(Harvard
Business Review Press, 2016).
Leigh Thompson is the J. Jay Gerber Professor of Dispute Resolution
and Organizations at the Kellogg School of Management. She is the
author of Creative Conspiracy: The New Rules of Breakthrough
Collaboration (HBR Press, 2013) and coauthor of Stop Spending, Start
Managing: Strategies to Transform Wasteful Habits (HBR Press, 2016).