“Big Data” and the Entrepreneur

First, a few estimates (not mine):

  • 45% of the world’s population is now online
  • One third of the world’s information is stored in alphanumeric text and still image data,
  • The estimated telecoms capacity to exchange data in 2014 was 667 Exabyte (1 Exabyte = 1 billion gigabytes)

Are we surprised that “big data” is a hot and growing topic? It takes me back to my time at M.I.T. Sloan and Jay Forrester. Jay was one of the first professors at Sloan (1956) and we studied his System Dynamics.

Using M.I.T.s computers and his systems, we tried to create models to predict the stock market and get wealthy (we couldn’t).

Then there was “data mining” provided by startups like MicroStrategy and established players like IBM. Mining data that was not readily available from the systems in place became important to support business decision-making.

Now there is “big data” where huge systems can “capture, curate, manage, and process” data from a variety of sources that is available online. What does this mean for the young entrepreneur and their idea for a new business?

In my experience, data analysis does not lead to new business models, or a different way of getting and satisfying a customer. It does not improve on legacy inefficiencies or lead to organizational change of a company. It may well support a new way of doing business such as micro-lending or peer-to-peer funding, but it will not surface the opportunity for the entrepreneur to jump on.

I remember having a discussion in 1984 with Tom Theobald, the then head of International at Citi and the last approval needed for my proposal to start an unregulated finance company in Sweden before foreign banks were allowed. I offered to explain all the detailed financial forecasts when he interrupted me. He said, “It’s a good business idea and the market needs it. We should do it. The numbers you forecast will change as you get going and you will adapt, but if it is a dumb idea and the numbers look good, we shouldn’t do it.” I got the approval and $5 million of startup capital.

M-Pesa’s good business idea is to provide financial transaction services via mobile phones where there are vastly more mobile phones than bank branches. Now it’s transactions approach 30% of the GDP in Kenya. That’s a good business idea. I’m not sure how big data would improve it.  So keep going entrepreneurs.

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