By Tiberio Caetano, NICTA

Much of big data comes from people. Web logs, mobile phone usage, financial transactions, insurance claims, you name it: it’s being recorded for potential further analysis to generate business value and improved customer experience.

It goes by the name of customer analytics, and large retailers and service providers, at least in the US, are obsessed with it.

Online businesses are significantly ahead of traditional bricks and mortar businesses when it comes to leveraging data to drive business value. The major reasons are cultural, social and operational.

These online businesses are much closer to a truly scientific culture in which every idea or proposition is automatically considered a hypothesis subject to testing rather than a heavenly insight for which the burden of evidence can be waived. They not only have an obsession with measurement, but also with experimentation.

A scientific approach to business

The design of experiments, data collection, analysis and understanding are what characterise scientific enterprise. So, in order to embrace big data, it’s necessary to embrace science, meaning its values, culture and new methods based on machine learning, which is the automation of hypothesis generation (from data) and testing (against data).

Yet, a scientific culture is not what you will find in a typical bricks and mortar business.

The top online companies have researchers and scientists who seriously understand science and its new machine learning method. Google recently hired Geoffrey Hinton, the father of neural networks and deep learning (instances of machine learning). It has also just reportedly acquired, for US$500 million, a startup comprised of deep learning experts.

Facebook followed suit by catching Yan LeCun, who pioneered the use of neural networks to solve large-scale real-world problems.

Extracting value from data requires not only the right tools but also the right leaders to build the right teams to use these tools (and build the ones that still don’t exist).

Bricks and mortar businesses in general do not have such people on board, although those who are ahead are desperately trying to hire them. The bad news is that the demand for those people is way, way beyond the supply.

Another crucial point is that those giant online properties have an operational model in which the results of the science can make their way into every decision that results in some intervention, with relatively small cost. This is in contrast to traditional businesses that are burdened with a range of channels each with legacy IT systems and human processes.

Data analysis is itself innocuous unless it drives some form of action. Internet companies have mastered this trade through computational advertising. The causal business effect of interventions such as displaying an ad in a webpage is quantified precisely by how much an advertiser has bid for having the ad displayed or clicked on.

The user’s feedback (in general through clicking or not) is then automatically sent back to a machine learning algorithm that learns how profitable that ad is (per customer). The loop is then closed. The system that determines the intervention allocation policy monitors the business outcomes of every intervention and from that updates the policy automatically so as to maximise the business value of future allocations.

The offline world

What to say of existing bricks and mortar businesses in this regard? Josh Wills, director of data science at Cloudera, a leading big data solutions provider for enterprise, claims no one is doing this automated closed-loop revenue generation mechanism apart from the giant online properties.

Maybe he is right, maybe not. But even if there are others doing this, there is certainly a long way to go. Granted, there are existing data-driven policies for marketing, credit scoring, pricing and other activities in big service providers like banks, telecoms and insurance companies.

But even in the US such large corporations suffer with the operational issues of legacy systems, as well as cultural and technological silos that simply make it too hard to integrate data science and intervention policy in a closed loop across a variety of business areas.

So, what’s the solution? I don’t think there is any silver bullet. The best bet I would place is simply to follow what has worked for online businesses: work as fast as possible on acquiring the right culture, people and operations model. In the US and Europe, some large retailers and service providers have been moving fast.

Walmart has had for years a large team dedicated to data science to leverage the historical purchase data to better tailor offers to its customers. Retailer Target made headlines two years ago when New York Times reporter Charles Duhigg brought to the public’s attention the now famous incident of one of Target’s analytics models predicting a teenager’s pregnancy before her father did.

One of the world’s largest mobile carriers, Telefonica from Spain, has several years ago established a scientific research group in machine learning.

Although Australian companies are in general significantly behind, in the past two years a few large corporations have started to make moves on the people side by succeeding in hiring data scientists. A notable domestic event was Woolworths recently acquiring a 50% stake in data analytics company Quantium.

Whether such and other large retailers and service providers will go a step beyond by realising a cultural and operational shift is also required remains to be seen.

The Conversation

Tiberio Caetano is affiliated with NICTA and its subsidiary, Ambiata Pty Ltd, as well as with the Australian National University. His role at Ambiata focusses on growing data-rich businesses through use of large-scale machine learning systems.

This article was originally published on The Conversation.
Read the original article.

• COMMENT ON PM ANNOUNCEMENT (see below):

A knighthood is an ancient title of chivalry and there are two traditional ways to acquire one: as a gift or for a fee.

Originally starting as Christian military orders during the crusades 900 years ago, titles of chivalry have now evolved into personal properties that can be given by a prince or a pope, or a parent as an hereditary asset.

Traditionally, titles have also been fund-raising opportunities for princes and popes and could therefore be purchased for a fee for a significant donation to the church, to a monarch or, more controversially, to the conservative political party.

Because of this dodgy practise the Labor Prime Minister, Gough Whitlam, put an end to titles of chivalry in Australia some decades ago.

Now the new conservative Prime Minister, Tony Abbott, has created a fresh regime for awarding titles in Australia: only as a gift and only 4 a year.

This means that BIG donations to the conservative party will no longer be a self-serving way for acquiring a title of chivalry in Australia. Is it now possible that Cardinal Pell might do the same in The Vatican and follow the excellent example of Tony Abbott?

__________________________________________________________________________

Tuesday, 25 March 2014, Canberra • Prime Minister

ANNOUNCEMENT

A new honour for pre-eminent Australians.

 

PRIME MINISTER: I have an important announcement today – a new honour for pre-eminent Australians.

On my recommendation, Her Majesty the Queen has amended the Letters Patent constituting the Order of Australia.

Knights and Dames in the Order of Australia will be approved by Her Majesty on the recommendation of the Prime Minister. There may be up to four Knights or Dames created in any one year. This special recognition may be extended to Australians of extraordinary and pre-eminent achievement and merit.

Henceforth, the serving Governor-General will be the principal Knight or Dame in the Order of Australia. The first new Dame will be the outgoing Governor-General and the first new Knight will be the incoming Governor-General. It is fitting that the Queen’s representative be so honoured.

My intention is that this new award will go to those who have accepted public office rather than sought it and who can never, by virtue of that office, ever entirely return to private life. The Chairman of the Order of Australia Council will be consulted on any such recommendation.

I congratulate Her Excellency the Honourable Dame Quentin Bryce and the Governor-General designate, General Peter Cosgrove, on this acknowledgement of their service to our country.

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http://resources0.news.com.au/images/2014/02/26/1226838/448076-f5590788-9ea2-11e3-b0f0-c1d617d9b2b1.jpgNew research from Deloitte has identified 25 sectoral hotspots with the biggest potential to lift Australia’s growth trajectory over the next 20 years.

Mining, which now makes up about 10 per cent of Australia’s economy, is set to be overtaken by growth waves in the “Fantastic Five” sectors of gas, agribusiness, tourism, international education and wealth management, Deloitte’s report “Positioning for Prosperity? Catching the next wave” says. These could add $250 billion to the economy over the next 20 years, potentially matching mining and keep Australia near the top of the world’s prosperity charts, Deloitte says.

At least a further $150bn in mainly high job creating areas of the economy is offered by a further 19 sectors, the report calculated.

“As Asia’s boom evolves and new domestic opportunities arise, our research shows that Australia’s growth options remain excellent,” said report co-author Deloitte Access Economics’ Chris Richardson.

“Our future prosperity will come from a more diversified spread of sectors, enabling Australia to remain the fastest-growing developed Western nation in the world in the coming decade.”

Australia has a head-start as it possesses world-class resources in land, minerals and energy, has proximity to the world’s fastest-growing markets in Asia, has a temperate climate and well-understood tax and regulatory regimes and speaks English, the international language of business, Deloitte said.

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