“Big Data” means different things to different people. In a March 7th, speech, Virginia Rometty, Chairman, President and CEO of IBM, provided her take on “Big Data” and I thought she relayed a number of interesting points. Her speech, entitled Competitive Advantage in the Era of Smart, describes a new way for private and public organizations to compete in an era of “Big Data” – data in the clouds, data on smart mobile devices and social networks, and corporations mining data for insights and the competitive edge. To her, “Big Data” is the next natural resource, like oil or electricity, to propel this country forward as everyone will have access to cloud infrastructures, mobile devices and social networks.

Ms. Rometty suggests three “principles of change” – change, not just in technology, but in an evolution of an organization – a cultural way of thinking and acting. All organizations make decisions about capital, people, products and services; create value for those individuals and entitles; and deliver value to its customers. Ms. Rometty laid her principles of evolution out as:

Decisions will be based not on “gut instinct,” but on predictive analytics;

The social network is the new production line; and

Value will be created not for “market segments” or demographics, but for individuals.

Let’s look at each principal enunciated by Ms. Rometty.

Principle 1: Decisions will be based not on “gut instinct,” but on predictive analytics

In today’s global community, Ms. Rometty believes that enterprises should move to an analytical decision making model. Why is that? Because every two days we generate the equivalent of all of the data produced up to 2003. With the volume of this data and today’s raw computing power organizations can and should harness this duality to produce accurate and insightful knowledge-based decisions.

Ms. Rometty believes that organizations must use analytical decision-making models to reduce errors, and inadvertent or damaging outcomes. As proof, she pointed first to a global survey of top risk managers that identified the #1 method for identifying and assessing risk – senior management intuition and experience. And second, to the greatest recession of our lifetime –which many believe was caused by an inability to see and manage risk. To illustrate her point, Ms. Rometty cautioned that many of our decisions are subconsciously influenced by our biases – relying too heavily on a single piece of information we have internalized. For example, a doctor hears a patient disclose two or three symptoms out of many, and then makes a diagnosis while discounting those symptoms that do not fit into her predetermined category. The key point to this analytical decisions making model is that:

“[t]his isn’t just a change in tools. It’s a change in mindset and organizational culture. Which is also the greatest challenge it poses: the need to “unlearn” deeply engrained professional and leadership assumptions: . . . How you manage enterprise risk . . . and how you manage an enterprise.

Ms. Rometty believes the mentality will be not just to learn new skills, but to learn a whole new job. So will we be willing to do that? And how quickly can such predictive analysis be created? Will executives be willing and able to wait for that analysis – I personally don’t think we are there yet. It certainly seems that we all are relying upon gut instinct every day…this would certainly be a hard thing for me to overcome.

Principle 2: The social network is the new production line.

Create intellectual capital! What does that even mean? According to Ms. Rometty, the vast amount of data now produced, the power of the computers, and today’s shared connectivity have now created the means for the production of knowledge – with social networks as the new production line. “In a social enterprise, your value is established not by how much knowledge you amass, but by how much knowledge you impart to others.” So how do you produce knowledge?

The long-term objective is an enterprise expertise model where information is analyzed automatically, content is organized in relevant topics and personalized action plans are created – and where rewards are shaped by who contributes the most and best ideas.

The goal is not to just share information – the connectivity – but actually create experts in an organization. Anyone in an enterprise can become an expert. Could every company, however, hire, compensate, evaluate and promote employees based upon the concept of “shared and catalyzed knowledge”? Ms. Rometty believes most can and will. Every IBM employee now has a social network page, and access to vast amounts of internal and external information sources, blogs and wikis – the ability to create intellectual capital. According to Ms. Rometty, IBM is working toward a future -

in which all IBMers will be rated by their peers and profession, based on how good they are at sharing their knowledge . . . how good they are at making it useful, consumable . . . how well they contribute to the community and to [their] clients’ needs and experiences.

I certainly agree that the ability to communicate, contribute and share is going to be a key factor to success in future organizations!

Principle 3: Value will be created not for “market segments” or demographics, but for individuals.

The rapid emergence of Big Data, social networks, mobile communications, and location tracking software has lessened the inherent value of segmenting consumers – whether public consumers of government services or private consumers of business. “I” and “You” bear today’s fruit. It’s the age of the individual. Today’s technology has created the ability for enterprises to track individual wants, needs and desires, and then to encapsulate that into a good or service targeted to that specific consumer.

In her speech, Ms. Rometty gave the example of how President Barack Obama’s re-election campaign used Big Data analytics and behavioral science to understand how individual voters in key states might react.

Using dynamic modes powered by voter contact data, the campaign’s Analytics team ran 66,000 simulations each night to protect who was winning every battleground state. They used this data to allocate resources-funding, campaign workers, outreach – in real times. The final simulations of the Ohio vote were accurate to within 0.2 percent.

Companies now must recognize the emergence of this capability to remain competitive in the global market place. Forward-thinkers will use this data and computational ability to actually learn what “You” and “I” want – not what some organization deems “we” want. Ms. Rometty believes, in the end, that organizations and consumers will offer each other measurable value – information about “You” and “I” in exchange for a benefit in return.

Virginia Rometty concluded by saying:

[t]he challenge is not the technology. The challenge, as always, is culture . . . changing our entrenched ways of thinking acting and organizing. . . .We have, in Big Data, a vast new natural resource, as well as the means to mine it for value. And that is unleashing not only insight and knowledge, but new ways of creating business and societal value . . . and new ways of working that are more flexible, innovative, collaborative, humane.

Erik Brynjolfsson, director of the Center for Digital Business at MIT’s Sloan School of Management, echoed Ms. Rometty’s sentiments. (see New York Times, I.B.M.s Rometty on the Data Challenge to the Culture of Management). “The technology has been available for a few years now to create a management revolution based on big data, and now we’re beginning to see more and more companies undertake the much harder job of reinventing their business process and culture to take full advantage of those technologies.” Based upon the number of targeted ads that we are seeing, I am pretty confident a number of organizations have embraced this last concept!

So what does this mean for you as an individual or an organization?  Do you agree that you should disregard your gut instinct and replace it with a “computerized” risk analysis?  Do you share and create knowledge and information to increase your market share and demonstrate your expertise – whether via social media or otherwise?  And finally, what do you think of the individually targeted culture being created by all of the data mined by organizations?