Big data is a trending word in the business world. In recent years, as the importance of promoting digital transformation in companies has increased, big data is being used not only in the IT industry but in all other industries.
However, the reality is that not many people understand what big data is. What big data is, and what can be achieved by utilizing big data, are not widely known.
In this article, we will introduce the definition of big data again. We will also clearly explain the advantages and disadvantages of using big data, so we hope you will find this useful in promoting digital transformation in the future.
What is Big Data?
Big data is a term that has been defined in various ways, but the Ministry of Internal Affairs and Communications’ “2012 Information and Communications White Paper” defines it from a purpose perspective as “data for deriving knowledge that is useful for business.” Another example of a quantitative definition is that big data is “data whose size exceeds the capacity of typical database software to grasp, accumulate, operate, and analyze.”
The document defines big data business as “a business that uses big data to solve social and economic problems or increase the added value of business operations or supports such business.”
In addition, the 2017 Information and Communications White Paper defines big data as follows:
- With the further advancement of digitalization and the sophistication of networks, as well as the advancement of IoT through the miniaturization and cost reduction of IoT-related devices such as smartphones and sensors, we are witnessing a huge amount of data obtained from miniaturized sensors, including location information and behavioral history via smartphones, information on internet and television viewing and consumption behavior, etc.
Advantages and disadvantages of using big data to promote digital transformation
There is no established definition of DX, but according to the Declaration for Creating the World’s Most Advanced Digital Nation and the Basic Plan for Promoting the Utilization of Public and Private Data, it is defined as follows:
- A business strategy that requires companies to respond to dramatic changes in the external ecosystem (customers, markets) while at the same time leading the transformation of their internal ecosystem (organization, culture, employees), and to create value and establish a competitive advantage by transforming customer experiences both online and offline through new products, services, and new business models using the 3rd Platform (cloud, mobility, big data/analytics, social technology).
Based on the above definition, in this chapter we will explain in order the advantages and disadvantages of companies using big data to promote digital transformation.
Benefits of using big data to promote digital transformation
First, we will pick out three representative benefits of using big data to promote digital transformation and explain them in order.
① Objective and highly accurate decision making
Big data allows companies to extract useful insights (e.g. patterns and correlations) from vast amounts of data, allowing them to make objective and accurate decisions based on information such as market trends, customer behavior, and financial performance.
For companies promoting digital transformation, using big data to create new products, services, and business models is essential to increasing competitive advantage. Big data will also play an important role in formulating business strategies and plans, as well as in risk management.
② Deeper understanding of customers and improved satisfaction
By analyzing customer data in detail, you can gain a deeper understanding of the needs and preferences of each individual customer, which can then be used to develop marketing strategies to provide products and services that are more tailored to each individual customer.
This will ultimately lead to improved customer satisfaction. Also, by analyzing customer behavior patterns, you will be able to predict future trends and needs, creating opportunities to gain first-mover advantage in the market.
For this reason, many companies aiming to improve customer satisfaction as they promote digital transformation are promoting the use of big data.
3) Leads to improved business efficiency, cost reduction, and innovation
The use of big data can also contribute greatly to streamlining business processes and reducing costs. Data analysis can identify operational inefficiencies and wasteful costs, leading to the devising and implementation of improvement measures.
Big data can also be used to consider new business models and realize innovations in existing products and services.
Creating new products, services and business models is considered to be a very important measure in promoting digital transformation. As the importance of quickly responding to market changes and achieving sustainable growth through digital transformation grows, many companies are working to utilize big data.
Disadvantages of using big data to promote digital transformation
Using big data to promote digital transformation in companies has both advantages and disadvantages, so it is important to be aware of both in advance. From here, we will pick out three major disadvantages and explain them in order.
1) Privacy and security issues
Big data also contains personal information, and strict privacy and security measures are essential when handling it.
To address the risks of data leaks and unauthorized access, it is essential to establish advanced security technologies and privacy protection protocols. Comprehensive measures, including compliance with legal regulations, data encryption, and access management, will be required.
②Big data cannot always be used effectively
One of the major challenges in utilizing big data is maintaining the quality and integrity of the data. Inaccurate data or incomplete data sets can lead to incorrect analysis results, which can lead to incorrect decision-making in promoting digital transformation.
In addition, utilizing big data requires the ability to process and analyze complex data sets. Companies considering using big data to promote digital transformation must secure personnel with these skills.
3) Cost and resource constraints
Companies that use big data to promote digital transformation may need to make large initial investments in data storage infrastructure and analysis tools, as well as in recruiting and training personnel with specialized knowledge.
The use of big data requires continuous data management and analysis, but this requires the allocation of human resources on an ongoing basis, which may place a heavy burden on small and medium-sized enterprises in particular.
summary
This time, we explained big data, focusing on its definition and the advantages and disadvantages of using it to promote digital transformation.
Big data is not simply a large amount of data; it is made up of four Vs: Volume, Variety, Velocity, and Veracity.
The use of AI and IoT has made it possible to obtain data that was previously impossible. By using big data correctly and effectively, it can be used in a variety of situations throughout business and society, and we can expect to see the “creation of new value,” which is important in promoting digital transformation.
On the other hand, if the introduction of AI, IoT, and 5G and the utilization of big data become the goal, there is a risk that the benefits of promoting DX will not be commensurate with the investment.
To avoid this, it is important to carefully consider in advance “why we are going to use AI and IoT” and “why we are going to use big data.”