The Perils and Promise of Real-Time Data
As the demand for real-time data increases, as more and more information flows into the enterprise and its systems, the challenge of understanding and managing it grows proportionately. And sometimes, more is just too much.
How to Calibrate Real-Time
In 2005, two researchers, one from Georgia Tech and the other from the University of North Carolina, set out to examine whether increasing the frequency of real-time data updates "enhanced performance." Would they be able to more quickly respond to changes in the environment and see the consequences of their actions? wondered Nicholas Lurie and Jayashankar Swaminathan.
What they discovered was that managers who received more frequent data points were making more poor decisions. "The danger of real-time data is that it may come to you at a frequent rate, maybe every hour, and if you respond to that data, if there's some random event and you treat the random event as systematic, it could really throw you off," Lurie says.
Yossi Sheffi, director of MIT's Center for Transportation and Logistics and author of The Resilient Enterprise, finds no fault with real-time data, only in the way people use it.
"The question is not, Is real-time information bad or good? There's only good in it," Sheffi says. "The danger [of real-time data] is if you would react too fast and not wait for the trend to reveal itself." As an example, Sheffi suggests that Procter & Gamble should not start making inventory or planning decisions on Tide sales at Wal-Mart based on data they receive every five minutes.
"You don't want to react to someone who came in and bought five boxes," he says. What you should do is look for trends in product sales combined with historical data—for example, during the last few days or weeks—and correlate that with other event-type data, such as in-store promotions or weather information that may affect sales. "You have to use it smartly," Sheffi says, noting that some companies right now are better at this than others.
At Priceline.com, Rose seems to have found that sweet spot for delivering real-time data to both IT and business users. The company was founded in 1998, and since then Rose says a culture of real-time data has flourished. "From day one we've always been about collecting business metrics on the fly," he says.
When asked why the business prefers hourly reports, he answers that while he could offer them minute-by-minute data (the BAM system has that capability), they've discovered that anything under 15 minutes most likely wouldn't be sufficiently significant to constitute a trend or something that demands their attention.
"Hourly data is good enough," Rose says.
