This article was first published in the May 2015 international edition of Accounting and Business magazine.

When two INSEAD professors, W Chan Kim and Renée Mauborgne, came up with the concept of Blue Ocean Strategy, they contended that competitors could be made irrelevant by creating an uncontested market space. They argued that rather than engage in cut-throat competition, companies can achieve growth by systematically creating their own unique and uncontested market space. Even though the crux of this article is not about the Blue Ocean Strategy, it highlights how the competitive landscape in Africa is driving companies to find new and innovative ways to grow their business.

Today, many companies on the continent are seeing fierce and intense competition for market share in major sectors of the economy like financial services, telecoms and consumer goods. They are looking for innovative ways to gain competitive advantage outside traditional methods such as advertising and marketing. This is why business intelligence (BI) in the form of big data analytics is seen by major players as a great way of gaining new and valuable insights.

That said, the use of big data is yet to become ubiquitous in Africa, but it’s growing in leaps and bounds. The strategic use of big data is seen as an antidote to the cut-throat competition and shrinking margins that pervade the market. This is why the big data revolution is spreading all over Africa and major players are entering the fray. 

Discovery, a South African company, is an integrated financial services organisation that specialises in health insurance and other financial services products. Discovery prides itself as a company that uses innovation to disrupt market trends and create value. In line with the business model of creating value through innovation, Discovery constantly explores ways to maintain its competitive advantage. 

It has used big data analytics to tackle fraud and billing errors – a major area of concern in the insurance industry. By investing in big data, Discovery was able to identify and recover millions of dollars in fraudulent claims and billing errors.

‘All areas of Discovery’s business use big data, including the protection, general insurance and wellness businesses,’ says Discovery Health CEO Dr Jonathan Broomberg. ‘We have over 3.2 million clients globally and we capture data for every single interaction that our clients have within the respective insurance systems. Key data categories include clients’ full clinical profiles, diagnostic and medical treatment data, full demographic detail, geographic utilisation, health provider supply patterns, financial behaviour data and driving behaviour.’

When asked if the investment in big data analytics systems had paid off for the company, Broomberg says: ‘Discovery’s business has always been data rich, and we have a long track record of analysing data to support our efforts in delivering value in the healthcare system, ensuring quality of care and incentivising wellness engagement. Fraud detection and prevention are some of the areas where data analysis has delivered good results. For example, our data analysis capabilities enable us to detect irregular or suspicious transactions among millions of claims lines processed every year.’

He adds: ‘In 2013 alone, we realised over R288m (US$25m) of savings through fraud and forensic recovery programmes, which are backed by robust data analytics. Other examples include projects to analyse data of client’s health outcomes and using these insights to develop initiatives with doctors and other service providers that improve their quality of care over the long term. Through the segmentation of data and understanding our members’ health status, we are able to design specific wellness and disease management programmes that address the healthcare needs of members with highly complex illnesses.’

Value-add

Even though the process of using historical information to predict the future is not new, utilising data in innovative ways is allowing companies to focus on value-adding activities. Discovery and many other leading companies in Africa are following this trend of successfully using big data analytics to manage the demands of their growing businesses. The investment in a robust and fully scalable system by Discovery has definitely helped them manage their business more efficiently.

The Nigerian telecommunications giant Globacom is also using big data to optimise its operations across the West African sub-region – Nigeria, Ghana, Benin Republic and Ivory Coast. With the huge amount of data it gets from different customer touch points, it has invested in sophisticated analytics systems » with the capability of analysing large swathes of structured and unstructured data to make customer experience more enjoyable.

This understanding of customer needs has helped increase customer retention and enhanced a more targeted and efficient overall operation. Big data analytics has also had a top-to-bottom impact, from helping decision-makers gain critical and more accurate insights into the business to helping call centre staff resolve customer queries much faster.

Another example of the big data revolution is the South African company Santam Insurance. Santam is quoted on the Johannesburg Stock Exchange and has presence in up to six African countries. The company uses predictive analytics with complex algorithms to process claims and simplify an otherwise labour-intensive and fraud-prone process. Just like Discovery, Santam has been able to improve its operational efficiency and combat fraud.

Big data drawbacks

It’s not in all cases that big data has been put to good use, however. It’s not uncommon in Nigeria to find mobile phone companies sending unsolicited text messages to customers based on what products or services they believe they would be interested in. Mobile phone companies utilise the data they have for the opportunity to cross-sell other products; however, many customers get put off by incessant unsolicited messages. Late last year, the Public Complaints Commission had to notify the regulator Nigerian Communications Commission to take action against any mobile phone company that sends unsolicited text messages or makes unsolicited calls.

Even though the most subtle of correlations can be detected within large data sets, interpreting the data meaningfully and reaching a sensible conclusion is a totally different ball game. Misinterpretation of data may be responsible for mobile phone companies targeting customers indiscriminately. 

This is why an upfront framework is required if big data is to be used successfully. Companies must ask important questions at the outset. What problems are we facing now? What questions are our key decision-makers asking? Are we able to find answers to these questions by drawing inferences from the data? Such a structured approach will prevent companies from being overwhelmed by the data and falling into the trap of data fatigue, which inadvertently leads to misuse or misinterpretation.

Key challenges

There are three key challenges. First, the cost of investing in a sophisticated business intelligence system with predictive data analytics capabilities is exorbitant. The majority of SMEs in Africa find the cost very restrictive, therefore they don’t see this as a priority. Besides cost, some bigger companies that can afford it do not seem to understand the full impact of the benefits and are reluctant to make the investment.

Secondly, companies have the challenge of identifying how best to use the data. There is a risk of getting overwhelmed by the amount of data coming out from different sources – hence the need for a coherent strategy to separate relevant from inconsequential data.

Lastly, there is a distinct lack of big data skills in Africa. This is symptomatic of a bigger problem, which is the general lack of skills that already exists in critical areas such as science, technology and engineering. To drive the big data revolution, the continent needs a lot more data scientists and IT experts than are currently available.

When asked if he would recommend the use of big data for predictive analysis to other companies within the African continent, Broomberg responds: ‘Big data and big data analytics capabilities are key for companies to create competitive advantage. It is an important strategy to assist companies in understanding customer behaviour better and to design innovative products and services that not only meet customer needs but which also make them more agile in responding to macro-economic trends.’

Even though big data and analytics is not the panacea to all business problems, decision-makers are getting more answers than ever before. They are able to make more confident decisions and predict the future with a higher degree of certainty. As big data continues to gain traction in Africa, companies will keep leveraging on the possibilities that it offers them to stay ahead of the competition.