Why Small Data Is The New Big Data by [email protected]

Martin Lindstrom discusses his new book about

Martin Lindstrom has spent time with 2,000 families in more than 77 countries to get clues to how they live — resulting in the acquisition of what he likes to call Small Data. In his new book, Small Data: The Tiny Clues That Uncover Huge Trends, he argues that the Small Data explains the why behind what Big Data reveals. [email protected] recently spoke with Lindstrom on the [email protected] show on Wharton Business Radio on SiriusXM channel 111.

An edited transcript of the conversation follows.

[email protected]: I wanted to start with an old line that has been around forever: “Don’t sweat the small stuff.” It seems like the opposite is true, correct?

Martin Lindstrom: Absolutely. The issue right now is that the corporate world has become completely blinded by Big Data. But it’s very, very hard to describe emotions using data. That is where the issue is. A great example of how powerful Small Data is, in fact, the story back to 2002 where the Lego company was almost going bankrupt. What they did was rely on Big Data. They concluded that the instant gratification generation would kill their product. So they changed the size of the small, tiny bricks to huge building blocks. In 2003, the company was almost going into bankruptcy mode.

What happened was that the company decided to go into the homes of consumers across Europe. They met up with this young kid, an 11-year-old German boy, and they asked him, “What are you most proud of?” The kid replied back, “This pair of sneakers.” He showed them an old, worn-down pair of sneakers. Then he said why. He said, “Well, because it shows I’m the best skater in town. If I slide down the skateboard, I am number one, and this is my evidence.” [Inspired that conversation with the boy, and realizing the quality of insights that could be gained by talking with individuals, Lego employed those methods and] … changed the size of the Lego bricks back to the tiny bricks, invented the Lego Movie and today is number one….

[email protected]: That’s amazing that something so innocuous as that conversation really changes the path of a major company. We have seen the unbelievable success that they have had over the last decade.

Lindstrom: Absolutely. It’s happening more and more. I think it’s fair to say if you take the top 100 biggest innovations of our time, perhaps around 60% to 65% are really based on Small Data. It’s everything from Snapchat, which was basically discovered by coincidence, to even the Post-It note. The issue here is that as we become so obsessed with Big Data we forget about the creativity. You have to remember that Big Data is all about analyzing the past, but it has nothing to do with the future. Small Data, which I define as seemingly insignificant observations you identify in consumers’ homes, is everything from how you place your shoes to how you hang your paintings. I call those the emotional DNA we leave behind ourselves…. You need the hypothesis first before you start to mine it and find correlations.

“If you take the top 100 biggest innovations of our time, perhaps around 60% to 65% percent are really based on Small Data.”

[email protected]: Please explain the difference between Big Data and what we’re talking about here with Small Data.

Lindstrom: Big Data is all about finding correlations in enormous amounts of data. An example would be back in 2012 where Google was analyzing the search algorithms and concluded that they could predict a flu outbreak a couple of days before it would happen based on people typing in the word “flu.”… The whole medical society was now preordering all their pharmaceutical products in advance because they had that warning, which was great. But just recently the Center for Disease Control concluded that Google had been completely wrong. In fact, the numbers were two times of what they should have been because people were not just typing in “flu….”

Big Data is all about finding correlations, but Small Data is all about finding the causation, the reason why. A simple question in a home would actually reveal that these numbers were probably a little bit too optimistic. That is what we forget as we become so obsessed with proving everything with numbers.

[email protected]: You share in the book a variety of different examples of this. I wanted to bring up a couple of them because the one that really jumped out first was the fact that you talk about smartphone usage. Let’s be honest: If you don’t have a smartphone, you’re very much in the minority today. The use of a smartphone can collect so much information about people right now.

Lindstrom: It absolutely can. It can tell an enormous amount about who we are and what we’re dreaming about. It can also encapsulate the users of the phone into somewhat of a conclusion about a whole nation, which I find fascinating.

One of the things I’ve done over the last 10 years is to spend a tremendous amount of time in consumer homes. It’s more than 2,000 homes I either lived in or visited across 77 different countries. You start to get a sense for what’s going on. What is fascinating is that if you take the Russian culture, for example, you will notice that they are not smiling a lot. In fact, they are very introverted. If you take the Saudi Arabian culture, you’ll notice that there is not a lot of water there. There is not a lot of greenery.

Now if I go back to the smartphone and look at the use of emojis, you will notice that the number one emoji used for Russia is a smiley. It’s actually a smiley with the hearts. The number one emoji used for Saudi Arabia happened to be a potted plant. The number one usage in UK is the wink because they have this funny, awkward British humor. A whole population can actually be squeezed into a little signal, a little piece of Small Data, which actually first makes sense when you know the culture, when you spend time in the homes. That is the fine balance we’re talking about….

[email protected]: You have worked with quite an array of companies over your career. How are they trying to use this data and reach consumers in a more effective manner? How are they affected by this shift and maybe even a growing focus on Small Data?

Lindstrom: What we started to learn right now is that those companies which are completely reliant on Big Data actually have started to have a problem. The best example is Walmart, which came up with the second profit warning just recently. They had the largest data-mining warehouse in the world, period. It gives you a good sense of where we are.

One of my clients is Lowes Foods, which is a North Carolina-based company. What they have done is to actually live with the consumer. They are living in the community to understand the Small Data, pick them up. As a result, they now have become much more focused on embedding themselves into the

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