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You can’t manage what you don’t measure.

There’s much wisdom in that saying, which has been attributed to both W. Edwards Deming and Peter Drucker, and it explains why the recent explosion of digital data is so important. Simply put, because of big data, managers can measure, and hence know, radically more about their businesses, and directly translate that knowledge into improved decision making and performance. Consider retailing.

Booksellers in physical stores could always track which books sold and which did not. If they had a loyalty program, they could tie some of those purchases to individual customers. And that was about it. Once shopping moved online, though, the understanding of customers increased dramatically. Online retailers could track not only what customers bought, but also what else they looked at; how they navigated through the site; how much they were influenced by promotions, reviews, and page layouts; and similarities across individuals and groups. Before long, they developed algorithms to predict what books individual customers would like to read next—algorithms that performed better every time the customer responded to or ignored a recommendation. Traditional retailers simply couldn’t access this kind of information, let alone act on it in a timely manner. It’s no wonder that Amazon has put so many brick-and-mortar bookstores out of business.