Plunging into a sea of data

Press release - 4/20/2017

Artificial intelligence, connected objects, machine learning and algorithms are all front page news today.

And they have one thing in common: big data. This describes the massive increase in IT data volume in recent years. However, incessant data flows mean nothing unless they can be analysed and used. Some players, whatever the sector, are finding that big data is a gold mine of value creation.

A not-to-be-missed development

90% of today's data were created in the last 2 years and Gartner, the US IT research firm, sees data generation soaring by 800% in the next 5 years. Data sources are all around us, in messages we send, videos we put on line, climate information, GPS signals and on-line transactions, for example. Between 50 and 100 billion objects will be connected by 2020[1]

Big data is a major challenge for companies, a not-to-be-missed development that is at least as important as the advent of the internet was in its time. Both IT sector firms and more traditional companies can achieve strategic advantages by digitalising their business. This can mean factoring in many more parameters to optimise the decision-making process, improving areas like cost cutting and productivity gains, creating new products and enhancing client relations and knowledge for more highly targeted marketing strategies. 

The first to take the plunge into the sea of data were, unsurprisingly, IT firms. For some time now, leading groups like IBM, Cisco and Microsoft have been building datacenters and dedicated IT analysis solutions. Sectors like insurance and autos are also making huge efforts to collect as much data on customer behaviour as possible so as to optimise risk analysis and identify new markets. 

The data explosion also represents an unprecedented opportunity for innovation in healthcare by identifying disease risk factors, providing assistance in diagnosing, choosing treatments and monitoring their efficiency, and helping areas like pharmacovigilance and epidemiology, etc. Thanks to big data, a so-called “4 P” or predictive, preventative, personalised and participative approach to healthcare is emerging.

[1] Source: IBM and Oliver Wyman.

Big Data will fuel tomorrow's cars

Sensors have long been present in our cars, helping, for example, to measure tyre pressure and oil and petrol levels. But the arrival of big data has completely transformed the sector, making driving safer, more responsible and more ecological. Today’s new cars leave the factory equipped with, on average, 100 sensors, including radars, high-resolution cameras and optical and thermal sensors. They now offer applications to help driving like trajectory control, ready-alert brakes, gear changing to help reduce petrol consumption and fatigue detection solutions to encourage drivers to take a rest. 

An auto industry forerunner like Munich-based BMW Group is looking to get the most out of the data revolution by building a digital ecosystem to improve the customer experience. The firm has put innovation at the heart of its growth strategy for more than 100 years. And to mark its first century of existence in 2016, management unveiled its “Vision Next 100” to imagine what tomorrow's cars would look like. Thanks to big data, the connected car – such as the recently launched BMW series 7 and 5- is already a reality for the group’s customers but BMW has no intention of resting on its laurels. 

BMW Group has already passed several milestones in its “Number One Next” plan focused on Autonomous, Connected, Electrified and Shared/Services (ACES). Hefty investments have been made in driverless cars and a brand new campus, the FIZ (Forschungs- und Innovationszentrum) employing 2,000 researchers and engineers, has been built next to its R&D centre in Unterschleissheim, near to Munich. The group has rolled out a free-floating car rental service called DriveNow, a ParkNow system and ChargeNow, a network of charging stations. It also teamed up with Audi and Mercedes to buy the mapping data company Here so as to improve data precision, accelerate real time traffic analysis and offer new services like helping drivers to locate available parking spaces. And thanks to the joint venture between BMW, Intel and Mobileye, a fleet of 40 driverless cars will take to the road in real conditions from this summer..

An investment theme in its own right

Economic agents are today in the middle of a deep and inevitable transformation that nobody can ignore. Some firms will prove better than others in benefiting from the data revolution. This makes big data an investment theme in its own right, one capable of creating very strong value. Tapping into this successfully means picking the companies which will be impacted directly or those with the skills to transform their business model.

We believe the right approach is to adopt a pragmatic and selective view when valuing these companies and assessing the products and solutions they offer. Our objective is to identify suppliers or users which will benefit from these opportunities. Our stock picking skills are our main source of added value.

[1] Source: IBM and Oliver Wyman.
April 2017. This document is non-binding and its content is exclusively for information purpose. 
WARNING: The data, comments and analysis in this document reflect the opinion of Edmond de Rothschild Asset Management (France) and its affiliates with respect to the markets, their trends, regulation and tax issues, on the basis of its own expertise, economic analysis and information currently known to it. However, they shall not under any circumstances be construed as comprising any sort of undertaking or guarantee whatsoever on the part of Edmond de Rothschild Asset Management (France). Any investment involves specific risks. All potential investors must take prior measures and specialist advice in order to analyse the risks and establish his or her own opinion independent of Edmond de Rothschild Asset Management (France) in order to determine the relevance of such an investment to his or her own financial situation. 
The information about the companies cannot be assimilated to an opinion of Edmond de Rothschild Asset Management (France) on the expected evolution of the securities and on the foreseeable evolution of the price of the financial instruments they issue. This information cannot be interpreted as a recommendation to buy or sell such securities.

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