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Algorithmic Economy: Forget Big Data. Algorithms Trump Data Any Day
Businesses in all industries are increasingly turning to high tech for innovation and as the fuel for achieving high growth. Algorithms have become the secret recipe for today’s business successes. Algorithms today are sophisticated and enable businesses to understand their customers and adopt to their needs.
Peter Sondergaard, senior vice president at Gartner, said that “algorithmic business is already here. Can you calculate the value of relationships with three billion people using smartphones? Can you calculate the value of access with 30 billion things? Can you calculate the value of trust in your relationships? If the most important thing you offer is data, you are in trouble. Big data is not where the value is. Data is certainly necessary, but it is transient. By itself it is not transformative. The organization can view you as the data keeper, but anyone can store data. Anyone can hire someone to store data and even analyze it. Data is inherently dumb. It doesn’t do anything unless you know how to use it and act with it. Algorithms are where the real value lies. Algorithms define action. Algorithms define the way the world works.”
The benefits that algorithms are providing businesses include:
- Algorithms improve business decisions and process automation.
- Algorithms are re-usable knowledge that can be consistently applied.
- Algorithms enable competitive differentiation.
Gartner predicts that “by 2017, enterprises making decisions controlled by differentiated algorithms will achieve a five per cent to 10 per cent increase in revenue. This increase will result from business and IT leaders taking risks, such as exposing core business algorithms to partners and even customers.”
