how are big data and analytics shaping strategy and ... · how are big data and analytics shaping...

How are big data and analytics shaping strategyand management?

Henri Schildt

Professor of Strategy

Aalto University

9.3.2017

Some questions I have been working on

March 13, 2017 © Aalto University Executive Education 2

What is actually novel in the contemporary "digitalization" that companies now allegedly face?

How does big data influence organization and management in companies?

How does big data influence firm strategies and their sources of competitive advantage?

Digitalization ≈ Data


run and optimize

business processes

do business and

secure profitsorganize and manage

Data has significant implications how corporations...

Software is eating the world- Marc Andreessen

From prompted to unprompted data


Biggest changes in technology costs & increasing human skills

• Cost of analytics is less than10% of what it was 15 years ago

– Creating coherent and clean datasets remains a hurdle

• Talent remains scarce, but skills are steadily diffusing

– McKinsey estimates shortage of nearly 200 000 analysts and 1.5 million

analytics-proficient managers by 2020 in the United States


Kinds of data analytics


Operational Tactical Strategic

Descriptive

(reports)

Predictive

(forecasting)

Prescriptive

(tied to actions)

1

2

3

Who are our most

important customers

and how should we

serve them?

Where should

we open our

next store?

How much should

we pay to show an

ad for this user?

The source of this categorization is unclear,

the schematic has been widely used, incl.

Gartner’s reports.

How does data change how companies organize?


Dreams of omniscience


Measuring processes

and performance

Controlling

processes with data

Reducing the required

workforce

Few simple measures for

outputs

Rich digital representations

of key inputs and outputs

Smart aggregate metrics

Experienced managers

supervise processes

Digital control of tasks

Automated feedback

Key decisions made by

algorithms

Learning drives greater

employee productivity

Robots & software robots

Micro-outsourcing

Self-service design

Myopic and reactive company

Holistic and proactive company

See e.g.: Winig, L. 2016. “GE’ s Big Bet on Data and Analytics,” MIT Sloan Management Review.

Optimizing is inherently different from learning


The optimizing organization?


The learning organization The optimizing organization

Source of

advantage

Ability to gain, create, and

distribute knowledge

Ability to coordinate and make

optimal choices through

superior data and with scale

Central

challenges

Knowledge leakage,

learning traps, myopia

Lack of accurate and timely

data, optimizing the wrong

things

Design of work

roles

Rich jobs that create

opportunities for continuous

learning

Simple predictable and fixed

jobs suitable for algorithmic

control

Role of IT IT as tool used by skilled

humans

IT uses humans to achieve its

goals

Algorithmic management

• Complex real-time data on

employees enables supervision and

control through algorithms

– Employees no longer need human

managers

– Alternatively, individual managers can

have dozens of subordinates

• This has obvious economic benefits

• Equally obvious human costs


Sources: Lee, M. K., Kusbit, D., Metsky, E., & Dabbish, L. (2015). Working with machines: The impact of

algorithmic and data-driven management on human workers. Proceedings of the 33rd Annual ACM

Conference on Human Factors in Computing Systems. 1603–1612. Seoul, Republic of Korea: ACM.

Schildt,H. (2017). Big data and organizational design – the brave new world of algorithmic management and

computer augmented transparency, Innovation: Organization and Management, 19:1, 23-30.

Becoming data-driven is a cultural challenge, not just technological

Many firms follow HiPPOs (Highest Paid Person’s Opinions)

March 13, 2017 © Aalto University Executive Education 12HiPPO was popularized by McAfee & Brynjolfsson HBR article in 2012, but it has

older history dating at least to Avinash Kaushik blog in 2006.

Culture of secrecy

March 13, 2017 © Aalto University Executive Education 13See also: Grey & Costas book Secrecy at Work (2016) and their related article

(Costas & Grey, 2014. "Bringing secrecy into the open”. Organization Studies)

Culture of secrecy Culture of transparency

Knowledge is a valuable asset that

must be guarded

Speed and agility are vital and require

openness

Managers should not poke their

noses in other departments’ issues;

division of labor creates efficiency

Issues are not tied to departments;

customer and shareholder value

concerns everyone

Privacy is best dealt with by limiting

access to data

Everyone must respect privacy; misuse

dealt with retrospectively

Communications support

management perspective and

alignment around strategy

We cannot control employee

interpretations of data; dissenting views

are valuable

How does data change strategies and the sources of competitive advantage?


Managers are increasing looking towards business model innovation for growth


Process

innovation

(1800->)

Product

innovation

(1920->)

Business

model

innovation

Data changes business models


Customizable

products

Service delivery

through digital

channels

If the supplier gets

data ownership,

relationships are

longer, otherwise

shorter

Freemium models and

multi-sided platforms

Digital allows low variable

costs and rewards models

with high fixed costs

Partnering is

more crucial

for

combining

data and

monetization

Data and

customer

relationships are

central assets

Move from products to services

and solutions

Multi-sided business models and platform ecosystems

• Data-centric operations drive firms to cater for multiple

markets and become “information intermediaries”

– Low price, extremely low variable costs

– Long-term relationships to drive down cost of sales


See: Thomas, L.D.W., Autio, E., & Gann, D.M. 2014. Architectual leverage: putting

platforms in context. Academy of Management Perspectives, 28: 198-219.

Platform business models center around focused service with scale

• Storage and order fulfillment as a web-based service to clients

– “Amazon is a gigantic peripheral you can plug into your IT system”

(Amazon CEO Jeff Bezos in a letter to shareholders)


API economy?

• Application Programming Interfaces

– Simple mechanisms through which services can be requested and

delivered inside and across firms

• Practitioners (e.g. IBM) see transformative potential

– More efficient transactions

– Lacking gatekeepers, fosters innovation

• Implications for strategy and industry evolution have not really been

examined thus far in the literature; it would seem that…

– Global firms provide cheap scalable services through APIs

– Local companies combine the services into customer-oriented solutions


Thank you!

Henri schildt

[email protected]

http://www.digitalizationofmanagement.net


how are big data and analytics shaping strategy and ... · how are big data and analytics shaping...

Documents