Thursday, August 21, 2014

Data driven competitive advantage: Implications for consumers and enterprises

The industrial age started with competitive advantage deriving primarily from the advantages in manufacturing products/services cheaply and with good quality and selling them to consumers (usually in a vertically and horizontally integrated single enterprise). It evolved as the enterprise split away into value chains of smaller specialized enterprises to reduce cost and improve quality while collaborating to deliver the end product to the consumer. The next step was flexible high-quality manufacturing and value chain management to introduce product/services customized to various customer segments and their fickle demand as well as management of this demand through marketing and advertising which too had evolved over the previous steps. Now we have reached the next stage of this logical evolution. Now the information about customer needs and wants as they evolve is the biggest asset.
Consumers are voluntarily sharing information about themselves with various enterprises, who then (may optionally) share this information with other enterprises. We all have signed such contracts on the Internet or on paper. Sometimes such information is involuntarily provided consciously/unconsciously by consumers to enterprises (and through them to other enterprises). Sometimes such information is plain stolen and utilized by enterprises for profit making purposes. Management of this information stream, its analysis and strategic decision-making based on such analysis are driving actions across entire value chains in most industries. Essentially the primary drivers of competitive advantage in this new new world are
The ability to derive non-linear profits through leverage of high-end computing resources to gather, analyze data (about people and machines) to drive actions through the value chain is visible in multiple enterprises...Amazon and Netflix being the poster boys, but these practices are spreading through all industries and enterprises.
No human currently alive knows for sure what and how much information other humans/enteprises are now holding about him/her. One does not even keep track of how much rights over one's own information one has signed away to other humans/enterprises. Control over inferences possible from discrete information pieces is even more difficult to track. Such information and inferences are used to influence subsequent decisions. Some of my friends have expressed how our decisions and actions are being influenced day-in and day-out raising doubts about whether we are free in any meaningful manner. It is due to this that data protection regulations are becoming stricter to protect consumers, their data/information and through it - their freedom.
Data is the primary source of competitive advantage in the Internet economy. Protecting it properly is important for survival and growth. The expenses and ceremonies around data can only rise at the current moment. All industries (including offshoring and outsourcing industries) need to evolve rapidly to remain viable in face of these expenses and ceremonies.
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