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Big data drives the daisy chain of value in today's economy

February 13, 2014

The recent death of folk music legend Pete Seeger brought to mind his beautiful song "Where Have All the Flowers Gone?" which he co-wrote with Joe Hickerson. Based in part on traditional Russian folk songs, the song's inspirational power derives from the circular simplicity of its imagery. It describes a life-and-death cycle—in other words, an existential value chain—that is as old as humanity:

"Where have all the flowers gone?...
Young girls have picked them everyone...
Where have all the young girls gone?...
Gone for husbands everyone...
Where have all the husbands gone?...
Gone for soldiers everyone...
Where have all the soldiers gone?...
Gone to graveyards, everyone...
Where have all the graveyards gone?...
Where have all the flowers gone?...
Young girls have picked them everyone."

Oddly, this song floated through my mind as I was reading the recent Forbes article "5 Things Managers Should Know About The Big Data Economy." Author Greg Satell presents a very thought-provoking list of visions, most of which originate from various business management gurus that he cites. You can read his discussion for yourself. As I was moving through it, I kept searching for a single uber-theme that unifies them all. Then I realized that, rather than a single theme, it was more of a circular chain of disruptive innovations that unify these themes. Here's my reworking of his thematics:

  • Deep-domain expertise is increasingly decoupled from business infrastructure.
  • Business infrastructure is a diminishing drag on operational agility.
  • Operational agility thrives on continuous consumption of fresh engagement data.
  • Engagement data drives fine-grained targeting.
  • Fine-grained targeting leverages open value chains.

Now, here's how I arrived at these themes (I'll save my circle-closing theme till the end of this post). I'll start by quoting each of Satell's themes verbatim, and then explain how my corresponding theme adjusts it to fit evolving realities:

  • "We Now Create Knowledge Without Expertise": That's simply not true. Deep-domain expertise is very much at the heart of the new big data economy. Domain expertise is increasingly concentrated in data scientists of all stripes. In the new economy, data scientists can bring the knowledge being harvested throughout value chains and reuse it everywhere as "next best action" process/decision logic. The difference from the past is that knowledge and expertise are less tightly coupled with specific operational roles or functions. This trend is at the heart of IBM's Smarter Planet vision. As Satell points out, "physical capital itself is becoming intelligent," lower-skilled structured tasks are being automated and even more of the higher-skilled tasks, such as healthcare diagnosis, are being done by "machines with data" (e.g., IBM Watson, which he cites). When Satell states that this "is going to require big changes in how we recruit, train and manage talent," that's exactly right. Businesses need to put data science centers of excellence at the heart of this knowledge/expertise management strategy. Hence: "deep domain expertise is increasingly decoupled from business infrastructure."
  • "We Can Attain 'Scale Without Mass' ": This is true, but has misleading connotations. It is essentially a new twist on the Schumpeterian cliche of "creative destruction." The word mass in this new formulation has a misleading connotation of stability, as if this is an enduring value being sacrificed in this brave new world. In other words, Satell is striking a nostalgic note that, in a risky new era of sudden-blooming, sudden-wilting mega-enterprises, we're losing the (dubious) stability of oldschool fixed capital investment. In fact, he underlines that point by paraphrasing a management guru's argument that "managers will have to learn to seek agility rather than stability." That's true, but it is not necessarily a new business imperative. He cites some Harvard professors as saying that "more rapid innovation helps to create a 'winner take all' environment, because now a valuable new idea can take off much more quickly." Yes, sure, but "winner take all" capitalism has been with us since the era of Rockefeller, Carnegie and so on. Anti-trust laws, instituted during that "robber baron" era, are still in place, so it's not clear whether today's winners can take all without facing down the authorities. Hence, it's better to say "business infrastructure is a diminishing drag on operational agility."
  • "Data Is The New Capital": This dictum is all about online businesses repurposing user clickstream, interaction, transactional and other so-called "data exhaust" in order to better serve consumers' needs and drive delivery of products uniquely meeting their needs. He cites Google leveraging user search data into new products and Amazon hooking consumers on cheap Kindles to better understand their content preferences. He also cites startups such as FlyOnTime.us "that are wholly built on data collected for one reason that was repurposed for another." I agree that repurposing of behavioral data from channels is a major driver of engagement and productization strategies in the new economy, but it's not as if the data alone is the capital (the resource that creates the value); that would be like claiming that the threads, not the looms, labor, factories, fabrication processes or management, were the capital underlying the first Industrial Revolution. In this new era, the capital is in the data harnessed by the algorithms, statistical models, business rules and other artifacts created by data scientists, domain experts and app developers, and executed on big data platforms in data centers and clouds. Hence, it's more useful to rework this theme into "operational agility thrives on continuous consumption of fresh engagement data."
  • "Privacy Will Become A Brand Value": This is a well-meaning statement, but I suspect that privacy protection will never be a huge differentiator for most businesses. For starters, practically every financial institution already sends privacy statements ad nauseam to customers, but I've never heard any consumer cite these in their decision to go with this or that mutual fund, bank, or credit union. And I think that Satell is seriously overstating the level of public alarm over commercial use of personally identifiable information. He says that "Most consumers are delighted to receive offers based on previous purchases, but understandably freaked out when data is used to decipher their private lives and positively enraged when they discover that these insights are sold on the open market as a commodity." Most? Freaked out? Enraged? Not to belittle serious privacy sensitivities in the age of big data, but I rarely encounter anybody in my normal life who loses sleep over commercial uses of big data. Privacy controls are essential for maintaining consumer trust, but not for ongoing consumer loyalty, retention or engagement. Hence, it's less inflammatory and more accurate to say: "engagement data drives fine-grained targeting."
  • "The Semantic Economy":  I'm not even sure what point Satell or any of the cited gurus is trying to make about a so-called "semantic economy." Near as I can tell, it has very little to do with "semantic web" and a lot to do with agile, on-demand, resource access being enabled through transparent discoverability. He says that "access is becoming universal" and then attempts to illustrate this by citing online CAD software, 3D printing, crowdfunding, and supercomputer timesharing as key use cases. He throws in a vague value-chain discussion: "digital technology has steadily increased permeability, not only within organizations and industries, but across them as well." And he throws in big data for good measure as something that's apparently "magnifying this trend." Yeesh! He seems to be talking about open value chains as essential for fine-grained, targeted assembly of complex new value in the online economy. Hence: "fine-grained targeting leverages open value chains."

Now, I bring this vision full-circle by noting that:

  • Open value chains depend on ubiquitous sharing of deep-domain expertise: As I stated here, "Big data will leverage the most open arena of all, 'crowdsourcing' cloud approaches...to pool the world’s expertise (or at least that of all the smart people in your company and/or value chain) in wide-ranging development, investigation and exploration of analytics- and data-infused business problems from all conceivable angles."

No, my circle isn't as singable as Pete's. And you wouldn't want to hear me on the banjo.

In closing, I wish you and your loved ones all a hearty kumbaya!