The Knowledge Exchange / Business Analytics / Strength in numbers: Data-driven decision making

Strength in numbers: Data-driven decision making

Erik Brynjolfsson, Director of the MIT Center for Digital Business, speaking at The Premier Business Leadership Series in Amsterdam.

What value does your organization place on business analytics to help understand and solve problems? MIT Professor Erik Brynjolfsson has spent years researching the value of business analytics to business and has quantitative data demonstrating why businesses that use data-driven decision making perform measurably better than those that don’t.

He shared those findings in a Premier Business Leadership Series Amsterdam keynote titled: Strength in Numbers: Data-Driven Decision Making. According to Erik, most revolutions in science begin with better methods of measurement. When we can see (and measure) new things, we are driven to seek answers and thus new ways of thinking and operating.

Now we have a flood of ‘big data’ that we can capture, store and measure, all of which enables new capabilities.

For example, online retailers can measure far more about their customers than their traditional bricks-and-mortar counterparts — giving them new options to innovate and transform their relationships with customers.

But this revolution of big data and big measurement is still in the early stages, notes Eric. Innovative organisations are not only adopting new technologies, they are creating new corporate cultures where there’s more reliance on data than experience or opinion. But it also gives organisations opportunities to predict the future with far greater accuracy than before. Citing an example of house purchases, Erik described how a model they generated to predict house purchases outperformed the experts in the field.

In Eric’s studies, organisations that relied on data-driven decision-making performed at rates 4-6% higher than their peers in a number of different categories. This was demonstrated to statistically- significant levels. But, those that are most likely to perform at the highest levels have data, expertise and leadership in abundance.

Erik thinks that ‘nano-data’ will be the successor to big data – i.e. the ability to make measurements and analysis on the basis of groups of one, but doing that within the deluge of big data.

For more, check out Erik Brynjolfsson’ blog: http://www.economicsofinformation.com/ or follow him on Twitter: @erikbryn

 

 

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3 Comments

  1. Posted May 17, 2012 at 5:44 pm | Permalink

    Thanks for sharing these valuable insights Peter!
    Analytics is vital for every business. Results have to be measured thus improving the process of decision making. Retailers like WalMart, Tesco, Metro etc. have whole business analytics departments. Their responsibility lies in interpreting the data correctly, providing a good platform to the Managment / Board in order to take wise decisions.

    • Peter Dorrington, Director of Marketing Strategy (EMEA), SAS
      Posted May 18, 2012 at 1:14 pm | Permalink

      Hello Krisz,
      Thank you for your reply. You raise an interesting and valid point. Some of the speakers at the conference talked about the role of the ‘Data Scientist’. In the opinion of some, this is the role that can bridge the gap between the analyst and the business leader, but I think that it is a little less clear cut than that; it is my contention that all business leaders need to be aware of the power and limitations of analytics and all analysts need to be able to advice the business on the types of questions that could and should be asked. As Sir Terry Leahy said in his keynote presentation – facts are not open to subjective opinion or bias. However, once we seek to ascribe meaning to analytical insights we enter the realm where humans can add really value. Erik hits the nail on the head when he described how humans competing with machines out-perform either individually. There is not a computer on the planet (that I am aware of) that is ‘creative’ and there are precious few humans who can deal with large volumes of data and discover significance within it.
      So, in summary then, I think the examples you cite are those of great organisations who rely on and use data and analysis in ways that support and execute the strategies of creative leadership teams. For them, the journey begins with ‘bring me the data’ and ends with measurable results that outperform those of their less analytically-minded competitors.

2 Trackbacks

  1. [...] spoke about his research that quantifies the performance impact of making data-driven decisions. He found organizations that [...]

  2. By Big data makes everything more complex on August 6, 2012 at 1:55 pm

    [...] of this together can add up to big results; in his presentation ‘Strength in Numbers: How Data-Driven Decision-Making Drives Innovation and Productivity,’ Professor Erik Brynjolfsson (Director at the MIT Center for Digital Business) explained how his [...]

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