Can Big Data Deliver Added Value?

Yes, but the key is leveraging it to allow leaders to make more informed decisions on how to create, deliver, and capture more value in both the short and long term.

Technologies such as the printing press and the steam engine were catalysts in creating step changes in the societal, political, and economic landscapes of their respective eras. Today, we find ourselves in the midst of a particularly prolonged period of instability as worldwide adoption of disruptive innovations such as the Web browser, social media, and the smart phone have converged to create a global digital nervous system that is profoundly redefining how we connect, communicate, coordinate, collaborate, and take collective action.

In today’s connected, complex, and constantly changing business environment, leaders are challenged to enable their organizations to become more responsive to unanticipated market shifts, more resilient to unpredicted disruptions, and more adaptive to unforeseen fall-offs in market adoption. This means leaders must become more adept and agile in deciding how to optimally allocate their scarce resources and capabilities against the ever-expanding array of opportunities and threats that face their business.

To survive and thrive in the era of Digital Darwinism, leaders must not only make more informed and timely decisions, they also must ensure that the decisions they make better balance the age-old organizational tension of exploiting their core business to deliver the required returns in the short term and exploring new value frontiers that will become sources of sustainable competitive advantage for the firm over the long term. The promise of “big data” is that it will allow leaders to make more informed decisions on how to create, deliver, and capture more value in both the short and long term.

In examining the behavior of organizations adopting break-though technologies, Peter Drucker popularized the notion of the Routinization Trap: a recurring pattern in which firms apply radically new technologies to automate existing business models rather than discover new ones. The printing press was used for many decades to print Bibles until someone had the bright idea to use it to print other books, too. Similarly, the steam engine first was used to power cotton gins in Britain before someone had the bright idea to use it to power a locomotive. In both these cases, the transformational power of the technology was not fully realized until decades after it initially was applied to automate an existing routine.

As the amount of data that surrounds our private and professional lives has grown from a trickle to a torrent over the last few decades, the ability to discover correlations through computation and analytics clearly holds the promise to deliver added value. The problem with this promise, however, is that big data primarily is being leveraged on the exploit side of the enterprise equation. In short, the current application of big data has fallen prey to the Routinization Trap, where it largely is being leveraged to find ways to maximize value within existing business models as opposed to identifying the new models that will create a step change in economic value creation.

With the ever-increasing pressure to deliver short-term results and the high likelihood that increased analysis of growing piles of data will reveal tangible opportunities to improve operational efficiency, leaders may be unconsciously lured into spending too much of their time attending to the improvement of their existing business. In its current incarnation, the application of big data runs the risk of diverting leaders’ attention in unfair measure toward the exploitation of the current business.

In the era of Digital Darwinism, leaders must recognize that the true sweet spot for organizations seeking to survive and thrive in an increasingly complex and connected business context lies in constantly striving to find the right balance between exploiting what we know and exploring what we don’t. The first step in achieving this illusive state of equilibrium lies in avoiding the trap of leveraging big data to merely mine the past at the expense of creating the future.

Tony O’Driscoll is regional managing director of Duke CE in Singapore, where he focuses on identifying and implementing next-generation learning strategies and approaches that accelerate the development of Leadership Sense- Abilities in this rapidly growing part of the world.