Gartner Says We're in the Algorithmic Economy


Good news for those in the analytics community. At last week's Gartner Symposium, the theme was that big data, AI, the Internet of Things, and mobility have all combined to propel us into the Algorithmic Economy. It seems you are more important than ever.

"Algorithmic business is here," said Gartner VP, Peter Sondergaard, "Can you calculate the value of relationships with 3 billion people using smartphones? Can you calculate the value of access with 30 billion things? Can you calculate the value of trust in your relationships?" Well, the A2 community can, so good on us.

What do we do about it? Gartner is continuing to talk about bimodal (thatís their term for an IT department that has two parts -- one to keep the lights on and one to innovate), except now they're talking about a bimodal business. "New businesses are designed to combine the physical and digital worlds. Moving at two speeds. Business itself is now bimodal, "Sondergaard said, "Digital does not compete with analog. They work together. Organizations are creating separate business units to concentrate on digital."

Williams-Sonoma and the bi-modal strategy
Credit: Flickr
Williams-Sonoma and the bi-modal strategy

Credit: Flickr

In other words, Gartner thinks that if you have a traditional business based on analog technologies and legacy applications, that business is slowing you down. It is keeping you from taking advantage of real-time analytics, machine learning, AI, and robots. But instead of shuttering that business, you should let it roll on. But build a new business, a digital business ready for the internet of things based on algorithms and machine learning to compete in the digital world.

One example they gave of this in practice is Williams-Sonoma. In an era when most retailers have been losing share to online stores and brick and mortar stores have suffered, half of Williams-Sonoma revenue is from digital. They took share from others. They didn't do this by reworking their brick and mortar stores. Instead they built a separate digital strategy.

"Your approach to digital reveals a lot about your maturity with data," Sondergaard said, "Consider where you start. An established business model attempts to adapt to the customer needs at the moment. They build processes on top of old processes. In contrast, digital organizations start with customer behavior. They don't ask what the customer wants, but what the customer does."

That's where algorithms come in. According to Sondergaard, "The new platform is less on data gathering and more on intelligent algorithms that react to the data." That data is coming from what they call the "digital mesh," a constantly growing network of connections between people, devices, and algorithms. And by necessity, more and more of those interactions will involve smart algorithms to keep up with the pace of business. You simply can't wait for humans to check all your data and make a decision. You'll need algorithms for pricing, stocking, shipping and a million other tasks that can't wait for a human to parse enormous chunks of data.

"By 2020 smart agents will facilitate 40% of customer interactions," Sondergaard said. By that he means intelligent devices like Cortana, Siri and Watson (and less chatty ones) actually making decisions for us. Think the Amazon "people who liked this, also liked that" concept except the machine may actually do the purchasing on our request.

I'll have more coverage on some of the developments and changes in BI, analytics, and data in the coming weeks, but for now, Gartner suggests a couple of things you need to do to get ready for the age of algorithms.

First, you need to inventory your algorithms. Every business has a secret sauce whether it is a real recipe for a product like Coke or the analytics you use to get your product to market faster than the competition. Outline those algorithms that are most important to your business.

Then assign ownership of those algorithms. Gartner suggests these be owned by the Chief Analytics of Chief Data Officer. Most importantly, they need to be nurtured as the key to the business.

Most importantly, you need to decide which algorithms to make public and which to keep private. Public? Yes, public. Gartner believes that the algorithmic economy is going to be one of give and take and that the giving and taking of algorithms and data sets will multiply their effect. What you really want to do is place yourself in the center of a dense digital mesh, a network of customers and machines around a product.

As an example, Tesla made their patents for super chargers available to the public. They didn't do it because they were nice. They knew research in super chargers would help them. And in fact, Ford and Toyota have not only shared their data on super chargers but have opened other patents as well. A perfect example of multiplying the effect of data and algorithms to the economic benefit of all.

But whether you're ready to throw your algorithms out to the public or not, this is a key moment for the analytics community. Analytics just got put on the top of mind of CIOs all across the country. Are you ready to respond with real-time analytics, prescriptive analytics, machine learning, and AI? If not, it is time to get ready.

David Wagner, Community Editor

David has been writing on business and technology for over 10 years. He has been Community Editor at InformationWeek.com and was most recently Managing Editor at Enterpriseefficiency.com. At E2, he covered leadership, Big Data, and mobility. He also led the community building efforts. Before E2, he was an Assistant Editor at MIT Sloan Management Review, where he covered a wide range of business topics including IT, leadership, and innovation. He has also been a freelance writer for many top consulting firms and academics in the business and technology sectors. Born in Silver Spring, Md., he grew up doodling on the back of used punch cards from the data center his father ran for over 25 years. In his spare time, he loses golf balls (and occasionally puts one in a hole), posts too often on Facebook, and teaches his two kids to take the zombie apocalypse just a little too seriously.

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Re: Where WS $ are coming from
  • 11/18/2015 11:49:50 PM
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Perhaps when Uber gets into package delivery heavily, there will be repurcusions to their ineptitude. In the very least, I know that Uber's tracking will be better ... and by better, I mean more satisfying in a refresh-every-minute-and-something-happens kind of way.

Re: Where WS $ are coming from
  • 11/18/2015 8:49:36 AM
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@Broadway. Right, forget about the apology. If you got a real human to speak to on the phone they would try to convince you that the delay was your fault, not the company's

Re: Where WS $ are coming from
  • 11/17/2015 9:48:00 PM
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It's part driver issue, part system issue. The drivers' are at fault for either not using their heads or not caring or both. The system is at fault because there's no built-in responsibility or consequence. Here's an example. I can't tell you the number of times I've paid to have something delivered to my office by 10am next day. When that package doesn't show up until 2pm, or worse yet, the next day, try getting some sort of refund or even apology as an individual. Driver just shrugs his shoulders, and trying to get someone on the phone ... fuggetaboutit.

Re: Where WS $ are coming from
  • 11/17/2015 10:23:42 AM
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@James they also still fall into delivering to the wrong address. I had packages delivered to the same number as my house on the next block. The woman who lives there called me to let me know because, she said, UPS refused to retrieve the packages. But sometimes mysteries persist. I noticed on my account that it showed a particular item as having shipped. I called to say that I never received it. The rep said it did go out and so must have gotten lost. To get it out of the system and issue a refund, she entered it as a return.

Re: Where WS $ are coming from
  • 10/26/2015 11:24:29 AM
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@kq4ym. I'm not surprised by the issue you had with package delivery. It's not just fedex; what I've noticed is that the delivery companies have done a great job of optimizing their sorting, location, and route processes. However, I've personally encountered a lot of problems with what I'll call "the last 20 feet". If they have an issue with delivery (like nobody home) the systems fall apart. Is that partly a human (driver) problem? Partly a digital issue, like you encountered? Probably both, but maybe that's the next issue for them to address.

Re: Where WS $ are coming from
  • 10/26/2015 10:01:09 AM
NO RATINGS

The bimodal model got me thinking this week of a really terrible experience with FedEX's online pages. Starting with a notice on my door that a signature was needed for delivery, I went to the web page to sign on to their messenger service to request a re-delivery. After many tries it wouldn't verify me, so no luck there. Then I tried the "chat" feature thinking I would get a real person. Nope. They've got the world's worst intelligent "agent" responding with canned text to my questions. And none of the responses were relevant. Bimoded didn't work for me with FedEX. I was shocked Fedex was apparently  satisified with their digital failure.

Re: Where WS $ are coming from
  • 10/16/2015 1:20:29 PM
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Terry what's also interesting is their focus on the customer experience with personalized services across their brand. Both Pottery Barn and Williams and Sonoma offer in home complementary decorating help with no obligation to purchase. Wes Elm is offering installation services for TVs pictures drapes at a fixed fee all building on the relationship of a person and the customer. The stores Williams and Sonoma also feature in store classes that are complementary and build the user experience. This differniates themselves from thier competitors and builds value and worth in their brand.

Re: On Autopilot
  • 10/15/2015 12:33:19 PM
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@jamescon- The problem with algorithms advising and not executing is that as algorithms get faster, having a person checking every decision is impossible. Take automated trading as an example. If you had someoe have to approve every trade with a click, the whole system would fall apart.

the same is starting to happen in manufatcuring and elsewhere. Waiting for the human to cach up to the algortihm is a losing proposition.

Re: Where WS $ are coming from
  • 10/15/2015 12:31:30 PM
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@Terry- Gartner's story is that that subsidiary is part of their "business at two speeds strategy." It relies havily on innovation and big data and allows them to be more agile than they can with the tradiional business. Your mileage may vary, but that's part of the story in hteir mind.

Where WS $ are coming from
  • 10/14/2015 2:15:03 PM
NO RATINGS

Williams Sonoma continued success in brick-and-mortar revenues has less to do with its own brand and says more about the strength of its West Elm subsidiary geared toward higher-end shoppers ("aspirational consumers," in demographic-speak). Regardless, it's still an interesting story to see a retailer -- any retailer -- thriving in an era of intense disintermediation.

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