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Create competitive advantage with your data

Many executives believe that their data will be the silver bullet to adding competitive advantage. Buzzwords like AI, Machine Learning and Big Data are thrown around to create excitement and spur investment. It is very true, a company's data can be a big asset and can be used to create competitive advantage. But it is not the only part of the equation. How can companies truly harness their data to realize this competitive advantage?

Before we explore that, it is important to know that there are two parts to the equation that creates competitive advantage:

  • Network Effect

  • Data Enabled Learning

Many companies apply one, the data, without the other only to get mediocre results and questions about the ROI of their investment.

Very briefly, Network Effect is essentially increasing a customer's willingness to pay and thus increasing adoption of a product or service. Network Effect comes in two flavours: Direct and Indirect. Direct relates to the increase in benefit that a customer gets from an increase of adoption with a classic example being social media networks where the more users are a part of the network, the better the experience for the users themselves. Indirect pertains to there being two distinct groups of people who's benefit is increased at the same time as the other where an example of this being owners of a certain laptop are benefitted by increasing amounts of compatible software for that laptop. It is not to be confused with Economies of Scale where the cost efficiency increases as quantity of usage goes up. This often occurs in conjunction with Network Effect but is not the same thing.

Data Enabled Learning is the self-sustaining cycle where as more customers adopt a product or service, they provide more data to be leveraged and subsequently the data is used to create better products or services which in turn drives more customer adoption. This is not a new concept by any means but given the maturity of the cloud and various other technologies, the rate at which this cycle can happen has been sped up where in some instances, it is in real time. A great example of this is the Waze app which finds the optimal route to a destination taking into account the current traffic. It adapts in real time to the traffic conditions its users are experiencing at that very moment.

When coupled together, these two concepts can be very effective at gaining new customers, creating product innovation and driving ROI. The ultimate goal is to reach a critical mass of Network Effect where your product or service adoption shifts to the Bandwagon Effect at which time people are driven to your products and services. This point in time is critical for businesses as Jim Collins points out in his legendary book Good to Great. It is very tempting for companies to rest on their laurels and milk the status quo. This creates a weakness for a company and over time reduces their stature. Walt Disney, the man, was a big advocate of "plussing" as he called it. The concept was to always make the products and services better than they were originally designed to be even when they didn't need to so. This focus on quality, experience and innovation led to The Walt Disney Company we see today which is world renowned for its products and services from films to theme parks to cruise ships and even an institute to teach other businesses how to harness Disney's process.

With that in mind, how can we harness a company's data to create competitive advantage? Here are some key concepts to ponder when figuring out the answer to this question.

  • How much added value does the customer data add beyond the product or service that is already offered?

  • Where does the Law of Diminishing Returns affect the value of the incoming data where more may not always be better?

  • How fast does your data age?

  • Is your data proprietary and how easy is it to copy or reverse engineer?

  • How easy is it to imitate the product improvements that are derived from the data?

  • Is the data improving the product or experience for customers?

  • How fast can insights be translated into innovations?

The most critical of those questions for creating or expanding the Network Effect are the last two. Armed with these questions, companies are ready to figure out how to capture their data, what is missing from their data and how to apply their data. Companies must constantly work hard to ensure they are getting the most out of their data to deliver value to their customers in order to reach the Bandwagon Effect. They must continue to do so afterwards in order to maintain the Bandwagon Effect.

As I mentioned at the beginning, Data Enabled Learning is not a silver bullet to create a scenario where a company crushes it's competition. It does ensure that the company can keep pace with and create more opportunities to edge out the competition. It bolsters and accelerates the Network Effects required to be successful.

TMH Solutions provide cloud solutions to small and medium sized businesses. We would love to explore how we can help your business realize its Business Intelligence potential! Contact us to discuss your vision!

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