how to use algorithms to scale digital business
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CONFIDENTIAL AND PROPRIETARYThis presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other intended recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2016 Gartner, Inc. and/or its affiliates. All rights reserved.
How to Use Algorithms to Scale Digital Business
Chet Geschickter, Research DirectorOctober 3, 2016
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In 2020, Things Dominate!
The network of physical objects that contain embedded technology to
sense or interact with their internal state or external environment
Gartner estimates more than21 billion connected devicesby 2020.
(Around 150 new devices every second, 24/7!)
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What Is Algorithmic Business?
A way to package and productize intellectual property, knowledge and
insight in a reusable form.
Algorithms:An encapsulated set of rules that
act on data to determine an outcome.
DATA ACTIONALGORITHM
"Algorithmic business is the industrialized use of complex mathematical algorithms pivotal to driving improved business decisions or process automation
for competitive differentiation"
Can be thought of as an applet,,function or solution.
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Business Already Uses Algorithms Every Day …
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What Is Changed?
The Internet of Things creates a digital version of physical world devices.
Digital business creates new business designs through merging the
physical with the digital.
Algorithmic business applies the knowledge encapsulated in algorithms — business gets
smarter and more powerful!
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Advanced analytics creates: Outputs that can be used to
optimize or improve outcomes Mathematical algorithms that generate
repeatable results
Algorithmic business adds: Speed — how quickly transactions
can be processed Scale — number of both simultaneous
and interrelated connections
Advanced Analytics Feeds Algorithmic Business
Output
CognitionAnalysis
Data DecisionPredictiveWhat will happen?
DiagnosticWhy did it happen?
DescriptiveWhat happened?
Action
Decision Automation
Decision SupportPrescriptiveWhat should I do?
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Digital Business Is Still Evolving
Autonomous Business: The optimization of business outcomes through the inclusion of goal-seeking, self-learning artificial agents.
Web
2000
E-Business
2005
DigitalBusiness
2020
DigitalMarketing
2013
AutonomousBusiness
Algorithms
AlgorithmicBusiness
Beyond
Smart Machines
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What’s Next? Things as Customers
RequestsService
Receivesmessages
ReportsDisputes
Makes itsown purchases
Negotiates forthe best deal
ExecutesDirections
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Customers Will Also Be Autonomous
FixedTake action on behalf of parameters
set by humans
AdaptableChooseamongmultiple
options, with outcomes set by humans
AutonomousDecide and take action
independentof humans
Basic Advanced
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Autonomous Business Will…
Abstract processes, programs, people and products/services into algorithms that minimize human involvement… other than setting goals and constraints.
Drive new business disciplines, designs and models. Disrupt all industries and markets, customer relationships and economic
architectures, but at different rates.
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Constraints and Caveats
– Regulatory roadblocks
– Legal and intellectual property issues
– Employee resistance
– Developing talent for a data- and analytics-driven enterprise
– Customer backlash against poor "digital ethics"
– Algorithm "fragility," lack of data stewardship, poor execution
– Business cases to support investment
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Business Impacts and Actions
The drive to algorithmic and autonomous business will be relentless; Analytics Leaders must spearhead adoption of technology and information tools.
Digital leaders are accelerating entry into numerous industries; business leaders must address the threats by embracing "digital weaponry."
Algorithmic business supports industrial automation and should upskill jobs rather than eliminate them.
Autonomous business and things as customers will catalyze disruptions to economic architectures; Analytics Leaders must create new capabilities within their organizations.
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