Entrepreneurship Why Big Data Won’t Improve Business Strategy Published 2 years ago on October 7, 2016 By The Asian Entrepreneur Authors & Contributors Share Tweet Over the years, I’ve heard a lot of people talk about algorithmic business and how big data will improve business strategy. For most, I strongly suspect it won’t. To explain why, I’m going to have say certain things that many will find uncomfortable. To begin with, I’m going to have to expand on my Chess in Business analogy. I want you to imagine you live in a world where everyone plays Chess against everyone else. How good you are at Chess really matters, it determines your status and your wealth. Everyone plays everyone through a large computer grid. Ranks of Chess players are created and those that win are celebrated. Competition is rife. The oddest part of this however is that no-one in this world has actually seen a Chessboard. When you play Chess in this world, you do so through a control panel and it looks like this … Each player takes it in turn to press a piece. Each player is aware of what piece the other player pressed. And so the game continues until someone wins or it is a draw. Unbeknownst to either player, there is actually a board and when they press a piece then a piece of that type is randomly selected. That piece is then moved on the board to a randomly selected position from all the legal moves that exist. White’s opening move might be to select ‘Pawn’, one of White’s eight pawns would then be moved one or two spaces forward. But all of this is hidden from the players, they don’t know any of this exists, they have no concept there is a board … all they see is the control panel and the sequence of presses. However, within that sequence people will find ‘favourable’ patterns e.g. the best players seem to press the Queen as often as possible! People will come up with their own favourite combinations and try to learn the combinations of other winners! “When your opponent moves the Knight, you should counter with Queen, Queen, Rook” etc. People in this world would write books on secret knowledge such as “The art of the Bishop” or “The ten most popular sequences of Successful Winners”. The more you aggregate data from different games, the more patterns will be proclaimed. Some through experience might even gain a vague notion of a landscape. Let us suppose one of those people – by luck, by accident or by whatever means – twigs that a landscape does exist and somehow finds a way to interact with it. Imagine one day, you play that individual but they can see something quite remarkable … the board. You start off planning to use your favourite opening combination of Pawn, Pawn, Knight, Bishop but before you know it, you’ve lost. Obviously, this was just luck! But every time you play this player, you lose and you lose fast. You keep recording their sequences. They beat you in two moves – Pawn (b) and Queen (b) (known as Fool’s Mate) or they beat you in four moves – Pawn (b), Queen(b), Bishop(b), Queen(b) (known as Scholar’s mate) but you can’t replicate their success even though you copy their sequences, it never works and you keep on losing. People will start to seek all different forms of answers to explain what is happening. Maybe it’s not just the sequence but the way that the player presses the button? Maybe it’s timing? Maybe it’s what they had for lunch? Maybe it’s their attitude? They seem to be happy (because they’re winning). Is happiness the secret to winning? All sorts of correlations and speculations will be jumped upon. However there is no luck to this or special way of pressing buttons. The player controlling Black simply has far greater situational awareness. The problem for the player controlling White is they have no real understanding of the context of the game they are playing. White’s control panel is just a shadow of the landscape and the sequence of moves lacks any positional information. When faced with a player who does understand the environment then no amount of large scale data analysis on combinations of sequences of presses through the control panel is going to help you. I need to emphasise this point of understanding the landscape and the importance of situational awareness and so we’ll now turn our attention to Themistocles. The battle of Thermopylae (the tale of the three hundred) and the clash between the Greeks and the mighty army of Xerxes has echoed throughout history as a lesson in the force multiplier effect of landscape. Themistocles devised a strategy whereby the Athenian navy would block the straits of Artemision forcing the Persians along the coastal road into the narrow pass of Thermopylae where a smaller force could be used to hold back the vastly greater Persian numbers. I’ve provided a map of this below. Now, Themistocles had options. He could defend around Athens or defend around Thebes but he chose to block the straits and exploit the landscape. Each of Themistocles’ options represents a different WHERE on the map. In the same way that our enlightened Chess player has many WHEREs to move pieces on the board. By understanding the landscape you can make a choice based upon WHY one move is better than another. This is a key point to understand. WHY is a relative statement i.e. WHY here over there. However, to answer the question of WHYyou need to first understand WHERE and that requires situational awareness. Now imagine that Themistocles had turned up on the eve of battle and said – “I don’t know WHEREwe need to defend because I don’t understand the landscape but don’t worry, I’ve produced a SWOT diagram” How confident would you feel? Now in terms of combat, I’d hope you’d agree that a strategy based upon an understanding of the landscape is going to be vastly superior than a strategy that is derived from a SWOT. The question you need to ask yourself however is … … what do we most commonly use in business? SWOT or MAP? The problem that exists in most businesses is that they have little or no situational awareness. Most executives are even unaware they can gain greater situational awareness. They are usually like the Chess Players using the Control Panel and oblivious to the existence of the board. I say oblivious because these people aren’t daft, they just don’t know it exists. But how can we be sure this is happening? Language and behaviour is often our biggest clue. If you take our two Chess players (White with little or no situational awareness, Black with high levels) then you often see a marked difference in behaviour and language. Those with high levels of situational awareness often talk about positioning and movement. Their strategy is derived from WHERE and so they can clearly articulate WHY they are making a specific choice. They tend to use visual representation (the board, the map) to articulate encounters both present and past. They learn from those visualisations. They learn to anticipate others moves and prepare counters. Those around them can clearly articulate the strategy from the map. Those with situational awareness talk about the importance of WHERE – “we need to drive them into the pass”, “we need to own this part of the market”. They describe how strategy is derived from understanding the context, the environment and exploiting it to your favour. The strategy always adapt to that context. Those with low levels of situational awareness often talk about the HOW, WHAT and WHEN of action (e.g. the combination of presses). They tend to focus on execution as the key. They poorly articulate the WHY having little or no understanding of potential WHEREs. They have little or no concept of positioning and they often look to ‘copy’ the moves of others – “Company X gained these benefits from implementing a digital first strategy, we should do the same”. Any strategy they have is often gut feel, story telling, alchemy, copying, magic numbers and bereft of any means of visualising the playing field. Those around them often exhibit confusion when asked to describe the strategy in any precision beyond vague platitudes. Those who lack situational awareness often talk about the importance of WHY? They describe how strategy should be derived from your vision (i.e. general aspirations). They often look at you agog when you ask them “Can you show me a map of your competitive environment?” Back in 2012, I interviewed 160 different high tech companies in Silicon Valley looking at their level of strategic play (specifically their situational awareness) versus their use of open (whether source, hardware, process, APIs or data) as a way of manipulating their environment. These companies were the most competitive of the competitive. What the study showed was there was significant difference in the levels of strategic play and situational awareness between companies. When you add in market cap changes over the last seven years then those with high levels of strategic play had performed vastly better than those with low levels. Now this was Silicon Valley and a select few. I’ve conducted various interviews since then and I’ve come to conclusion that less than 1% of companies have any mechanism of improving or visualising their environment. The vast majority suffer from little to no situational awareness but then they are competing in a world against others who also lack situational awareness. This is probably why the majority of strategy documents contain a tyranny of action and why most companies seem to duplicate strategy memes and rely on backward causality. We should be digital first, cloud first, we need a strategy for big data, social media, cloud, insight from data, IoT … yada yada. It’s also undoubtably why companies get disrupted by predictable changes and are unable to overcome their inertia to the change. At the same time, I’ve seen a select group of companies and parts of different Governments use mapping to remarkable effects and discovered others who have equivalent mental models and use this to devastate opponents. Now, don’t believe we’re anywhere near the pinnacle of situational awareness in business – far better methods, techniques and models will be discovered than those that exist today. Which brings me back to the title. In the game of Chess above, yes you can use large scale data analytics to discover new patterns in the sequences of presses but this won’t help you against the player with better situational awareness. The key is first to understand the board. Now certainly in many organisations the use of analytics will help you improve your supply chain or understand user behaviour or marketing or loyalty programmes or operational performance or any number of areas in which we have some understanding of the environment. But business strategy itself operates usually in a near vacuum of situational awareness. For the vast majority then I’ve yet to see any real evidence to suggest that big data is going to improve “business strategy”. There are a few and rare exceptions. For most, it will become hunting for that magic sequence … Pawn, Pawn … what? I’ve lost again? ________________________________ About the Author This article was written by Simon Wardley. Simon is a researcher for the Leading Edge Forum, a global research community focused on identifying and adopting next business practices. He writes constantly at his personal blog, see more. Related Topics:businessFocusimportanceIoTlanguageMarketingmeStorysuccesstech Continue Reading You may like Jason Feng, Co-Founder of Pillpresso Will Financial Liberalisation Trigger a Crisis in China? Georges Tchokoua Women on Top in Tech – Chrissa McFarlane, Founder and CEO of Patientory Why Angel Investors are Shaking Up the Global Startup Scene Emmanuelle Norchet Callum Connects Jason Feng, Co-Founder of Pillpresso Published 22 hours ago on April 26, 2018 By Callum Laing Mr. Jason Feng is re-engineering the healthcare industry. What’s your story? I am an engineer at heart. I enjoy the process of problem solving and have been actively developing innovative solutions to existing problems. Me and my co-founder settled on the problem of poor medication adherence among the elderly. This was a problem which struck a chord with us because we all have loved ones who have to take multiple medications on a daily basis. The complex medication regimen, coupled with declining cognitive abilities of the elderly tend to exacerbate the lack of medication adherence, which may lead to disease relapse and hospital readmissions, ultimately increasing the burden to caregivers and the society. What excites you most about your industry? The problem of medication adherence is not a new one in the healthcare industry. In fact, lack of medication adherence is a well-researched problem in many countries. Solutions which have been developed to address this problem face three major issues: Entrenched mindset within the healthcare system, many of which are used to and unwilling to change from the legacy systems which were implemented decades ago. Complex nuances in healthcare delivery across different countries, making it hard to “copy” and “paste” solutions which have worked well in other areas. Because poor medication adherence is multifactorial, and many solutions focus solely on a few aspects, and do not employ a holistic approach. Nevertheless, entering this industry at this time excites me because we are in the midst of a global shift in healthcare models; one where the industry is moving away from a service-based model, towards a more value-based model. This shift means that traditional players such as insurance companies and pharmaceuticals are under increasing pressure from patients and payers to demonstrate the value of their products under real-world use. Medication adherence data is one crucial missing link in this puzzle to deliver better care to patients. Being able to build a business around these incumbents and pioneer a new way of care is something which I look forward to. What’s your connection to Asia? I am a Singaporean. Most of my experiences throughout my life have been in Asia. Favourite city in Asia for business and why? I have not worked in other Asian countries outside of Singapore, so I can’t comment on other Asian countries too much. Singapore has a relatively low barrier for starting a business, and all business rules and regulations are clear and transparent. The startup ecosystem is also rather comprehensive and easily accessible. Being a small country, Singapore has a very limited market for products and services. However, due to its size and efficiency, it serves as an excellent test bed for new ideas. Being a travel hub, travelling to other Asian countries is cheap and easy. What’s the best piece of advice you ever received? Fail fast, fail often. The greatest lessons are never learnt through success. Who inspires you? Elon Musk What have you just learnt recently that blew you away? Successful launch of Falcon Heavy and the recovery of the 2 side cores. The way the 2 cores landed was like something you’d only see in CGI. Very well calculated. If you had your time again, what would you do differently? Applied for NOC (NUS Overseas College) How do you unwind? Go rock climbing. Favourite Asian destination for relaxation? Why? Nepal. I’m an outdoors guy. Being able to trek around the Himalayas is probably the best form of relaxation for me. Everyone in business should read this book: Creative confidence, by the Kelly Brothers Shameless plug for your business: Pillpresso is an award-winning health-tech startup that aims to improve medication adherence. We’re developing a medication management system that empowers seniors to manage their medicines independently and deliver proactive healthcare in the community through technology. Comprising individuals with complementary skills across business, engineering and medicine, our team is driven by a desire to improve healthcare and the human condition. Grand Prize Winner of the 2017 Tech Factor Challenge https://www.opengovasia.com/articles/8072-top-4-grand-prize-winners-for-3rd-edition-of-ageing-in-place-tech-challenge-announced-in-singapore Grand Prize Winner of the 2015 Modern Aging https://www.channelnewsasia.com/news/business/3-teams-receive-s-125-000-of-seed-funding-for-elderly-friendly-i-8246318 How can people connect with you? [email protected] — This interview is part of the ‘Callum Connect’ series of more than 500 interviews Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’. Connect with Callum here: twitter.com/laingcallum linkedin.com/in/callumlaing Download free copies of his books here: www.callumlaing.com Continue Reading Entrepreneurship Will Financial Liberalisation Trigger a Crisis in China? Published 2 days ago on April 25, 2018 By The Asian Entrepreneur Authors & Contributors The People’s Republic of China (PRC) has been liberalizing its financial system for nearly 4 decades. While it now has a comprehensive financial system with a large number of financial institutions and large financial assets, its financial policies are still highly repressive. These repressive financial policies are now a major hindrance to the PRC’s economic growth. The PRC is at the beginning of a new wave of financial liberalization that is necessary for supporting the country’s strong economic growth. The country’s leaders have already unveiled a comprehensive program of financial reform, which includes 11 specific reform measures in three broad areas: creating a level-playing field (such as allowing private banks and developing inclusive finance), freeing the market mechanism (such as reforming interest rate and exchange rate regimes and achieving capital account convertibility), and improving regulation. But could financial liberalization lead to a major financial crisis in the PRC? What would be the consequences for financial stability as the PRC moves to further liberalize its financial system? If the PRC repeats the painful experiences of Mexico, Indonesia, and Thailand, then it might not be able to achieve its original goal of overcoming the middle-income trap. International experiences of financial liberalization, especially those of middle-income economies, should offer important lessons for the PRC. In our new research, based on cross-country data analysis, we find that financial liberalization, in general, reduces, not increases, financial instability. This powerful conclusion is valid whether financial instability is measured by crisis occurrence or by fragility indicators, such as impaired loans and net charge-offs. The only exception is that financial liberalization does not appear to significantly lower the probability of systemic banking crises, although it does lower the risk indicators for banks. These results have higher statistical significance and are greater in magnitude for the middle-income group than for the entire sample. The insignificant impact on banking crises, however, should be interpreted with caution. One of the possible explanations is that under the repressed financial regime, the government supports banks with an implicit or explicit blanket guarantee. This reduces the probability of an explicit banking crisis, although the banking risks may be even greater because of the moral hazard problem. In fact, government protection of banks could also increase the probability of a sovereign debt crisis or even a currency crisis before financial liberalization. If financial liberalization significantly reduces the likelihood of financial crises, especially in middle-income economies, then why did some middle-income economies experience financial crises following liberalization? We further investigate whether the pace of liberalization, the supervisory structure, and the institutional environment matter for outcomes of financial liberalization. We obtain three main findings. First, an excessively rapid pace of financial liberalization may increase financial risks. The net impact on financial instability depends on the relative importance of the “liberalization effect” and the “pace effect.” In essence, what the “pace effect” captures could simply be the prerequisite conditions and reform sequencing that are well discussed in the literature. Second, the quality of institutions, such as investor protection and law and order, also matter. International experiences indicate that investor protection can significantly reduce the probability of financial crises. Third, the central bank’s participation in financial regulation is helpful for reducing financial risks during financial liberalization. This is probably because central banks always play central roles in financial liberalization, especially in the liberalization of interest rates, exchange rates, and the capital account. If a central bank is responsible for financial regulation, its liberalization policies might be more cautious and prudent. Our research findings offer important policy implications for the PRC. (1) Further financial liberalization is necessary not only for sustaining strong economic growth but also for containing or reducing financial risks. (2) Gradual reform may still work better than the “big bang” approach, and sequencing is very important for avoiding the painful financial volatilities that many other middle-income countries have seen. (3) The government should also focus more on improving the quality of other institutions, especially market discipline, to contain financial risks. (4) It is better for the central bank to participate in financial regulation. The new regulatory system should focus exclusively on financial stability and shift from regulating institutions toward regulating functions. It should also become relatively independent to increase accountability. ________________________________________________________________ About the Author This submitted article was written by Qin Gou and Huang Yiping of Asia Pathways, the blog of The Asian Development Bank Institute was established in 1997 in Tokyo, Japan, to help build capacity, skills, and knowledge related to poverty reduction and other areas that support long-term growth and competitiveness in developing economies in the Asia-Pacific region. Continue Reading Latest Popular Callum Connects22 hours ago Jason Feng, Co-Founder of Pillpresso Entrepreneurship2 days ago Will Financial Liberalisation Trigger a Crisis in China? Investors2 days ago Georges Tchokoua Entrepreneurship2 days ago Women on Top in Tech – Chrissa McFarlane, Founder and CEO of Patientory Entrepreneurship3 days ago Why Angel Investors are Shaking Up the Global Startup Scene Entrepreneurship3 weeks ago Women on Top in Tech – Melissa C. 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