Six decades into the computer revolution, four decades since the invention of the microprocessor, and two decades into the rise of the modern Internet, all of the technology required to transform industries through software finally works and can be widely delivered at global scale.
That’s Marc Andreessen, venture capitalist and Netscape co-founder, writing in the Wall Street Journal. The piece could just as easily be titled ‘Why Analytics Is Eating The World’. If you substitute “analytics” for “software” throughout his argument largely holds. Many of the businesses cited by Andreessen are not just software-centric, but analytics-centric as well: Google, Amazon, Netflix, Pandora, Facebook, LinkedIn. Such companies compete in arms race environments for extremistan market dominance.
In some industries, particularly those with a heavy real-world component such as oil and gas, the software revolution is primarily an opportunity for incumbents. But in many industries, new software ideas will result in the rise of new Silicon Valley-style start-ups that invade existing industries with impunity. Over the next 10 years, the battles between incumbents and software-powered insurgents will be epic. Joseph Schumpeter, the economist who coined the term “creative destruction,” would be proud.
Two of the incumbents mentioned are Wal-Mart and FedEx—both successful adopters of analytics. Of insurgencies:
Perhaps the single most dramatic example of this phenomenon of software eating a traditional business is the suicide of Borders and corresponding rise of Amazon. In 2001, Borders agreed to hand over its online business to Amazon under the theory that online book sales were non-strategic and unimportant.
Today, the world’s largest bookseller, Amazon, is a software company—its core capability is its amazing software engine for selling virtually everything online, no retail stores necessary. On top of that, while Borders was thrashing in the throes of impending bankruptcy, Amazon rearranged its web site to promote its Kindle digital books over physical books for the first time. Now even the books themselves are software.
Inciting innovation and driving disruption through software—and analytics—is not, however, without its challenges. Andreessen:
[M]any people in the U.S. and around the world lack the education and skills required to participate in the great new companies coming out of the software revolution. This is a tragedy since every company I work with is absolutely starved for talent. Qualified software engineers, managers, marketers and salespeople in Silicon Valley can rack up dozens of high-paying, high-upside job offers any time they want, while national unemployment and underemployment is sky high. This problem is even worse than it looks because many workers in existing industries will be stranded on the wrong side of software-based disruption and may never be able to work in their fields again. There’s no way through this problem other than education, and we have a long way to go.
This echoes two of Analyst First’s core contentions. First, that analytics is first and foremost about human infrastructure. Second, that although it is increasingly a core business literacy, analytics is at the same time beyond the reach of a growing number of workers:
The problem is, basic literacy and arithmetic numeracy is pretty much where it appears to have stopped for all but a new technological elite of scribes. This includes way too many people whose job it is to develop strategy, see “the big picture”, produce “evidence based policy”, hear the arguments of quantitatively skilled advisors or in many other ways interact with, and manage a data-rich world, of changing, poorly understood circumstances, vast uncertainty and with powerful analysis tools just a click away.
This is basically the condition of most people interacting with data in the modern world. These are the people who think that BI=Analytics=Reporting. These are the people who cannot read an XY graph, or trust any data summary more complex than an average. These are the people who when shown any kind of report, dashboard or graph ask to see the raw numbers because they are on firmer ground there, even if the numbers are millions of transactions and no useful inference can be drawn from eyeballing them.
Related Analyst First posts:
- The centrality of prediction to all decision making
- Real forecasting versus punditry
- The ‘fake supply’ of bogus and unverifiable forecasts
- Foxes and hedgehogs
- The ‘no change’ benchmark
- Cognitive styles and biases
- The importance of forecast track records
- The case for prediction markets
- Why organisations often don’t want accurate forecasts
- DARPA’s ill-fated Policy Analysis Market
Anyone interested in forecasting and prediction who doesn’t know the work of Tetlock, Taleb, or Hanson should chase up the above links.
Related Analyst First posts:
About usAnalyst First is a new approach to analytics, where tools take a far less important place than the people who perform, manage, request and envision analytics, while analytics is seen as a non-repetitive, exploratory and creative process where the outcome is not known at the start, and only a fraction of efforts are expected to result in success. This is in contrast with a common perception of analytics as IT and process.
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