In the era of big data and quantitative algorithms, HR must play a central role in creating competitive advantage, writes Wayne Brockbank
Global business has entered the era of big data and quantitative algorithms. This combination has been framed by many as today’s source of competitive advantage. As HR professionals, we appropriately ask ourselves, “What role, if any, does HR play in this world of big data and their related algorithms?”
The premise of this article is twofold:
1. Big data and their related algorithms are becoming commoditised and are entering their hygiene phase; that is, companies need to have them but they are increasingly less competitive differentiators.
2. The social processes by which such data are interpreted, meaning is derived, decisions are made and actions are taken will be the competitive differentiators.
Competitive advantage through data
I do not have extensive hard data that doubt the assumption of data and algorithms as a competitive advantage. But let me suggest three sources that might question this assumption and then examine the role that HR might play in the informational world of the future.
First, recently I Googled the following: “Is big data as a competitive advantage decreasing?” It is noteworthy that none of the top 20 sites answered the question; rather, they all focused on the assumption that big data is currently a competitive advantage. And the timing was also noteworthy: three sites were posted between 2004-2013, six were posted between 2016-2019, and eleven were posted between 2014-2016. In today’s VUCA world, five-year-old news is old news. This might lead one to conclude that early adopters of big data and their algorithm probably had a competitive advantage but for the late adopters, big data is becoming a price of entry but is no longer a source of sustainable competitive advantage.
“For information to be a competitive advantage, data must be uniquely accessed, fully analysed and seamlessly utilised”
Second, in the Financial Times (6 May 2019) it was noted that quantitative equity funds have seen an outflow of US$25 billion in the past six months. It appears that relying on big data, algorithmic-based trading and technology is less likely to result in returns that investors desire. At least in this sector, the point of diminishing returns of from data, algorithms and technology appears to have been reached.
Third, over the last two years, I have had the opportunity to visit 26 or so companies in the tech, financial and fast-moving consumer goods sectors to understand how they think about big data, analytical algorithms and technology as competitive advantage.
Among other insights, two were most noticeable:
1. When comprehensively compiled across these companies, a clear informational model emerges. For information to be a competitive advantage, data must be uniquely accessed, fully analysed and seamlessly utilised. There is a multiplicative relationship among the three. If anyone of the three is weak, the entire informational equation is weak.
2. Virtually all of these leading companies asserted access to data and analytical algorithms are becoming commoditised. Five to ten years ago, both were source of competitive advantage; no longer.
HR and the big data agenda
At this point, you may be asking yourself, “What does this have to do with HR?” In today’s VUCA world, the questions are no longer, “Do you have access to big data and do you have the sophisticated interpretive algorithms?” Your firm need answer these questions but the answers are increasingly hygiene factors.
“HR will have to play a central role in creating the processes, structures, talent and most of all, the culture to support the big data agenda”
Rather the emerging questions that create competitive advantage are centrally relevant for HR: “Once data are quantitative analysed, are there forums to aggressively debate the meaning and implications of the data? Do these forums consciously address and overcome the multitude of biases that result in false conclusions? Are the right people involved in such debates? Are creative and non-traditional ways of interpreting information encouraged and legitimised? Do we have culture of full horizontal and vertical information sharing? Are decisions based on clearly defined and utilised decision rules? Do we translate decisions into fast and accurate actions? Do we have the measurements and rewards in place that support the above?” All of these are directly relevant for the strategic HR agenda.
Thus if big data and analytical algorithms are to contribute to your firm’s competitive advantage HR will have to play a central role in creating the processes, structures, talent and most of all, the culture to support the big data agenda. It is an exciting time to be in HR but to play this role HR professionals must understand the logic, processes and dynamics of the big data agenda.
3 action items for HR
- Understand the flow of big data through your firm.
- Create forums in which data are debated, biases are overcome, information insights are fully realised, right people are involved, new ways interpreting data are encouraged, culture of information sharing is reinforced, and actions are taken quickly and accurately.
- Ensure that organisation practices including processes, structures, measurements, rewards, and talent facilitate the full utilisation of big data.