The presentation discusses the concept of algorithmic business, highlighting the integration of complex algorithms into digital business to enhance decision-making and process automation. It emphasizes the role of the Internet of Things and advanced analytics in creating a more autonomous and efficient business environment. Challenges such as regulatory issues and the need for skilled talent are noted, along with the necessity for business leaders to adopt digital technologies to remain competitive.

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How to Use Algorithms to Scale
Digital Business
Chet Geschickter, Research Director
October 3, 2016

2. 1 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved.
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 than
21 billion connected devices
by 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 ACTION
ALGORITHM
"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 Decision
Predictive
What will happen?
Diagnostic
Why did it happen?
Descriptive
What happened?
Action
Decision Automation
Decision Support
Prescriptive
What 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
Digital
Business
2020
Digital
Marketing
2013
Autonomous
Business
Algorithms
Algorithmic
Business
Beyond
Smart
Machines

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What’s Next? Things as Customers
Requests
Service
Receives
messages
Reports
Disputes
Makes its
own purchases
Negotiates for
the best deal
Executes
Directions

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Customers Will Also Be Autonomous
Fixed
Take action
on behalf of
parameters
set by
humans
Adaptable
Choose
among
multiple
options, with
outcomes set
by humans
Autonomous
Decide and
take action
independent
of 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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