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How to Use Algorithms to Scale Digital Business

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Gartner defines digital business as the creation of new business designs by blurring the digital and physical worlds. Digital business creates new business opportunities, but the amount of data generated will eclipse the human ability to process it. Further, many complex decisions will need to be made in timeframes, and at scales, that are impossible by human actors. Gartner analyst Chet Geschickter will explain share advice on how to leverage algorithmic business principles to drive digital business success.

Published in: Data & Analytics
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How to Use Algorithms to Scale Digital Business

  1. 1. CONFIDENTIAL AND PROPRIETARY This 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 Director October 3, 2016
  2. 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!)
  3. 3. 2 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved. 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.
  4. 4. 3 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved. Business Already Uses Algorithms Every Day …
  5. 5. 4 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved. 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!
  6. 6. 5 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved. 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?
  7. 7. 6 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved. 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
  8. 8. 7 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved.7 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved. What’s Next? Things as Customers Requests Service Receives messages Reports Disputes Makes its own purchases Negotiates for the best deal Executes Directions
  9. 9. 8 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved.8 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved. 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
  10. 10. 9 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved. 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.
  11. 11. 10 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved. 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
  12. 12. 11 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved. 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.
  13. 13. 12 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner delivers the technology-related insight necessary for our clients to make the right decisions, every day.

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