When are data-driven decisions better than those coming from HiPPOs (Highest-Paid Person’s Opinions)?
At the annual Thought Leadership Forum in Melbourne, Ross Dawson delivered an insightful keynote speech on this topic. He says that in domains where sufficient data is available and the decisions are definable and tractable, algorithms will surpass human judgement.
What is new compared with longstanding analytic practices is the rapidly growing volume of data and the diversity of sources. In a study by Andrew McAfee and Erik Brynjolfsson of MIT, companies using data-driven decisions and predictions were shown to be 6% more profitable than their competitors using human intuition and HiPPOs.
Yet Dawson doubts the effectiveness of algorithms in situations which cannot be clearly defined. “A prominent example is an organization’s strategic positioning. Any data-driven model of industry structure and potential decisions will be based on implicit assumptions by the creator of the algorithm.” And McAfee and Brynjolfsson emphasize that human insight is still very much needed. Humans see the opportunities and the challenges. And they ask the right questions, which will eventually be answered by data and algorithms.
Data can show the way consumers navigate through a website, which products they look at and which ones they buy. The products on the Amazon site are placed and shown accordingly, optimized for each customer. Often the many small decisions, following a well-defined model, are the ones done perfectly by algorithms. And those millions of good decisions on which books to show, for which customer, add up to a substantial profit. Even if the algorithm is occasionally wrong, it rarely matters.
However, it’s a different story if there is only one significant decision to make, especially one which is hard to define. Then humans want to get involved.
Combining both worlds
Dawson points out that big data needs interpretation and communication in order to be able to support human decisions. And while many jobs will be replaced by algorithms, a growing number of jobs will be needed to mediate between data, algorithms, and human decision-makers.
This appears to be in line with managers’ views. In a study of C-level executives by the Economist Intelligence Unit in September 2014, nearly half believe big data to be a useful tool, while only less than a quarter believe it will revolutionize the way businesses are managed. The biggest named obstacle to using data more extensively is the lack of managers’ understanding of how to apply data in their functions, while the most named solution to this is to create enterprise-wide teams to assess and propose approaches.
“The true professional is one who can communicate data in a way that changes the thinking of the highest-paid person,” Dawson says. “This is a human art requiring relationship skills that far transcend those of computers.” These people need to understand human cognition and empathy as much as they understand the data. Let the HiPPOs and trained professionals decide—and keep them well informed with qualified data.
For more on this topic read this post by Ross Dawson.
Image source: Caitlin
Is bigger data better? Helping “HiPPOs” make big data decisions
By Vanessa CartwrightAt the annual Thought Leadership Forum in Melbourne, Ross Dawson delivered an insightful keynote speech on this topic. He says that in domains where sufficient data is available and the decisions are definable and tractable, algorithms will surpass human judgement.
What is new compared with longstanding analytic practices is the rapidly growing volume of data and the diversity of sources. In a study by Andrew McAfee and Erik Brynjolfsson of MIT, companies using data-driven decisions and predictions were shown to be 6% more profitable than their competitors using human intuition and HiPPOs.
Yet Dawson doubts the effectiveness of algorithms in situations which cannot be clearly defined. “A prominent example is an organization’s strategic positioning. Any data-driven model of industry structure and potential decisions will be based on implicit assumptions by the creator of the algorithm.” And McAfee and Brynjolfsson emphasize that human insight is still very much needed. Humans see the opportunities and the challenges. And they ask the right questions, which will eventually be answered by data and algorithms.
Data can show the way consumers navigate through a website, which products they look at and which ones they buy. The products on the Amazon site are placed and shown accordingly, optimized for each customer. Often the many small decisions, following a well-defined model, are the ones done perfectly by algorithms. And those millions of good decisions on which books to show, for which customer, add up to a substantial profit. Even if the algorithm is occasionally wrong, it rarely matters.
However, it’s a different story if there is only one significant decision to make, especially one which is hard to define. Then humans want to get involved.
Combining both worlds
Dawson points out that big data needs interpretation and communication in order to be able to support human decisions. And while many jobs will be replaced by algorithms, a growing number of jobs will be needed to mediate between data, algorithms, and human decision-makers.
This appears to be in line with managers’ views. In a study of C-level executives by the Economist Intelligence Unit in September 2014, nearly half believe big data to be a useful tool, while only less than a quarter believe it will revolutionize the way businesses are managed. The biggest named obstacle to using data more extensively is the lack of managers’ understanding of how to apply data in their functions, while the most named solution to this is to create enterprise-wide teams to assess and propose approaches.
“The true professional is one who can communicate data in a way that changes the thinking of the highest-paid person,” Dawson says. “This is a human art requiring relationship skills that far transcend those of computers.” These people need to understand human cognition and empathy as much as they understand the data. Let the HiPPOs and trained professionals decide—and keep them well informed with qualified data.
For more on this topic read this post by Ross Dawson.
Image source: Caitlin
Three critical domains of change driving the future of professional services
By Ross DawsonYesterday professional services expert George Beaton and I ran the inaugural Clients and Firms of the Future: How to Compete conference in Sydney, bringing together around 100 senior leaders of professional services firms to look at the future of the industry.
It is just over 15 years ago now that my first book was released with the subtitle The Future of Professional Services (now out in its Second edition). While these days my work covers a far broader scope, over the years I have worked extensively with professional services firms to help them create successful futures.
There has been substantial change in the professions over the last decade, however there will unquestionably be far greater change in the years to come.
It was an absolutely fascinating day at the conference exploring the future of professional services. I will be sharing more from the conference over time, but today would just like to put down a few initial thoughts from the three themes of the day.
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Shazam will recognize objects as well as music: the implications for retail and design
By Ross DawsonThe music recognition service Shazam will branch out into new domains, said CEO Rich Riley at Mobile World Congress in Barcelona today.
Reuters reports:
The capability is not new, with services such as Amazon Firefly allowing users to identify objects and buy them on Amazon, and Slyce identifying objects within a store for lookup and purchase. However Shazam’s excellent and long-standing service suggests they will execute well on object recognition and take the domain further.
There are massive implications for both retail and product design.
Design
A couple of years ago, anticipating this development, I wrote about the idea of “Shoezam“, that could recognize and order shoes on the street. I wrote:
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Using Anonymous Employee Feedback Platforms to Drive Better Performance
By Steve BynghallPlatforms where employees give anonymous feedback on organisations provide valuable insight.
Websites such as Glassdoor, Careerbliss and Vault allow employees to leave information about working conditions, levels of pay, opportunities for advancement, management and the experience of being interviewed. Specific feedback is presented and ratings scores are aggregated, usually with companies graded between 1 and 5 for different aspects such as salary levels. This information is extremely valuable for anybody researching career options or who is in the job interview process.
Growth of online reviews of employers
In the same way that many of us would now check out online travel reviews before booking a hotel, the same is becoming true for recruitment. For example technology review company Software Advice conducted an extensive and independent survey from early 2014 and found that 48% of employees in the US have used Glassdoor in their search for a new job.
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How the future of work leads to the future of organisations
By Ross DawsonLast week I did the keynote on The Future of Work and Organisations at a four-city roadshow for social business consulting firm KINSHIP enterprise, spanning Sydney, Canberra, Melbourne and Brisbane.
The slides to my presentation are below, together with an overview of the 7 sections of the keynote.
My keynote was framed around looking through the critically-important lens of the future of work to gain insights into the future of organisations. As you will see in the slides, I covered:
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Video: Why professional services leaders need to think about the future
By Ross DawsonLeading up to the Client and Firms of the Future: How to Compete conference in Sydney on March 11 (which I discussed in a previous blog post), my co-organiser George Beaton and I have recorded a brief video to set the scene.
In the video we begin by addressing the question: Why do professional services leaders need to think about the future? and go on to discuss what to expect at the conference.
Points we make in the video include:
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Case Studies: Using Crowdsourcing and Mobile to Give the Supply Chain a Voice
By Steve BynghallGlobal companies are using mobile technology to gather feedback from supply chain workers in order to improve working conditions.
Mobile technology is opening up exciting new opportunities for organisations to gather feedback and opinions from internal crowds, particularly employees who work in factories, warehouses and retail units.
Previously this section of the workforce has been regarded as difficult to communicate with digitally. This is mainly because they do not have easy access to a computer terminal during the working day. Also many do not have digital identities such as a corporate email address which are usually required to roll out digital communication platforms.
In practice many organisations have deprioritised efforts to open a meaningful dialogue or deliver digital services to this section of the workforce, and attempts have either been muted or ineffectual.
Using employee’s own mobile phones as the primary channel for digital communication removes many of the logistical barriers and presents an exciting opportunity to leverage the ideas and insights of factory and retail workers.
Soliciting opinions from the supply chain
Some organisations are even going one step further, and actively canvassing the opinions of workers in their supply chain, particularly in manufacturing units in developing countries.
In recent years large corporates have come under scrutiny from consumers, pressure groups and even shareholders over poor working conditions and low levels of pay in factories in developing countries.
But giving workers in these facilities a voice provides a potentially revolutionary opportunity to achieve better working conditions, ensure standards continue to be adhered to and satisfy consumers with ethical concerns.
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APIs are enabling an unprecedented flow of innovation
By Ross DawsonOn Tuesday I had the great pleasure and honor of doing the opening keynote at the APIDays Sydney conference, the first API (Application Programming Interface) conference in Australia, excellently organized by Saul Caganoff of SixTree.
APIDays was founded by Mehdi Medjaoui in Paris in 2013, has since been run in Barcelona, Berlin, San Francisco and now Sydney, with the event in Paris last year attracting 800 delegates.
Below are the slides for my keynote on The Flow of Innovation. As always, note that my slides are designed to support my presentation and not to stand alone, but still may be of interest to people who did not attend my keynote.
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Creating the future of professional services – Sydney 11 March
By Ross DawsonThe subtitle of my first book, 15 years ago now, was ‘The future of professional services’. I still believe it’s an incredibly important topic, not just in the future of business, but also in the future of work and society.
As such I am delighted to be collaborating with one of the world’s leaders in professional services strategy, George Beaton, in organising the Clients and Firms of the Future: How to Compete conference in Sydney on 11 March.
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Why 2015 Will be Another Year of Growth for Elance-oDesk and Freelancer
By Steve BynghallService marketplaces like Elance-oDesk and Freelancer are well placed to experience growth in 2015.
There is every indication that the rapid growth of the major service marketplaces will continue during 2015. Both the two market leaders had a successful 2014 and are well-placed to capitalise on the opportunities in the sector.
Freelancer continues buying its competitors
In late 2013 Sydney-based Freelancer floated on the Australian stock exchange. The IPO has given the company a foundation to continue its ambitious acquisition program, gobbling up minor competitors, players with a significant footprint in individual countries or marketplaces which focus on a particular niche.
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