The Real Deal on Data
CUSTOMER DATA AND analytics are an enormously potent combination. We all know the drill: The more customers you have, the more data you can collect and analyze to create ever better products that attract ever more customers. Conventional wisdom holds that this virtuous cycle confers a nearly unbeat-able competitive advantage.
Not so fast, say Andrei Hagiu of the Questrom School of Business and Julian Wright of the National University of Singa-pore. They argue that it’s a mistake to assume that the benefits of data-enabled learning are as powerful or as enduring as those of network effects, wherein the value of an offering—say, a social media platform—keeps rising as more people use it.
“In most instances,” they say, “people grossly overestimate the advantage that data confers.” To attain the strongest competi-tive position, you need both data and network effects—a dual accomplishment that very few companies manage to pull off.
That doesn’t mean that data alone won’t help you. In fact, you can use data and analytics to build competitive defenses even without the reinforcement of network effects. Hagiu and Wright explain how in “When Data Creates Competitive Advantage…and When It Doesn’t” (page 94). Indeed, the abil-ity to improve offerings with customer data will be essential to compete. But to outperform rivals over the long haul, you need something more: You must know how to balance an organiza-tion’s capabilities and use them to amplify one another.
ADI IGNATIUS Editor in chief of Harvard Business Review USA Magazine

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