Innovation and Strategy in

the Digital Economy

Class 2: Data and Big Data in Business

Milan Miric CBS / INO

(mmi.ino@cbs.dk)

About me

PhD Student at Department of Innovation & Organizational Economics.

Area of expertise:

Academic background:

Digital economy, technology platforms, innovation, competitive strategy &

commercialization.

Undergraduate degree in Mechanical Engineering, MBA.

Visiting scholar at Bocconi University (2012 2013) and London

Business School (2013 2015).

Positioning of this class

Class 1: Digital transformation

Focus: Digital technology is transforming business.

Class 2: Data & Big Data

Focus: How is Big Data specifically is shaping business.

Digital Transformation: Recap

Digital technology transforming a wide number of industries.

Affecting the way firms do business in brick-and-mortar

industries.

Creating new types of competitors for firms in digital industries.

Creating entirely new industries that did not previously exist.

Brynjolfsson & Hitt (1996)

Brynjolfsson & Hitt (1996)

Digital transformation & Data

Digital vs. Analog Technology:

Analog: Information represented by electronic pulses.

Digital: Information represented by binary (0 or 1) values.

Key distinction: Digital information is easier to collect, store, analyze & less noisy (prone to errors).

So far more data is being collected than ever before!

From Varian (2013)

A billion hours ago, modern homo sapiens emerged.

A billion minutes ago, Christianity began.

A billion seconds ago, the IBM PC was released.

A billion Google searches ago was this morning.

Benefits of Data Explosion

Scope for production efficiencies.

Scope for more effective marketing.

Ex. Automobile manufacturers.

Ex. Airline / Hotel rewards programs.

Scope to collect, combine and analyze information which was previously

not possible.

Ex. Demographics behavior - location revealed preferences.

Challenges of Data Explosion

Challenges of collecting data.

Challenge of storing and managing data.

Ex. Collecting millions of data points in real time.

Ex. Storing vast amounts of relational information.

Challenge of analyzing data.

Ex. Difficult to disentangle causal effects.

Ex. Difficult to analyze data with such a large amounts of variables /

observations.

In this session

What is the data used for?

What makes data a valuable asset?

(How) can firms profit from data?

Hype around

BIG data!

But does this

answer the
earlier
questions?
NO!

What is data
used for?

Data in Brick-and-Mortar Industries

Firms use data to offer better products and services.

Winners & Losers:

What are examples of firms that are doing this well? (AND WHY?)

What are examples of firms that are doing this poorly (AND WHY?)

In products? In services? In manufacturing?

Can data be a source of competitive advantage? Why or why not?

Data in Digital Industries

Firms use data to offer better products and services.

Winners & Losers:

What are examples of firms that are doing this well? (AND WHY?)

What are examples of firms that are doing this poorly (AND WHY?)

In products? In services?

Can data be a source of competitive advantage for digital businesses?

Why or why not?

From Chen et al. (2012)

From Chen et al. (2012)

Break
(15 min.)

What is Data Used for?

Inform decision making?

(evidence based decision making)

Improve productivity.

Offer new products / services.

But, What makes

data valuable?

What type of data is valuable here?

(Examples)

Inform decision making?

(evidence based decision making)

Improve productivity.

Offer new products / services.

What is the abstract value of data?

How is the value of data measured?
Scientific Question:
How would you measure
the actual value of data?
(as precisely as possible)

Avg. Revenue Per User:

Facebook, Twitter, Google

Does this reflect

the market value
of data?

Then, can firms profit

(develop CA) from
data?

What is nessesary for data to

provide CA?

Valuable.

Rare (Not everybody has it).

Inimitable (Difficult to copy).

Organization Specific
(More valuable to own it than sell it).

CA from Data
Firms can have an advantage over competitors based on
data.

Winners & Losers:

What are examples of firms that are doing this well?

What are examples of firms that are doing this poorly?

What are examples of firms that may be better off selling their
data than profiting from it themselves.

What does a market

for data look like?

Break
(15 min.)

How does the revenue from

users translate into valuations?

Source: Forbes 2013.

What explains the size of these valuations?

For example:
Why was WhatsApp valued
at $19 Bn?