Algorithmic Business – What it is and how to become one
What is an algorithmic business? How to make use of algorithms? How to become an algorithmic business?
With the rich interconnections between businesses, consumers, and the general public in a digital environment, a huge amount of significant data may be collected at any given time. Information regarding preferences, routines, needs, and wants may be assessed for developing strategies to market, sell, and efficiently deliver products and services. The heart of algorithmic business is turning raw data into strategic business goals. And this fuels the new but very influential source of business growth in this age.
What is an algorithm?
Put simply, an algorithm is a method, formula, or procedure to accomplish a task or to solve a problem. The most familiar examples of algorithmic businesses are the online services such as Google, Facebook, and online shopping sites. Google’s success stemmed from its unique service, a very comprehensive search algorithm that delivers instant results. Google’s search engine can predict search terms through the first letters typed by a user; and it even has an option for a lucky result where a website that is on top of the search results is automatically loaded. Facebook shows selected feeds from selected connections using an algorithm detecting friends whose posts have been previously liked or commented on and a bevy of other factors. Amazon displays products that might be of interest to a user based on previous searches and purchases.
How can your business benefit from it?
While online businesses get the most obvious benefit from algorithmic computations, all kinds of businesses can benefit from it. You can use supply and demand metrics to plan inventory, come up with sales tactics, develop pricing schemes, and choose the best available routes, suppliers, and all other considerations for the business. Knowledge of customer preferences gives an enterprise every opportunity to make services very personal and attract a loyal following.
Today, collecting data is already a given. The issue is whether a business is able to make intelligent use of the information or not. Algorithms are no longer an exclusive enclave for mathematicians. Computers are able to do human computing tasks that take hours to complete in less than a second. Moreover, cost is no longer a problem. The price of algorithmic software is already made affordable by competition. In effect, there is no reason why businesses should not go with this trend. Following are some important features.
Efficiency in doing business
Algorithmic software helps optimize processes. Based on metrics, businesses can make optimal work, ordering, and staffing schedules based on the availability of service vehicles, numbers of customers needing services at a given time, traffic patterns, and supplier prices, amongst others. You can also use it to simplify business procedures in order to minimize waiting times, especially for customers. It enables businesses to attain a level of operational accuracy for added cost savings and ease in carrying out normal functions.
Enhanced customer interaction
Personalized services are now easy to implement with readily available information about customers. Direct marketing is made more effective because data regarding customer preferences and their ability to buy are available and accessible. Not only that, but entities such as banks and lending companies can assess the risk profiles of customers in order to apply effective and appropriate interest rates for each one. Predicting buying habits can also make work easier for both the customer, with heightened ease in purchasing products or services; and for the business, with the enhanced ability to predict inventory or supply needs. Businesses can also customize their processes in response to changes in buying behaviours.
The ever changing role of CIOs
In all these, the CIO’s role transitions from just controlling data to the management of algorithms. With the rise of algorithmic software, CIOs will need to build a new IT platform, one that is always offering new solutions. CIOs should be seen as partners to the business, not just cost centres that must be managed. IT in business is itself a profit-driver with innovative solutions to all sorts of business issues.
Driver for the Internet of Things
There will be a myriad of connections in IoT in the next few years. With all sorts of appliances, and even cars, being smart now, means it is more likely that data may be mined to provide insightful information in all areas cutting through all lifestyles. The only way to make this mammoth amount of information intelligible and useable is with the help of algorithms. Apps are getting smarter, catering to every whim.
Predicting all sorts of behavioural patterns will give birth to many new business ideas. Every business should take advantage of them.