Using Big Data to Build a Strategy Toolbox

There is academic debate regarding whether big data helps or hurts strategy. In our research at MIT CISR, we’ve identified some important advantages to viewing big data as a strategic opportunity. In particular, companies can use big data to greatly improve and innovate their business model—and to extend their strategy toolboxes.

Improving the Business Model

Of the companies we’ve studied, the most successful ones are using big data to refine and optimize business processes and decision making. Big data offers novel sources of data, new techniques for identifying insight, and different ways to act.

For example, companies can leverage big data by embedding sensors in products to track actual usage. They can mine social media for customer feedback. And they can collect customer-produced content to better understand preferences and behavior. This new data allows companies to more deeply understand their customers’ motivations. And companies can act upon new customer insights quickly and more wisely than in the past.

Big data can be used to facilitate improvements to business models across all industries, but successful companies have one commonality: a clear strategic driver underlying the big data initiatives.

Innovating the Business Model

Companies using big data are also finding new ways to generate revenues. Two approaches we’ve studied include data monetization and digital transformation.

Data monetization is the act of exchanging information-based products and services for legal tender or something of perceived value. We’ve found that companies are monetizing by selling, bartering, and wrapping information. Wrapping refers to wrapping information around other core products and services and is particularly exciting to MIT CISR companies, as they can wrap to differentiate a core product or service offering to meet their customers’ informational needs. This makes the product or service more attractive and generates greater revenue.

Enterprise digitization—outputs from things like sensors, robots, and automated business processes—generates new and different types of data. Companies that manage their digitization well will know more about their employees, partners, and customers. This deep knowledge is a critical capability facilitating the identification of the new partnerships, new customer segments, and new markets, all of which are needed to be competitive in a business ecosystem. Using big data, companies can transform in ways that change the traditional competitive landscape.

Are you using big data to improve and innovate your business model? How are you using big data to extend your strategy toolkit?

Barbara H. Wixom is a principal research scientist at the MIT Center for Information Systems Research (CISR), and Stephanie L. Woerner is a research scientist at MIT CISR. This post is a summary of an article they coauthored, “Big Data: Extending the Business Strategy Toolbox,” which was published in January 2015 in the Journal of Information Technology (subscription only).