Can Data Build a Competitive Advantage for Businesses Today?

Data is a great competitive advantage and source of growth for businesses all over the world.

Data is now integrated into every industry and highlight of the global market, and much of current economic growth would not be possible without them, just as it would not be possible without other important factors of production such as physical assets and human resources.

For businesses all over the world, data is a great competitive advantage and source of growth. Data analytics can reveal secret insights into a company's everyday activities, allowing it to devise more effective and productive operating methods, price risks, and forecast market patterns. Data is the main prize, and businesses are increasingly realizing how it's realistic, daily applications can add tremendous value to their operations.

Many businesses believe that having access to customer data would give them an unfair advantage. The more customers they have, the more data they can collect, and when they analyze the data, they can sell a great package that attracts consumers. They would then collect even more data, repeating the same thing until the opponents become irrelevant. However, this way of thinking is always incorrect. Though data-enabled learning's exponential cycles appear to be similar to network effects, in which an offering becomes more valuable to users as more people embrace it and eventually reaches a critical mass of users that locks out competitors, they are not as strong or as long-lasting.

Customer data will, however, assist in the development of strategic defences in the right circumstances. It all relies on whether the data has high and long-term value, is exclusive, contributes to changes that are difficult to duplicate, or provides quick-to-implement insights. Those attributes do provide a competitive advantage to businesses.

Data-Enabled Learning  

In analytics solutions, data-enabled learning algorithms assist businesses in rapidly processing and making sense of large volumes of data. Customers' personal information, content preferences, search habits, emails, GPS location, social media messages, and use patterns can all be gathered directly from CRM systems. The data is then analyzed by Machine Learning algorithms to represent the results, which are personalized to each person.

In an article named "How to Use Data for Competitive Advantage", written by Sumit Aggarwal (Strategy and Data Science Leader at Viacom18| MIT Sloan | IIM), he mentioned in the section: Is Data-enabled competitive advantage sustainable, this depends on the nature of the industry, how an organization is using data, the quality of data and the quality of competitors themselves. HBR article on When Data Creates Competitive Advantage lists the following factors as determinants of sustainability of competitive advantage:

1. The higher the value added by the data, the greater will be the chance that it will last for long.
2. The slower the marginal value of data decreases, the stronger the barrier created by it
3. The faster the data becomes obsolete, the easier it is for competition/new entrants as they need not learn from years of data.
4. Unique customer data which cannot be bought or substituted creates a defensible barrier.
5. Product enhancements for which competitor don't need data to replicate doesn't create a durable advantage.
6. The speed at which insights from data can be incorporated into the offerings. Rapid learning cycles make it difficult for competitors to catch up.