blog.collarity.com

Quick. How does your business make decisions? Is it a “finger in the air” measuring which way the wind is blowing exercise or is it a “crunch the numbers” picture that comes to mind? Most business schools would tell you to not ignore your gut intuition, but understand when, and more importantly, how to apply research and data.

Ian Ayres, a Yale Law School professor and econometrician has recently published a book called “Super Crunchers” (NYT review, Newsweek review) that focuses on the powerful trend of automated, data-driven decision making in business – using numbers and statistics to steer business choices where human intuition formerly ruled. Think about jobs like bank loan officers that have been replaced by call-center attendants filling in the requisite pieces of the decision formula.

The book picks up where other books like “Moneyball” (Michael Lewis’ bestselling book about how the Oakland Athletics produced a winning baseball team by choosing players based on unconventional statistics while being at the bottom of the aggregate payroll scale) leave off. Newsweek couldn’t have summarized Collarity’s perspective on the trend better than their opening book review paragraph:

“If the editors of a magazine—NEWSWEEK, for instance—want to know what interests their readers, their resources are limited. They can count cover sales, but that only tells them about one story a week. They can convene a focus group, but that’s a cumbersome and costly way to assess the tastes of 3 million subscribers. Online, by contrast, that information is available for the asking—not just the numbers of readers, but how long they spent with a given story and what else they read. So as journalism increasingly migrates to the Web, the job of figuring out what readers want becomes almost automatic—thereby raising the question, how much do we really need editors, anyway?”

Their comment is tongue-in-cheek, but they are not far off the mark, and they know it. It doesn’t mean editors go away, it just means that journalism professionals have better things to do than creating lists of related articles for their readership. There are now tools that automate the process of figuring out which other stories web visitors might like to read, once they’re done with the current one. Newsweek goes on to say:

“this is a microcosm of a powerful trend that will shape the economy for years to come: the replacement of expertise and intuition by objective, data-based decision making, made possible by a virtually inexhaustible supply of inexpensive information. Those who control and manipulate this data will be the masters of the new economic universe.”

The point is that valuable data, feedback derived directly from your customers, is often plentiful and free. Companies that choose to use this information (think Amazon and Netflix) will turn the statistics into revenue. It’s not a new idea. It’s the core of what Tim O’Reilly talks about when he describes harnessing collective intelligence and Web 2.0. It’s also at the center of John Battelle’s famous “database of intentions” narrative.

For web publishers, the data exists. Now you just need a tool to put it to work for you. Collarity can help.