When Data Creates Competitive Advantage

… and When It Doesn’t

by Andrei Hagiu and Julian Wright

MANY EXECUTIVES AND INVESTORS ASSUME that it’s possible to use customer-data capabilities to gain an unbeatable competitive edge. The more customers you have, the more data you can gather, and that data, when analyzed with machine-learning tools, allows you to offer a better product that attracts more customers. You can then collect even more data and eventually marginalize your competitors in the same way that businesses with sizable network effects do. Or so the thinking goes. More often than not, this assumption is wrong. In most instances people grossly overestimate the advantage that data confers.

The virtuous cycles generated by data-enabled ...

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