Big Data to Big Profits: Asset Surveillance & Economic Value

Big Data and Analytics, Innovation

Big Data to Big Profits: Asset Surveillance & Economic Value

22 Nov , 2014  

Leveling the Data Playing Field – Forming New Markets

The economic concept of asymmetric information is fascinating … so much so that research on the topic earned the 2001 Nobel Prize in economic sciences. The idea is that there is an imbalance of power in a transaction when one party has access to more information than the other. It results in buyers not being able to bid as much or sellers not knowing what to ask for an asset. Markets freeze up or at least huge price premia are placed on the uncertainty. Bringing more information to all sides allows for more efficient markets.

Of course, as technology has developed and more people have access to more information at less (or no) cost, asymmetry of information has started to break down. Today’s digital platforms enable information to be communicated very quickly in a format that is relevant to whatever decision a party needs to make.

In the case of Uber, for instance, drivers and passengers alike have access to the same information about the location and availability of – as well as demand for – drivers. That information can affect the outcome of the economic relationship between driver and passenger, both of whom choose to work together (or not) based on the same set of data. Airbnb does something similar with housing.

When asymmetry of information breaks down, markets operate more efficiently. It does not even mean that prices have to fall. In fact, in the case of Uber, it is now possible for drivers to earn premium fares during peak periods, something that was not possible in the past.

I think it will be interesting to see how digital platforms continue to remove the asymmetry of information in our daily decisions. Already Yelp helps us pick better restaurants. Similar models based on digital platforms are on the way in how we select housing, insurance, doctors, and even who to date (as in on-line dating services). In this age of big data analytics, data-driven decision making and information accessibility, symmetry of information will become more demanded and help us match supply and demand.

Follow me at @RussWalker1492 and russellwalkerphd.com

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By  -      
Russell Walker helps companies develop strategies to manage Risk and harness value through Analytics and Big Data. As Clinical Professor at the Kellogg School of Management of Northwestern University, Russell Walker has developed and taught leading executive programs on Big Data and Analytics, Strategic Data-Driven Marketing, Enterprise Risk, Operational Risk, and Global Leadership. He founded and teaches the popular Analytical Consulting Lab and Risk Lab, experiential classes, which bring Kellogg MBAs together with real-world projects in Analytics and risk evaluation. His is the author of the book From Big Data to Big Profits: Success with Data and Analytics (Oxford University Press, 2015) which examines data monetization strategies and the development of data-centric business models in the new digital economy. He is also the author of the award-winning text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management as a competitive advantage. Dr. Walker consults with firms on the topics of Big Data and Analytics, Risk Management, and International Business Strategy. Russell Walker can be reached at: russell-walker@kellogg.northwestern.edu @RussWalker1492 russellwalkerphd.com



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