We all have predictive powers
We can create hypothetical future scenarios in our minds, estimate probabilities, and make forecasts. Without these abilities, life would be an endless string of surprises. But, it isn’t. The world around us consists of patterns that we are able to model and simulate with some level of accuracy.
These predictive powers are essential for running a successful business.
They enable management to see risks and opportunities so that the company can act and adapt. The more capable the process, the more accurate the predictions, and the more informed the decisions. Statistically, over time, even small differences in predictive accuracy can separate market leaders from others.
How to increase predictive powers?
There is, therefore, a strong incentive for companies to increase their predictive powers. However, management systems that rely heavily on human intuition and gut-feeling decisions hold them back.
Let’s face it: our mental capabilities are limited.
We are slow at processing large data sets and bad at assessing probabilities, and our decision-making is often biased.
The first step forward is to abandon the self-flattering story that the human brain will remain the state-of-the-art in management. All that we know about algorithms, computation, physics, and biology tells us otherwise. We might disagree about the time the change will take but not the ultimate outcome.
The second step is to turn your data into business value by actually using it.
An average organization only uses 50% of its structured and 25% of its unstructured data for decision making. [Source: Forrester’s Business Technographics® Global Data and Analytics Survey, 2017]
Some market leaders, of course, have been using machine learning to inform their decisions for years. A more recent development is companies’ increased use of artificial neural networks, deep learning, and natural language processing. These are game-changers because they enable artificial systems to learn new capabilities quickly and easily. Some of their powers are already superhuman.
The rising wave of cognitive computing will disrupt not only the way information is processed but also the way businesses are managed.
What to do?
The change won’t happen overnight, but the era of gut-feeling decisions will end soon. Therefore, company management should prepare their data so that artificial agents can use it. This process includes four steps:
- capture the data
- enrich it by filtering out any human biases
- use the enriched data for training the algorithms
- manage this end-to-end flow of information
Nevertheless, even though we find ourselves in the midst of this technological revolution, some fundamental rules of competition stay the same.
Insightful leaders will continue to dominate the game of business.
Eventually, however, these top players will be non-human. Algorithms with predictive powers will be the new decision-makers and visionaries. Our job is to teach them well.
Read more about Elinar AI.
Text written by Mika Suominen, quality manager at Elinar