Big Data Changing Business Decision Making
More and more, we are going to see algorithmically-managed organizations.
…The dirty little productivity secret of big data is that Pareto’s 80/20 insight has decayed into empirical anachronism. Analytically aggressive firms increasingly see Pareto proportions closer to 10/90, 5/50, 2/30, and 1/25. Depending on how rigorously the data is digitally sliced, diced, and defined, 1/50, 5/75, and, yes, 10/150 Paretos emerge. Pareto’s “vital few” becomes a “vital fewer.”
The preliminary success of Pareto ensembles recalls the critical insight from the Netflix Prize competition: The best results came not from improving individual model performance but from creating ensembles where the best attributes were collectively amplified. Ironically but appropriately, Pareto analytics could determine the most valuable ensembles.
Rigorously applying the Pareto analytics to Pareto analytics seems obvious, but few organizations demonstrate that discipline every day. That must change. Strategic plans and technology road maps need to be analytically informed by “Pareto pathways.” The ability to better predict tomorrow’s vital few, the opportunity to combinatorially combine KPIs from across the enterprise, will become sources of not just greater efficiencies but also determinants of disruptive value creation.