When Data Can Give You a Competitive Edge—and When It Can’t
In this HBR article, coauthored by Questrom professor and platform strategy expert Andrei Hagiu, the value of consumer data is put to the test. Using a model of competition in which firms can improve their products through consumer data, Hagiu and coauthor Julian Wright of the National University of Singapore explore the implications of competitive dynamics using this consumer data compared to traditional learning-by-doing settings.
“Many executives assume that customer data can give you an unbeatable competitive edge. The more customers you have, the more data you can gather, and that data, when analyzed, allows you to offer a better product that attracts more customers. You can then collect even more data, repeating the cycle until you eventually marginalize your competitors. But this thinking is usually wrong,” writes Hagiu.
“Though the virtuous cycles of data-enabled learning may look similar to those of network effects—wherein an offering increases in value to users as more people adopt it and ultimately garners a critical mass of users that shuts out competitors—they are not as powerful or as enduring.”
Read more about this research at HBR or read the full paper here.