You have probably heard more than enough hype about how big data and algorithmic processes are going to revolutionize the economy and usher in an automated tech utopia.
With endless think pieces describing data as the “oil of the 21st century”, and algorithms as some kind of panacea to all of the industry problems that were once considered insurmountable, it can often be difficult to cut through the noise and see beyond mere platitudes.
With that in mind, we thought we’d provide five concrete, real-world examples of how algorithmic processes are enhancing business success and improving outcomes across a wide range of industries. Read on to find out more.
1. Automated Management Systems
An estimated 3 million workers in the US now work directly under so-called ‘robo-bosses’, which are essentially algorithms that are able to sort through an employee’s workload, mandate, and profile in order to assign tasks to them. While this may sound somewhat dystopian, this process has been proven to improve efficiency and ensure workers are tasked with jobs that are best suited to their abilities. It also allows them to learn new skills and embrace new responsibilities. Automated management systems are now in place at various levels in companies such as Google, Uber, Tesla, Amazon, and WeWork.
2. Automated Smart Trading
One major algorithmic disruption that is shaking up the world of high finance is the use of trading algorithms to trade commodities and assets in real-time. Both companies and individual traders make use of algorithms such as forex trading robots, which can analyze staggering amounts of market data to make decisions on trades in a way that no human ever could. These algorithms also remove human error from the trading process, ensuring all investing and trading is data-driven. Furthermore, it allows for a much greater volume of trade to be executed, and for portfolios to be diversified to new extents.
3. Enhanced Fraud Detection
Recent estimates have calculated that online credit card fraud costs companies and banks around $32 billion in the US alone last year. As a result, many of the world’s largest financial behemoths, such as Lloyd’s, Merrill Lynch, Wells Fargo, and Blackrock now employ sophisticated machine learning algorithms to analyze online behavior and determine whether attempted fraud is taking place. Modern ML fraud detection systems now rely on thousands of data points to determine whether or not an attempted transaction is fraudulent. This result so far has been that companies have saved tens of millions of dollars and have greatly increased their fraud detection rates.
4. Seamless Targeted Marketing
Targeted marketing campaigns are often the most visible face of algorithmic business models. However, this term rarely extends beyond sponsored social media ads. To see how algorithms can be used in marketing to the best of their abilities, it’s worth looking at how some of the most successful companies in the game are using them. One prominent example is the cosmetics giant Sephora, which has attributed its record sales figures to its so-called ‘smart marketing strategy’. This strategy relies on collating thousands of data points from in-store and online shoppers to compile bespoke email, social media, and text communications. Not only do these communications contain products that the viewer is most likely to purchase, but they also use language and images that are deemed most likely to engage that user.
5. Inventory Optimization
Finally, it’s worth looking at how algorithms are helping to reduce the cost of an age-old business problem; inventory. The most significant example of algorithm-powered ‘inventory optimization’ is undoubtedly the e-commerce giant Amazon. At their 2.2 million-square-foot fulfillment center in Phoenix, Arizona, millions of packages and products are assigned a specific spot in the warehouse that the data says is the most efficient place to put them. The result is that Amazon is able to deliver almost 2 million packages per day, more than any other company in the world by far.
These are some of the concrete ways in which algorithms are shaping new business outcomes. Embracing these processes and techniques will prove the key to long-term business success in the future.