Can Big Data Protect a Firm from Competition?
London Business School
Catherine E. Tucker
Massachusetts Institute of Technology (MIT) - Management Science (MS)
December 18, 2015
There is plenty of hype around big data, but does it simply offer operational advantages, or can it provide firms with sustainable competitive advantage? To answer this question, we look at big data using a classic framework called the 'resource-based view of the firm,' which states that, for big data to provide competitive advantage, it has to be inimitable, rare, valuable, and non-substitutable.
Our analysis suggests that big data is not inimitable or rare, that substitutes exist, and that by itself big data is unlikely to be valuable. There are many alternative sources of data available to firms, reflecting the extent to which customers leave multiple digital footprints on the internet. In order to extract value from big data, firms need to have the right managerial toolkit. The history of the digital economy offers many examples, like Airbnb, Uber and Tinder, where a simple insight into customer needs allowed entry into markets where incumbents already had access to big data.
Therefore, to build sustainable competitive advantage in the new data-rich environment, rather than simply amassing big data, firms need to focus on developing both the tools and organizational competence to allow them to use big data to provide value to consumers in previously impossible ways.
Number of Pages in PDF File: 20
Keywords: Big Data, Resource-Based View of the Firm, Competitive Advantage
JEL Classification: L1, L86
Date posted: December 22, 2015