Software algorithms are at the core of all products and services in the digital economy. As I explained in a previous blog post, proprietary algorithms will come to define the function and value of almost everything we will use in the future.
Whether it’s an algorithm that keeps us at a safe distance as we navigate traffic in the fast lane, keeps the ever-taller high-rise apartment building upright in high winds or offers the best seasonable accompaniments to compliment the meat we ordered online, algorithms increasingly impact everything in our lives.
The same is true for CEOs – whether they lead a bank, an industrial manufacturer or professional services firm, and for leaders of government institutions. For this reason, in the digital economy, CEOs must focus the same attention on managing their organization’s proprietary algorithms just as they would safeguard traditional analogue products and intellectual property.
To prepare for a future defined by algorithms, CEOs must do three things:
- Inventory your algorithms
- Assign ownership to manage those algorithms
- Qualify which algorithms are public and which are private
As they say, there’s no time like the present.
First, do you know that your business already has many algorithms you rely on? This includes algorithms in products and services, in business processes and via external partners, whether in software or as part of products from sub-suppliers. Most businesses reply on a core set of proprietary algorithms and the number is growing. Since they are core to most products or processes, it is paramount for you to do an inventory. Without a good understanding of what you have today, you may be giving strategic components of your future business away without ever realizing it.
The recognition of algorithms as strategic assets leads to the need to assign ownership and responsibility for coordinating corporate activities. The emerging role of chief data officer (CDO), who is responsible for data and information, is a natural candidate. Consider extending their responsibilities to include algorithms.
If you choose this route, ensure your CDO focuses on algorithms internal to your organization as well as those used in relationships with external partners of software or products.
Since algorithms define many of the products and services that your partners provide, they will also define the safety and quality of your products or services. This impacts the definition of responsibility of your chief risk and security officer (CISO). S/he will become responsible for not only risk and security, but also quality and safety as products are increasingly defined by software. This effectively erases the distinction between software-based security versus quality and safety. For example, how can an autonomous car, defined by software algorithms, have several different executives responsible for security? Ultimately someone needs to do the overall coordination and be responsible to the board.
Algorithms — Public or Private?
CEOs must define which algorithms are private and which algorithms can be made public. Selling, licensing or even giving away your algorithms can enhance your influence in future digital business ecosystems. Tesla and Goldman Sachs have decided that giving away some of their algorithms is beneficial to the future of their business because it creates an ecosystem that ultimately benefits them in the future.
So now is the time for you to audit, assign ownership and begin the debate within your leadership team about which algorithms should be kept secret and those that should help create new public ecosystems. Treating algorithms strategically is your responsibility. Make this your New Year’s resolution.
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