Competing with big data
There is plenty of hype around big data. But does it only offer operational advantages, or can it provide firms with sustainable competitive advantage?
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In their recent paper, Anja Lambrecht and Catherine Tucker argue that big data is not a sustainable source of competitive advantage. Their findings are based on the “resource-based view of the firm”. This requires that, for big data to provide a competitive advantage, it has to be inimitable, rare, valuable, exploitable and non-substitutable. Big data does not meet these conditions.
Big data is imitable because of the nature of the digital footprint: there are several equivalent ways to track consumer choices. Big data is not rare because the declining cost of data storage makes it possible even for small entities to collect and keep historical data. The value is insignificant without the skills, talent and ability to analyse the data and extract useful insights. Finally, the best-known recent success stories (for example, WhatsApp, Candy Crush, Airbnb, Tinder) suggest that access to big data alone is not enough for success – it is more important to provide greater added value to customers than your competitors do.
Since big data does not seem to constitute a hurdle for competition among firms, there is no need for intervention from antitrust authorities. However, big data does certainly imply changes in the context in which firms operate. Authorities and regulators do not seem to have realised this. New tools as well as innovative ways of applying existing instruments are therefore desirable in market definition practices: assessments of abuses of dominant position, merger controls and settlement of privacy rules. In the last case it is extremely important to define the boundaries of competition and privacy law, as they currently appear to be blurred and this might cause misunderstandings.
Beyond an adaptation to the new digital context, a more case-by-case based analysis needs to be implemented when assessing the role of data in competition practices. Different kinds of data, as well as their combination, might determine the gains or returns that firms can be obtain through analytics. This approach remains valid when evaluating profitability: it is not the direct access a firm might have to big data that determines the worthiness of an investment, but rather the performance of a firm within the digital context. A clear example is Zalando, which managed to raise a lot of private finance notwithstanding the dominant position of Amazon on the same market.
Therefore, the bottom line appears to be the following: big data is changing the playing field where firms operate, resulting in a more dynamic context with new rules. This situation calls for adaptation from authorities. New tools and new measures could make the European market attractive for data experts and scientists. The paper and recent debates suggest that the mere accumulation of big data does not harm competition, as it does not offer firms a competitive advantage; but the analysis of data, aimed at creating additional value through more targeted advertising and better customised solutions for consumers, should be fostered and properly regulated given its great potential for success.
Event summary by Elena Vaccarino, research assistant
Can Big Data Protect a Firm from Competition? | Presentation by Lambrecht and Tucker
Lunch and check-in
Assistant Professor, London Business School
Director, Brussels office, Computer and Communications Industry Association (CCIA)
Beatriz Sanz Fernández-Vega
Competition Policy Manager, Telefónica
Case officer, European Commission, DG COMP
Distinguished Professor of Management Science, MIT Sloan School of Management, USA
Karen E. Wilson
Former Non-resident Fellow
Location & Contact