Machine Learning as Management Strategy
Innovators like Google and Amazon have been data-centric since their inception, with a repeatable formula that drives business value through exploration, innovation, disruption, and agility. Rather than decision-making by HIPPO (the Highest Paid Person’s Opinion), ideas are tested and judged on efficacy — and everyone is encouraged to test early and often. This focus on metrics enables meritocracy: a virtuous circle that empowers continual innovation throughout the organization.
In 2003, my Data Mining and Personalization team at Amazon brought Jeff Bezos a hypothesis he hated; nonetheless, he let us try it. A small test on the live website confirmed that running ads was extremely profitable. His openness to enabling testing in the first place, and his willingness to choose results over instinct, led to Amazon’s single most profitable project to date.
After a decade observing the most innovative and profitable tech companies, now as a founder and CEO myself, I’ve confirmed that most 21st-century juggernauts share this mindset. I’ve distilled these tenets into a management approach called Hill Climbing (after the computer science thought experiment of the same name). Like the optimization technique that postulates continuous improvement of a solution from any starting point, Hill Climbing enables any business to adopt the following as a framework for decision-making and begin to benefit immediately:
Amazon is a Hill Climbing organization because Jeff Bezos’s decision to test wasn’t a fluke or an outlier. Their innovations don’t stop at web design or product features. A bias toward using data (rather than hunches) permeates the entire company. Amazon analyzes and tests every piece of data — not just the products it sells, but how Finance, HR, and Operations processes operate. That’s how they became a behemoth: Building a metrics-oriented culture meant employees could grasp any metrics — about their own projects and departments, as well as the activities of other teams — in an easily visualized form (which included alerts), so continuous improvement was possible.
Ultimately, by building a numbers-oriented approach in an optimization-focused culture with the infrastructure to execute tests consistently, quickly, and at low cost:
At RichRelevance everyone optimizes. How we hire product managers and engineers, for instance, exemplifies our own testing culture. In a typical engineering interview, we often ask candidates to write code to solve a problem. Even if they get it right immediately, how do they know it’s right? How do they test and verify their answers? We want to know about their thought process: How do they validate their own ideas? How do they measure success? What data points do they check to see if what they’ve done is correct?
Customers now demand real-time feedback as well as consistency and ease of experience among touch-points, which have expanded from in-store, POS and call center to include mobile, web click-stream and social preferences. Data increases by an order of magnitude while “the Single View of the Customer” increases in importance to management. Seamless data integration is vital, but legacy technology often cannot deliver real-time decisioning, storage costs for all that new data are soaring, and traditional data analytics and warehousing technologies are reaching their limits.
Given that IT has its hands full with challenges of scalability, availability and security, even as brands must test and learn faster, the key infrastructure enablers of a successful Hill Climbing organization are:
As systems are selected, built and integrated, testability and flexibility are included as meta-requirements. Rather than initial specs-like elements driving designs too rigidly, flexibility enables nimble changes later — as business conditions change (which they will). Marketing and Merchandising can independently test and update to achieve their goals, just as IT is freed up to meet its myriad challenges.
Along the way, if a department or employee suggests an idea that seems silly, odd or downright distasteful … encourage your firm’s leadership to pause before passing on it. The next technology game-changer, industry transformation or billion-dollar innovation could start with a simple test, enabled by personalities secure enough to tolerate — or even encourage — disruption.