An executive’s guide to machine learning

An executive’s guide to machine learning

Machine learning is based on algorithms that can learn from data without relying on rules-based programming. It came into its own as a scientific discipline in the late 1990s as steady advances in digitization and cheap computing power enabled data scientists to stop building finished models and instead train computers to do so. The unmanageable volume and complexity of the big data that the world is now swimming in have increased the potential of machine learning—and the need for it.

Dazzling as such feats are, machine learning is nothing like learning in the human sense (yet). But what it already does extraordinarily well—and will get better at—is relentlessly chewing through any amount of data and every combination of variables. Because machine learning’s emergence as a mainstream management tool is relatively recent, it often raises questions. In this article, we’ve posed some that we often hear and answered them in a way we hope will be useful for any executive. Now is the time to grapple with these issues, because the competitive significance of business models turbocharged by machine learning is poised to surge

What does it take to get started?

C-level executives will best exploit machine learning if they see it as a tool to craft and implement a strategic vision. But that means putting strategy first. Without strategy as a starting point, machine learning risks becoming a tool buried inside a company’s routine operations: it will provide a useful service, but its long-term value will probably be limited to an endless repetition of “cookie cutter” applications such as models for acquiring, stimulating, and retaining customers.

We find the parallels with M&A instructive. That, after all, is a means to a well-defined end. No sensible business rushes into a flurry of acquisitions or mergers and then just sits back to see what happens. Companies embarking on machine learning should make the same three commitments companies make before embracing M&A. Those commitments are, first, to investigate all feasible alternatives; second, to pursue the strategy wholeheartedly at the C-suite level; and, third, to use (or if necessary acquire) existing expertise and knowledge in the C-suite to guide the application of that strategy.

The people charged with creating the strategic vision may well be (or have been) data scientists. But as they define the problem and the desired outcome of the strategy, they will need guidance from C-level colleagues overseeing other crucial strategic initiatives. More broadly, companies must have two types of people to unleash the potential of machine learning. “Quants” are schooled in its language and methods. “Translators” can bridge the disciplines of data, machine learning, and decision making by reframing the quants’ complex results as actionable insights that generalist managers can execute.

Are we any nearer to knowing whether machines will replace managers?
It’s true that change is coming (and data are generated) so quickly that human-in-the-loop involvement in all decision making is rapidly becoming impractical. Looking three to five years out, we expect to see far higher levels of artificial intelligence, as well as the development of distributed autonomous corporations. These self-motivating, self-contained agents, formed as corporations, will be able to carry out set objectives autonomously, without any direct human supervision. Some DACs will certainly become self-programming.

One current of opinion sees distributed autonomous corporations as threatening and inimical to our culture. But by the time they fully evolve, machine learning will have become culturally invisible in the same way technological inventions of the 20th century disappeared into the background. The role of humans will be to direct and guide the algorithms as they attempt to achieve the objectives that they are given. That is one lesson of the automatic-trading algorithms which wreaked such damage during the financial crisis of 2008.

No matter what fresh insights computers unearth, only human managers can decide the essential questions, such as which critical business problems a company is really trying to solve. Just as human colleagues need regular reviews and assessments, so these “brilliant machines” and their works will also need to be regularly evaluated, refined—and, who knows, perhaps even fired or told to pursue entirely different paths—by executives with experience, judgment, and domain expertise.

The winners will be neither machines alone, nor humans alone, but the two working together effectively.

http://www.mckinsey.com/Insights/High_Tech_Telecoms_Internet/An_executives_guide_to_machine_learning?cid=Digital-eml-alt-mkq-mck-oth-1506

 

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