How Important Are Algorithms for a Modern CEO?
We hear a lot about algorithms these days, but how useful can they be for a modern CEO? By looking at how algorithms work in the business world, we can see different examples of the benefits that they can bring.
Proprietary Algorithms to Grow a Business
The use of proprietary algorithms has been a key factor in the growth of many businesses throughout history. Perhaps the best example comes from Google, with figures from 2021 showing that they earned over $148 billion from search ads from their overall revenue of $256 billion. The way Google collects and uses data is crucial in this, but it’s their algorithm that gives each user the most relevant search results and ads each time they use the service.
Amazon has also used algorithms as one of its most important money-making factors. They need to make sure that people see as many products as possible that are likely to interest them. The Amazon A9 ranking algorithm connects people to the right products using details such as keywords, customer reviews, delivery time, and price. Existing Amazon customers will find that the list of items offered to them grows closer to their taste over time too, which helps to keep them coming back and buying more.
Netflix has also invested heavily in algorithms, and the results can be seen in its recommendations system. This takes into account the likes of your viewing history with them, what people with similar tastes watch, and even what type of device you use to access the service. Netflix believes that the use of 1,300 recommendation clusters helps to grab people’s attention in the crucial first 90 seconds and that without it they would lose $1 billion each year in cancelled subscriptions.
What to invest in is another issue that CEOs can look to resolve using algorithms. This is because there’s an increasing number of Robo-advisors, which are pieces of software that use algorithms to provide suggestions about the potential investments each person could make.
This approach can be seen in sites such as Betterment, which uses an automated financial advisor to provide advice. Is Betterment safe? This review confirms that they are registered with the FINRA and the New York Stock Exchange (NYSE). They use algorithms to help investors balance their portfolios while saving time, as well as to automate deposits and decisions, although the option of paying for a human advisor is also offered.
This type of investing technology is growing all the time, and provides a useful alternative and provides a useful alternative for a busy CEO who wants to grow their money but doesn’t have the time to fully research the markets on their own. As investing sites enhance and expand their algorithms, it’s easy to imagine a situation shortly when we let them take care of just about everything without any need for human intervention.
With these examples, we’ve seen the algorithms can be used to both grow a business and to help a CEO manage their money more easily. Most people never know much about how these algorithms work, but it’s now easy to see why CEOs typically need to understand more about them than most other people.