Classroom Companion: Business

20.3.10 
 Data Illiteracy
Big data analytics and artificial intelligence are highly specialized disciplines taught 
in advanced courses at several universities. Both fields require insight into highly 
specialized technologies and advanced mathematical methods. The technology and 
its applications are not taught at business schools. One concern is, therefore, that 
the benefits of big data technologies often are neglected by the management 
because of data illiteracy.
An example of how big data can be exploited to create several new business 
opportunities for a media company is described in 
7
Box 
20.3
.
Box 20.3 Netflix and Big Data
Big data is an essential commodity for 
Netflix in its business operations. 
Netflix gathers and stores data from its 
over 180 million users and uses this 
data to discover user behavior and 
viewer patterns. The data collected is 
detailed and creates a comprehensive 
profile of the subscribers, for example, 
the time it takes the user to finish view-
ing a movie or a show, devices used to 
view the show, pauses taken during the 
show and whether the viewer continues 
to watch the show after the pause, and 
which days of the week and time of the 
day the user is active.
Netflix uses big data analytics to 
process this data and turn it into useful 
information. The information is used to 
recommend movies and TV shows to 
the users, matching their preferences as 
accurately as possible. Over 75% of 
movies and TV shows the user watches 
are based on recommendations by 
Netflix. Netflix also uses the 
information to decide which new con-
tent to produce. Observing that excep-
tionally many customers are viewing a 
particular series may result in the pro-
duction of new series in the same genre.
Netflix also uses this information 
for marketing purposes, e.g., by attach-
ing different marketing trailers to the 
film or the show that are tailored to 
match the interests of different user 
groups.
The recommendation algorithm 
used by Netflix does not require any 
direct input from the subscribers. It is 
only based on information collected 
from the Netflix servers. The economic 
value of recommendation algorithms 
must not be underestimated. They may 
reduce customer churn, increase the 
value of Netflix as a marketing arena, 
and boost user satisfaction. Netflix may 
be regarded both as a data analytics 
company and as a media company 
(Sivasubramian, 
2020
).