Steve Lucas: How to Build Winning Algorithms

Jeff Woods

As the son of a nuclear physicist who developed mathematical models for a living, Steve Lucas learned early about the power of algorithms to predict behavior and performance. As president of Digital Enterprise Platform at SAP, he also knows that the business value of algorithms depends on the people who create and use them. Digitalist Magazine editorial director Jeff Woods met with Lucas to find out why.

Jeff Woods: How do you identify the right people to create your algorithms?

Steve Lucas: Companies that deliver goods and services with greater efficiency and that respond most accurately to consumer demand will win. So you have to understand your existing processes and the desired state for your business. Then you need a multidisciplinary team that includes people who understand your business processes as well as people who can create mathematical formulas from them. There are no “quant jock” soloists.

Woods: What should you do if people resist using algorithm-based business processes?

Lucas: As with any big change, people resist when they don’t understand the potential and when they fear their roles are at risk. If you start with small, high-value initiatives, you can create positive experiences and build expertise. Once you open people’s eyes to what they can do with algorithms, they’ll be encouraged to incorporate them into their decision making.

Woods: What should leaders do to get their teams working on algorithm-enabled business strategies?

Lucas: People get caught up in the debate about whether you need a chief data officer or chief digital officer. But it’s more important to build a data science capability. By establishing a center of excellence, you can stop relying on third parties to build your models. Your people can get comfortable with the latest tools and best practices, and they can focus on the best uses for your business data. You could develop an algorithm to optimize payroll, for example, but it might not be that useful. Just because the process is there, doesn’t mean it needs math.

In every industry right now, there’s at least one organization that is redefining itself through mathematics. If your organization is not doing this, you need to get started.

About Jeff Woods

Jeff Woods is Chief Product Strategist, Products and Innovation at SAP.