LinkedIn's Reid Hoffman On Groupon's Big Advantage: Big Data

Fast Company is traveling with LinkedIn cofounder Reid Hoffman (above, center) as part of "Silicon Valley Comes to the UK" (SVC2UK) this week. In part two of our interview with him (part one is here), Hoffman talks about how big data is going to give Groupon a competitive advantage in the deals space, why he wrote a book called The Start-Up of You, and why he's only checked the LinkedIn stock price a handful of times since the company went public in May.

FAST COMPANY: One of the themes you’ve started talking a lot about this year--and you'll be doing a talk about at SVC2UK this year--is big data. Why focus on this now?

REID HOFFMAN: Because of Web 2.0 [the explosion of social networks and consumer participation in the web] and the increasing number of sensors, there's all this data. With these massive amounts of highly semantically indexed data, that's indexed around people and places and all the things that matter to us and our lives, I believe there are going to be a ton of interesting apps that come out of that.

The reason I started speaking about this is that it’s like shining a spotlight for the entrepreneurial community and investor community to say, "Look, guys, I think there's going to be a lot of world-changing applications over here. We should all pay attention."

Greylock has actually hired a "Data Scientist in Residence" [DJ Patil, the former Chief Scientist at LinkedIn]. Why?

Every single company in our portfolio is going to be asking questions about what's their data strategy--how should they hire the data team, how should they integrate that with the product. Part of our view is the next generation in venture involves offering very specific help. At Greylock, we specialize in software--consumer and enterprise. Data is central to both of those.

We don't really know where the job will go. It's entrepreneurial. DJ is coming in as Data Scientist in Residence, and we'll see where it goes.

What do companies miss out on if they don't have a data strategy?

Potentially a lot. If you say the way our products and services are constituted, how we determine our strategy and maintain a competitive edge against other folks--if data is a very strong element of each of these, and you’re not doing anything, it’s like trying to run a business without business intelligence. I'm not sure I have a broad enough view that I would say every company needs to have a data strategy. But I would say many companies do. I certainly think that any company that is over 20 people needs to have a technology strategy, and data is essential to where technology is going.

How has having a data strategy helped LinkedIn?

I hired DJ at LinkedIn to build out a Data Sciences group. LinkedIn Skills is a perfect example of how to use data to create applications that help people navigate the world better. If you’re a professional who wants to work in a certain industry and you want to know what skills you should be working on, which companies are really good at those skills, which regions are growing those skills, what the related skills are that you might consider investing in--that's just the beginning. You might also wonder how and where could you learn those skills and which skills you should include in your profile so people know what you’re doing.

Big data is also why you have faith in Groupon [in which Hoffman is an investor].

Yes. There's two points on which a lot of the discussion about Groupon misses key insights. First is what exists with Groupon today: both scale and data. Data becomes important because of the scale. If you look at the core service that Groupon built on, it's: Here are some offers that may motivate you to act today. That’s interesting enough for you to plunk down the money.

As the activity in this space gets denser, it becomes important for [deals companies] to maintain their value proposition, both for the merchant and the consumer, and to be able to match the right two. The ability to do that kind of matching, off the data, is the kind of thing that has a robust, at-scale, defensible value proposition and makes it harder for other people to offer products that are as good.

I also think people discount Groupon's ability to build new value propositions. Groupon launched Groupon Now. An ability to raise my mobile phone and say there's a 20 percent off offer two blocks from you in the next hour is actually pretty useful. And that's a value of scale.

You have a book coming out early next year, The Start-Up of You [co-authored with Ben Casnocha]. What is it about?

The idea is that every individual needs to run their work life and their career with a very similar skillset to how entrepreneurs create and build companies. The old world, where you join a company and stay there until you retire, is transforming at a fast rate everywhere in the world.

So individuals need to do things that companies need to do. They need to look at which industries are growing, think about how they maintain flexibility both within the industry they're currently in and other industries, how they develop their competencies and skillsets so that they're more and more valuable potential employees, how they take intelligent risks to get breakout effects in their career, and how they have competitive differentiation.

The idea of the book was how you take that concept seriously of investing in yourself in a business of one.

This is the basic idea behind LinkedIn as well.

Yes. When I saw this transformation happening, my first response as a software entrepreneur was to build a platform by which every individual could now navigate their work life as a business of one. What kicked off the book was when I gave the commencement speech at my high school a couple of years ago. I was trying to figure out what I would say to a group of high school students.

LinkedIn put more shares into the market on Thursday. You've said you’ve only looked at LinkedIn's share price a handful of times since the company went public in May. Why?

I believe the right way to build great technology companies is to focus on three- to five-year strategies. The most interesting companies do that, and that’s how I spend my time, both as a founder and as an investor.

Read also: LinkedIn Cofounder Reid Hoffman in the UK: Silicon Valley Can Be Exported

[Images: Graph: Flickr user Thox. Hoffman: E.B. Boyd, Flickr user joi]

E.B. Boyd is FastCompany.com's Silicon Valley reporter. Twitter | Google+ | Email

Add New Comment

0 Comments