Malcom Frank

Companies can turn ‘code halos’—virtual ‘halos’ of information that surround people and objects—to business advantage, Malcolm Frank tells TheStreet’s James Rogers. “Big data in a lot of cases is just big noise,” says Frank. “We’re living in this time, this decade, where most corporations are going to see a 50 time increase in the data they manage. But the winners will be those that can read meaning and insights into it. We’ve already seen this in firms like Google, Netflix, Pandora and Amazon that have changed their industries, because they take that data and tailor it to customers, and they get insights into those customers that their competitors just don’t have.”

Frank says there is a lot of science here. “A lot of us talk about Data science, but we recognize something that we call Code Halo: it’s the virtual you. It’s the halo of information that surrounds every person now and is now surrounding every machine. If we go into Amazon, they don’t see you physically. But they see the code halo. They recognize the virtual you. When they recognize what your true desires are in music, movies, or literature, they can build a one-to-one curated consumer experience for you. We saw firms like that which have massive market value as a result of building and managing code halos. Now we’re seeing that coming to other industries as well,” he says.

Now, says Frank, more industrial companies are joining the world of code halos. “GE is doing a fabulous job with their brilliant machines. They are putting code halos around jet engines, around scanners, around locomotives, so that they can share with their clients the economic benefit of seeing the virtual as well as managing the physical,” he says. “Nike, with their FuelBands, have seen terrific results by instrumenting their consumers and helping them become better athletes or get in better shapes. We’ve seen more traditional firms get into this as well.”

According to Frank, a really instructive case would be Blockbuster’s loss to Netflix. “Initially, they thought this isn’t hard. It is just the internet as a distribution channel for selling things or renting things. But what Netflix was doing was recognizing the code halo around that customer and building a curated personalized movie-watching experience, whereas Blockbuster played by the older rules and really paid for that.”

When asked about the key takeaway from the book on the topic that Frank has coauthored, Frank says, “When we first looked at the concept, we started asking: Why did Google beat Yahoo? Why did Netflix win against Blockbuster? We thought it was just focused on those industries. We recognized code halo is not for the Silicon Valley wunderkind, but it’s for everybody. We saw these universal transitions. If you can understand how to architecture these solutions and build supporting business models, we think that a lot of organizations can build market value in the same way that those other firms did.”