There is well-supported rule of thumb that says more data beats a better algorithm. Google is a good example, taken from the linked article:
Another fine illustration of this principle comes from Google. Most people think Google’s success is due to their brilliant algorithms, especially PageRank. In reality, the two big innovations that Larry and Sergey introduced, that really took search to the next level in 1998, were:
1. The recognition that hyperlinks were an important measure of popularity – a link to a webpage counts as a vote for it.
2. The use of anchortext (the text of hyperlinks) in the web index, giving it a weight close to the page title.
First generation search engines had used only the text of the web pages themselves. The addition of these two additional data sets – hyperlinks and anchortext – took Google’s search to the next level.
Failure is a data point. For example, Edison famously said about the light bulb, “I have not failed 1,000 times. I have successfully discovered 1,000 ways to not make a light bulb.” A business failure is a special kind of data point, because complex data mining teaches that independent, 3rd party data that is not affiliated with the original data source almost always adds more value. In Google’s case, hyperlinks and anchortext were independent data, revealing what other people think about any given web page. Independent data always accompanies a business failure: customers wouldn’t buy, investors wouldn’t invest, industry gurus gave an unfavorable review.
Entrepreneurs have a choice: accumulate data (find out what doesn’t work), or write better algorithms (business plans, strategy, etc.). As in complex data mining, the experts in innovation believe that more data beats a better algorithm. Why does Sand Hill Road continue to fund entrepreneurs who have failed before? Because seasoned entrepreneurs hold more data.
As IBM founder Thomas Watson put it, “If you want to increase your success rate, double your failure rate”.
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