Data markets could become a new market category. Here, companies buy, sell or trade data for mutual benefit.
5 Big Wishes For Big Data Deployments
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There's an old aphorism that anything you're not using is costing you money. That's true of data, especially in light of the fact that collecting and storing it isn't cheap. It would make sense, then, for companies to try to wring more value out of the data resident in their systems.
IT pundits tout data as a strategic asset, but the value of data is often seen as unquantifiable, somewhat like goodwill, intellectual property, patents and business methodologies. Even when executives understand the value of their company's data, they don't always make it a priority to monetize it.
In quantifying the value of data, it's critical to separate the gold from the pyrite. One method is to determine its material value to the business. For instance, by applying analytics in real time to data from revenue-generating initiatives, companies can adjust rapidly to changing market conditions. That data thus becomes a tangible, valuable asset.
It's widely understood that social media companies seek to monetize the data they capture from personal and professional interactions. They rely almost exclusively on advertising revenue, thus their data is valuable to ad buyers who use that information for brand building or more effective customer segmentation and marketing. Those social media customers reach their own customers through both online and mobile platforms, via a variety of tools for cross-selling, up-selling, next-best offers, customer attraction and attrition management.
Online merchants analyze customer transactions at the point of sale or via online product searches, then tailor their offers by aligning a customer's purchasing patterns with similar shopping behavior information from other customers. The more data these merchants collect on each consumer, the better the targeting becomes.
There are newer, innovative approaches to data monetization. Consider data markets, a model that has the potential to create a new market category. Here, companies buy, sell or trade data for mutual benefit.
For example, a cloud service provider that has installed a large-scale technical infrastructure can analyze the performance and reliability of the installed hardware. It can then provide insights to the hardware vendor -- via a data market -- on warranty issues and improvements to incorporate into future versions of the hardware. In return, the hardware vendor can provide the cloud service provider with complementary product or component performance data. The hardware vendor could also supply the cloud provider with product enhancements or service-level customizations in exchange for the product feedback.
Similarly, a maker of snacks might decide to share its proprietary product nutrition information with a data market in exchange for consumer feedback on the product by specific locations. The data market, in turn, might sell or exchange the snack company's nutritional profile data to a developer of a smartphone app that compares the calories and fat content of various confections and offers product recommendations.
As you can see, significant revenue-enhancing synergies are possible. The cloud service provider delivers a more reliable service; hardware and software providers gain product usage information to improve their goods and services; the snack company gets field data from a variety of data sources not previously available to it; and the software company has the accurate data it needs to build its application.
With all this data sharing, there are issues to resolve. Privacy is a critical concern, especially when companies are looking to market potentially revealing customer data. This is where terms-of-service agreements and privacy policies play a critical role. If companies keep their customers well informed, and they include appropriate opt-in or opt-out provisions, they can mitigate privacy concerns.
They should make such notifications and agreements easy to understand and, when preparing data for sale or trade, ensure they scrupulously comply with all privacy regulations. Failure on this front can be incendiary. Companies also need to ensure that their valuable data doesn't land in the hands of competitors.
IT can assist by scrubbing the data for the purposes of sharing it to minimize competitive risk. C-level execs must also begin to understand that the potential risks can bear even greater rewards. It's a new world out there, and there's money to be found in data for those intrepid enough to look for it.
John Lucker is a leader of Deloitte Consulting's Global Advanced Analytics & Modeling practice. Ajit Prabhu is a principal in Deloitte Consulting's Strategy and Operations practice.
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