While it is common to hear the refrain ‘data is the new gold’ (or its variant ‘data is the new oil’) such statements can be misleading. Data in and of itself has no inherent value. That’s not say that data is valueless – it can be extraordinarily valuable – but merely possessing data confers no immediate value on the holder. For data to have value it must at some point be deployed via a business model that generates a positive economic outcome for an entity.
In this sense, data is actually more like dirt. There’s a lot of it around and unless you cultivate, nurture, and understand how to use it to enable growth, that dirt will remain essentially worthless.
The starting line of any data monetization journey is a simple realization: data is the gateway to action.
The value of data comes from its ability to generate insights, which in turn enable management teams to make better decisions, which leads to the company being able to take more effective actions. These actions could be anything: better targeting of customers, improved efficiencies, reduced costs, reduced risk etc. In this sense data is always a means to an end rather than an end in and of itself.
Many companies (large corporates in particular) have significant existing data sets as a function of their operations or collect data as a matter of course but have taken few positive steps to understand the “insights > decisions > actions > outcome” pathway necessary to convert that data’s potential value into actual value.
Based on this premise, it should be obvious then that to make money from data, it won’t be enough to just understand what data you have or how to extract it at a technical level.
Instead, the more important questions will be:
- What insights can be derived from this data?
- How can these insights be used by our own organization or an external party (see ‘part 2’ of this article for more on this point) to make decisions and take actions that generate value?
- What are the potential returns, costs and risks associated with taking those actions?
This last question is critical because not every data driven action will have a positive outcome, sometimes the monetization of the data simply does not exceed the cost and risk involved. Unfortunately, too many companies get “data heat” and charge into data monetization initiatives without stepping back, taking a breath, and doing a clear-headed analysis of cost, benefits, risks, and most importantly value.
If you are embarking on a data monetization journey, the only way to understand what your return on investment will be is to build a business case, which we cover in part two of this article.
If you’d like to understand how EverEdge can help you on your data monetization journey, email firstname.lastname@example.org