Competing With Data & Analytics
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Data has become a key input for driving growth, enabling businesses to differentiate themselves and maintain a competitive edge. Given the growing importance of data to companies, should managers measure its value? Is it even possible for a company to effectively measure the value of its data? An increasing number of institutions, academics, and business leaders have begun tackling these questions, leaving managers with many alternatives for assessing the value of data. None are yet generally accepted, nor completely satisfactory, but they can help organizations realize more value from their data.
Why Is Data Valuation Important?
There are three basic reasons organizations want a good way to understand the value of their data. A good sense of value can help guide good decisions around direct monetization, internal investments, and mergers and acquisitions.
Direct Data Monetization
Many organizations are keen to monetize data directly by selling it to third parties or marketing data products. Inability to understand data’s value can result in mispriced products. Understanding the impact of exposing data to third parties on the value of a company’s data for indirect monetization can help guide the decision on whether to pursue explicit monetization. Today, despite an increasing recognition of potential benefit, most organizations are very conservative about what data they expose outside the enterprise. Good valuation approaches could help leaders understand if selling their data would really affect their competitive position or ability to realize their own benefit from it.
Understanding the value of both current and potential data can help prioritize and direct your investments in data and systems. In our experience, most organizations struggle to articulate the relationship between their IT investments and business value generally. For data systems, the problem is particularly acute. Surveys report that only about 30% to 50% of data warehousing projects are successful at delivering value. Understanding how data drives business value can help you understand where you should be minimizing costs, and where you should be investing to realize potential ROI.
An ability to articulate data’s contribution to an organization’s overall value can transform the relationship between technology and business management. Chief experience officers (CXOs) charged with managing data report that their ability to articulate business value from data investments with rigor supported by the CFO results in more resources available to drive more positive outcomes for their organizations.