How do you turn the world’s most valuable commodity into one of your company’s most valuable assets?
In a recent economist article, the author states that data has surpassed oil as the world’s most valuable commodity. Many of us believe this to be true now or will be soon. However, most data, like crude oil, needs to be refined to get the maximum value. So how much refining of your data is required to drive higher internal and external value? If your data strategy is ineffective your data can not only lose value over time, but can also become a significant liability or risk.
How do we get started?
First, find out what you have. Initially, you need a comprehensive view of all the data that is generated or consumed to run your business. It is important that this view be inclusive of all the data you can identify. Consider this your raw data. This initial task can take significant effort, however, there are tools that can help in the effort. Your IT department most likely has much of the internal data documented. It is important to recognize that some of your data may come from systems that are outside your core applications or even in a spreadsheet that a person or group uses.
We found our data – what’s next?
It’s time to start the refining process. It is critical to understand how and why the business uses the information. Without that knowledge, you will not be able to determine if the data meets your current and future needs. The first step in refining your data is establishing clear definitions for your data from a business and IT perspective. This ensures that your organization is using the data consistently within each business process. From a practical standpoint, you would start evaluating the alignment of your data with your key business processes and expand from there. This builds the foundation which will ultimately turn your data into actionable information.
We defined our data – How do we leverage it?
Once your data is understood and well defined you can determine how much of your data you want to collect, structure, store and refine. The more data that you refine, the more value achieved over time. However, the effort to refine all your data initially can be overwhelming. Start with collecting, storing and securing the data in a way that it can be refined over time. The determination of what data to refine and use as information is generally driven by business value. This process can be mapped out in a timeline based on business value. Or in many cases driven by pain points in the business that can be solved by having better information.
One of the key benefits of understanding how your data interacts with your business processes is that you can see how often a piece of data is used or “reused” across the entire organization. This refinement process also allows you to identify the most natural owner of the data via their level of involvement in generating and maintaining the data. Ownership is a critical aspect of refining your data. Like many things in life, data is not static. It needs to reflect the changes in your business. This could include your customers, products, services or even employees or financial structures. If the data does not reflect the past, present and even the future it loses value quickly. “Future” you ask – how can data reflect the future? When you are considering a business change, e.g., launching a new product, looking at M&A activity, or reorganizing your sales force, having a way to look at the impact of your decision in advance of making it, can be invaluable. How your data is structured plays a key role in quickly assessing the decision and related impacts. This can also include leveraging industry, trade or third party data.
How do we continue to increase the value?
One way data differs from other commodities is that it can be reused without losing value. This is only true if you continue to invest in your data like an asset. The more you explore its uses both internally and externally and refine it the higher value will become. Today more companies are considering monetizing their data. One key question to consider is “If you don’t know what you have and you don’t take care of it why would someone else pay a premium for it?”. Like oil, someone may pay for the raw material that you own, but if they don’t know exactly what they are getting and the quality of it, they will heavily discount their offer. If you can give them a refined product that is of high quality and exactly what they are looking for or even educate them on the benefits of it, they will pay a premium. This is especially true for your internal customers.
Why act now?
The longer you wait to implement a data strategy the greater the opportunity loss. Unlike crude oil, data continues to increase requiring more effort to make it valuable. It is also true that collecting vast amounts of data without understanding how and why it should be used adds risk. Your strategy also needs to include storing and securing your data. By putting a strategy in place that defines how and why the data is used, you reduce the risk of inappropriate access and usage.
Our challenge for you is to take that first step and understand the data you have and how your organization is using it to fuel your key business decisions.