When considering data monetization, it’s helpful to look at the evolution of the information industry overall. It started with firms aggregating data—such as hospital performance or the results of legal cases—and selling it to other companies (in this case, hospitals or law firms). The next step was to add workflow tools and software, and other services to help massage the data into readable and actionable formats. Now, information companies are increasingly analyzing the data and delivering actionable, value-added results to clients.
Certainly sell your data if you can make money from it while managing the risks.....but never forget that the most valuable data-monetization strategy is to drive your own business.Timo Pervane, Partner
For companies looking to monetize their own data, there are three waves to consider.
Wave 1: Apply data to drive your business, through more efficient processes
Common targets are pricing, sales prioritization, sales cycle management, and product development. Data is also useful to gain a deeper understanding of customer needs and provide a better customer experience. Every company is thinking about using data in this way.
Wave 2: Make money, or enhance current offerings, by selling data to your customers
You know them and understand their needs, and if you can provide additional value you might increase retention and stickiness. If you can provide both data and workflow tools that make the data even more informative for them, you can increase value capture. This requires some investment, but if you are already cleaning and analyzing the data for your own needs, it’s a marginal add-on investment to make it available to others. For example, many retailers package up sales data and sell it back to suppliers, improving coordination and system-wide efficiency.
Wave 3: Sell your data to other companies that are not your customers or suppliers, and essentially start a new line of business
Your data can be valuable in surprising places. For example, a hedge fund might want to know the daily spending at a new online retailer, or energy traders might want to know thermostat settings for different demographics and regions. Yodlee Inc., which provides online finance tools to large banks, has started a side business selling aggregate data it collects from credit- and debit-card transactions, which can suggest trends in consumer buying that will eventually influence stock prices.
Which data wave should you catch?
For most companies, starting an information business from scratch is a distraction to the core business. Beyond that, many companies overestimate the value and uniqueness of their own data, and the chances are good that someone else is already supplying something that’s as good or better. Furthermore, customer may get annoyed if the data is misused. But this is not to say that there aren’t great business opportunities to be pursued and that there won’t be companies who are successful at Waves 2 and 3.
In practice, most activities in Wave 3 will likely be done in partnership with existing information services companies (that have the customer base and go-to-market capabilities already). They are in a stronger position to create industry consortia that can aggregate data from different companies in a given vertical so the data buyer gets access to a broader view than just an individual company’s slice of the market, turbocharging the value.
Certainly sell your data if you can make money from it while managing the risks, especially if you can use your data to bolster partnerships with existing customers or create more efficiency across the whole value chain. But never forget that the most valuable data-monetization strategy is to drive your own business.