While some businesses have started putting data on the balance sheet, others are yet to fully understand how to optimise the value of their data. Considering data to be an asset with a real value is a good start.
In the past, businesses have often looked to sell data to monetise it. While this is an effective approach, it doesn’t maximise the data’s value. Like any asset, once it’s sold, it’s gone. And, given the complexities around data regulation and privacy, selling data may not be compliant with legal requirements or even feasible.
Businesses should therefore look to create new value streams without losing control of the data as an asset.
The most valuable output of data is the insights it can deliver. Specifically, businesses expect to build a better understanding of their customers’ needs, wants, and behaviour. That’s where the actionable information lies, and is therefore where the real value is created.
Therefore, the most useful and effective way to monetise data could be to use the insights derived from the data to create new product or service offerings, or to introduce operating efficiencies, which can result in increased revenue, profitability, or both.
Many businesses do this effectively by setting up selective partnerships with businesses that have complementary data, often in adjacent industries. This can multiply the value of the data rapidly. Where one of the partners generates more value than the other, which is often the case, revenue sharing creates value for both partners.
There are three key ways by which data then turns into money: new revenue streams; increased margin; and higher customer retention rates.
To make the partnership model work, it’s worth considering involving a trusted adviser who can receive, integrate, and protect the data assets of all players. This means none of the partners actually accesses their partners’ data but, instead, can see the insights derived from that data. The trusted adviser provides specialist capabilities and helps manage any data privacy concerns.
Ideally, a trusted adviser is more than just a technical third party. They should be able to contribute to the effectiveness of the insights by integrating relevant open data, particularly spatial data as well as technology, to feed outputs into core operating systems.
When the partnership model is executed well, businesses will see annual revenues from the work. The ongoing value creation comes from robust, repeatable processes.
There are four key steps to take to monetise data:
- Understand how the data can be monetised: It’s important to understand that monetisation is determined by sharing the value creation, not just accepting a licence fee that someone else adds a margin to.
- Question the data: Examine your data to see whether it would be valuable to other businesses. To have a strong sense of value, you need access to integrated and enriched data internally first.
- Research the compliance considerations: Be aware of compliance when monetising data. The what, how, and why are important to understand to ensure that compliance is effectively managed.
- Turn analysis into insights and actions: Being prepared to share and combine different customer data sets may deliver competitive advantage. It will also begin the journey to disrupter from disrupted.
The outcome is an improved overview of customers’ needs, wants, preferences, and behaviours that providers a context for new products and services.