Monday, February 4, 2013

How do we determine the ‘value’ of data?

Data is rapidly becoming a new form of currency – It is bought, sold and protected in ways similar to currency and the commodities that back it.  There are a variety of examples of companies that have been built around the idea of collecting and using data in creative ways, enabling business models not previously possible.  Facebook, Google, Yelp, Groupon and a host of other companies across many industries have embraced this model of using data in new ways to create new business models.

But how do we value data?  How do we assign an exchange rate to something that is very much valued in the eye of the beholder?

Value takes many forms.  Using a financial metric is one way, assigning a price, or the impact to the business.  But ultimately value is set by the influence an item has on the world around it.  When it comes to data, the value has three components:
  1. The cost of gathering the data
  2. The cost to replace any lost data
  3. The potential for future gains because of the insight gained from the data

Data is rapidly becoming the most important commodity of all.  Companies buy it, trade it, sell it, insure it and use it as leverage in negotiations.  Data has rapidly eclipsed the traditional, tangible assets of business as how a company is valued on the market and to its customers.

Many successful companies today work to ensure that have a large customer base to pull from; they leverage that base to collect as many details as possible on customers’ habits, motives and behaviors; and in turn companies use that information to grow their markets, their attach rates and their business.

As the worlds’ economy continues to shift towards services and intellectual offerings, and away from traditional manufacturing, data will only become more valuable. Over time more and more companies will have to ensure they have proper corporate policies in place to track and protect the data that drives the organization and ensure they can maintain a competitive advantage.