Treat data like capital: Accumulate it, and invest it
- 16 February, 2016 08:51
Data is a capital asset, as essential to the growth of a digital business as financial capital, according to a senior Oracle executive. And, by recognising this, he argues that established players can better counter outside-the-box disruptors such as Uber.
“Data is a necessary input into new digital products and services — without it they cannot exist,” Paul Sonderegger, chief data strategist at Oracle, told Computerworld.
“It is a kind of capital required for the creation of products and services. If you are a retailer and want to go into a new market but lack financial capital, you can’t go.
“By the same token, if you want to create a dynamic pricing algorithm or a recommendation engine or a shopping basket analyser and lack the data to feed those algorithms, you cannot create those services.”
Sonderegger argued that a consequence of data being akin to financial capital is that “platforms tend to win”: Those who control the key data platform for an industry are well placed to dominate. Uber, he said, was a classic example.
“Taxi operators did not know they were in platform competition for transportation until after Uber showed up,” Sonderegger said.
He said there were many other industries where such disruptions have yet to occur and where incumbents, were they to understand this paradigm, would be well placed to pre-empt Uber-like disrupters.
As an example, Sonderegger cited a system for optimising the deliver of fertiliser to crops: “It is now possible to have a drone that will take spectroscopic images of a field of corn and, based on analysis of those images determine the optimal amount of fertiliser for every part of the field.
“That information can then be fed to the fertiliser spreader on the tractor and the amount of fertiliser adjusted for different parts of the field. So the tractor now is in competition to be a platform for agricultural services.
“If the drone/fertiliser spreader combination or one or the other builds up a large enough unique data capital it can become the platform for agricultural services and the tractor becomes a provider into that platform. That is not the outcome the tractor manufacturer is looking for.”
Although Uber has wreaked havoc in the taxi industry around the world, incumbents, he argued, were well placed to forestall such disruptions.
“Incumbent companies have a distinct advantage when it comes to creating a unique stock of data capital because of the volume of interactions they already have with customers and trading partners,” Sonderegger said.
Sonderegger said many organisations had vast repositories of data that they were not fully exploiting, but a higher priority was to build up new reservoirs of high value data capital ahead of competitors.
“There’s a growing interest in big data and a growing understanding that a greater diversity of data to feed applications, to feed algorithms, is vital to competitive advantage,” the data strategist said.
“Companies are in a race to digitise and ‘datafy’ key value generating activities before their rivals do.”
His view is reinforced by the results of a survey of enterprises undertaken by UK based Aberdeen Group.
It found the best performing organisations to be those that had managed to break down internal data silos and create analytical cultures where information is shared.
“Best-in-Class organisations are 40 percent less likely to report problems with data silos,” the report said.
“This enables them to focus on becoming more data driven across all operations and accelerate analytical processes to match the pace of business.”
Key to enabling businesses to leverage their data capital, Sondereggger said, were big data discovery tools that sat on top large data repositories, typically managed with tools like Hadoop.
“With this kind of environment managers that are not statisticians but have real questions about the business can shop through a big Hadoop cluster just like you might shop for a dishwasher or cooker when you are redesigning your kitchen.”