Economic Insights - July 2017

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Today, data itself is increasingly a commodity.  But the ability to monetize data effectively can be a source of competitive advantage in the digital economy.

As  the authors explain, companies can take three approaches to monetizing their data:

  1. Improving internal business processes and decisions.
  2. Wrapping information around core products and services.
  3. Selling information offerings to new and existing markets.

These approaches differ significantly in the types of capabilities and commitments they require, but each represents an important opportunity for a company to distinguish itself in the marketplace.

Theoretically, companies can pursue more than one approach to data monetization at the same time.  In practice, adopting each approach requires management commitment to specific organizational, technological and data management capabilities.  Thus, it’s best to identify your most promising opportunity and start there.  In doing so, you will enhance your data in ways that will accelerate subsequent efforts related to the other approaches. More importantly, you’ll build your company’s capacity for monetizing its data.

The first approach, using data to improve operational processes and boost decision-making quality, may not be the most glamorous path to monetizing data, but it is the most immediate.  Executives often underestimate the financial returns that can be generated by using data to create operational efficiencies.  Companies see positive results when they put data and analytics in the hands of employees who are positioned to make decisions, such as those who interact with customers, oversee product development, or run production processes.  With data-based insights and clear decision rules, people can deliver more meaningful services, better assess and address customer demands, and optimize production.

When Satya Nadella became CEO of Microsoft Corp. in February 2014, he urged employees to find ways to improve the company’s processes with data.  Within sales, executives believed that, with the right tools and systems, they could improve the productivity of their salespeople by 30 percent.  To do so, Microsoft’s sales leaders sought to deploy tools that would help...

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