So what is my data worth?

Data – I’m often asked “so this data thing, how do you place a value on it’?

Businesses and governments today are increasing ‘data centric’, and their business models are founded on data collection, retrieval, value addition and in some cases sale. Interestingly, despite the pivotal role that data plays in their businesses, these companies do not have a way to practically account for this asset on a daily basis.

The valuation of data provides a significant opportunity to gain competitive advantage or increase public value for the government. Those that are not investing in their data will experience greater business hurdles unless they acknowledge their data holdings as an asset, if not the most valuable.

Presently, the scope for data valuation using traditional methods is fairly restrictive. However, emerging industry practices point to a trend of increasing information monetisation. It is important that businesses stay alert to opportunities for data valuation within their environments and begin early to achieve a head start in the process. Doing so will present a better understanding of actual corporate valuations and guide strategic data cenertic investments for improving performance.

With data undergoing such sweeping changes in its role and attribution in driving businesses and emerging as a market in itself, companies and governments are aware that they have to rethink the valuation of their data assets.

Data projects such as ‘Business Intelligence’ have a poor success rate because they often lack support. Senior leadership commitment is never easy to gain as for many; the return on data investment is not easy to define or communicate in advance. Currently, there is a lack of a simple and accessible data valuation process for business leaders to understand and utilise. Furthermore, the ability to easily benchmark data holdings is also a major capability gap for businesses.

The pursuit of valuing information or ‘Infonomics’ has a significant amount of underpinning academic research. This research has produced many well-known mathematical models that generally require expert knowledge to exploit fully. Most of these translate well when just working with data, yet despite the weight of research, there remains no simple approach for the most basic of valuation and estimation. With the growth of data as a strategic business asset showing no abatement, this area need not be so complex.

So, let us start to frame a perspective. Below are six areas that can help any organisation start to understand the value of their data holdings? These have been used by many different organisations over the years, so I don’t claim it’s my intellectual property, far from it. I have merely assembled the most common data valuation approaches I’ve used and seen over the years.

When working on a data project, ask yourself these questions:

What is the intrinsic value of your data – How good and easy to use is the data versus how likely are others outside the organization to have it also? This is the presumptive value of data enabling apples-to-oranges comparisons in business.

What is the business value of your data – The value of data to a business process: How good is the data? How applicable to the business or a particular business process is it? How quickly can we get fresh data to the point of the business process?

What is the loss value of your data – The cost of not having data: What would it cost to replace the data, and what is the financial impact to the business if the data were lost over a time period?

What is the performance value of your data – Value of data to business objectives represented as key performance indicator (KPI) targets: How much does having a unit of data incrementally contribute to moving closer toward all KPI targets over a given period?

What is the economic value of your data – The bottom-line financial value for the data asset: The Performance Value of Data (PVD) for a revenue metric less the cost of acquiring, administering and applying the data.

What is the market value of your data – The income that can be generated by selling, renting or bartering this data – how much is a business partner willing to pay for access to this data?

With the rising importance of data-centric business models; data asset valuation is rapidly emerging as a key area of study within financial sciences. The availability of such evaluation approaches and principles will help data driven businesses in measuring the present and future value of their data assets.

While the above information is not new and is widely available from consulting companies you are still thinking – ok, show me how?

If you want to know more about the ‘how’ drop me a line.