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The business value of data
Each piece of data can be used in any number of analyses that will drive business results. It has
value, then, in making possible the results that are obtained from those analyses. For example,
if the enterprise analyzes its historical transactions and, as a result, finds ways to optimize its
supply chain, thereby reducing costs, then the data has played a role in enabling that cost
reduction. Consequently, data has a business value that stems from its potential use in increasing
profits or accomplishing mission objectives.
It is easy to find instances of data being used for its non-transactional value. Johnson &
Johnson, for example, uses the transactional data it has stored in the cloud to improve physician
compliance, optimize its supply chain, and discover new drugs. Nike collects data on customer
achievements to drive the customer's digital experience in NikePlus. Lyft collects and stores
the GPS coordinates of all of its rides; when they analyzed it, they found that 90% of rides
overlapped with other rides from nearby locations. This insight led to the creation of Lyft Line, a
service that allows passengers to share a car and receive discounts of up to 50 percent.
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Because these uses can lead to future profits—even if the profits are not yet being realized—
we can think of data as a financial asset (although in most cases a non-GAAP asset). It is no
surprise, then, that the data a company has accumulated can be a factor in the acquisition value
of the company or may enable it to form partnerships with other business ventures. Witness, for
example, Microsoft's acquisition of LinkedIn, with its data on 433 million customers, for $26.2B
or the bankruptcy proceedings of Caesars Entertainment Operating Corp. Inc. in 2015–2017,
where creditors argued that the data on the 45 million customers in its Total Rewards customer
loyalty program was worth $1B and was its most valuable asset.
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It is helpful to think of data as having business value as a kind of financial call option—that is, it
gives us the opportunity to make changes in the supply chain or launch a new product but does
not obligate us to do so. We can exercise the option or not, depending on how valuable the data
indicates that the new business will be. It is here that we have had trouble finding the value of
the data asset: Valuing a call option is considerably more complicated than calculating the ROI of
a projected stream of cash flows. As a result, enterprises often neglect the value; but as I show in
my book War and Peace and IT
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, many of the techniques of agile IT delivery result in this kind of
option value.
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AWS case studies. See https://www.youtube.com/watch?v=6A1tOFqvgek, https://aws.amazon.com/products/databases/, and https://aws.amazon.com/solutions/
case-studies/lyft/.
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Both examples from https://sloanreview.mit.edu/article/whats-your-data-worth/. A detailed analysis of the Caesars bankruptcy can be found at https://turn-
around.org/sites/default/files/11.%20Paper%20-Caesars.pdf. The bankruptcy was exceedingly complex and the value of Total Rewards was included with other
assets, so it is not clear what value was ultimately attached to it.
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Mark Schwartz, War and Peace and IT: Business Leadership, Technology, and Success in the Digital Age (Portland, OR: IT Revolution Press, 2019).
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