Cost Center to Profit Center: IT Makeover Possibility through Data Monetization
Organizations have always been routinely collecting data at every touch point of a business transaction. While this data was traditionally stored and managed manually, it has taken on a digital avatar with the widespread use of information technology (IT). What was once occasional and structured, data these days is frequent, unstructured and voluminous and accumulates in multiple formats rapidly. This phenomenon leads us right into the area of big data and business analytics. The use of this data till date has been limited to understanding customer behavioral trends to help in launching new products and services and improving efficiency. However, a new definitive trend is emerging.
Organizations today compete and differentiate themselves on their ability to discover new opportunities, create disruptive business models and leverage new possibilities in the market. Given the intense competition, the thirst for agility, accuracy and efficiency have never been greater in an era where connectivity, Internet-of-Things (IOT) applications and public unstructured data are the norm. This needs to be fueled by the large treasure troves of data accessible to the organization. In future, winning enterprises will be those who will drive tangible and measurable outcomes through predictable and actionable insights directly resulting from large-scale data monetization.
In Search of ‘One Version of Truth’
The existing architecture of IT system infrastructure is not designed to derive and deliver rapid actionable insights from typically large volumes of structured and unstructured data. This leads business groups to request their IT departments for new reports on an ad hoc basis. IT departments are not staffed or equipped for this challenge as they don’t have the appropriate tools to sift through their cache of unfamiliar business data at high speed. Sometimes, this forces business teams to create their own shadow IT departments below the radar. While this can be understood at one level, the security concerns of such moves cannot be ignored.
On the one hand, IT as the custodian of data may not be aware of its full value but on the other hand, business leaders do not understand the function and nuances of data management, storage and governance. These silos make the search for a single version of truth elusive and analytics ends up being used as a tactical tool, rather than for strategic decisions.
This provides a unique opportunity for CIOs to turn a new leaf and transform themselves from being cost centers to profit centers. CIOs can now create value and generate revenue through data monetization. CIOs are exploring avenues to provide packaged services to external customers beyond just servicing internal customers. The emerging area of data monetization is their new ally in their forays into external markets. Data monetization is no longer just a good-to-have capability, but a must-have in order to succeed in today’s challenging and dynamic marketplace in which data is in abundance.
All Paths Lead to One – Business Value
According to Gartner, “Data monetization refers to using data for quantifiable economic benefits”. Data monetization includes both direct monetization and indirect monetization.
Data monetization is the process of synthesizing corporate data into a veritable currency. The currency can be in the form of actual dollars, but it can also be used as a bartering device or as a product or service enhancement.
Data monetization also helps in building an impressive brand in the market to influence stakeholders. It helps in creating differentiation through collaboration with the partner ecosystem. This can benefit the business organizations in creating a self-funded model for transformation.
There is rapid adoption of data monetization phenomenon among the usual suspects—Banking, Financial Services, and Insurance and Manufacturing industry. Every year, tax departments are beset with huge loss of revenue due to improper payments, fraud, waste and abuse of tax payment networks. Hence, it is no wonder that Governments are the front-runners in adopting data analytics in their endeavor to detect and mitigate fraud.
Although organizations are not always able to create new models that generate revenue, they can derive competitive advantage by improving customer intimacy, operational efficiency and risk management.
These competitive advantages are the Unique Selling Proposition (USP) for the businesses. Data monetization is getting traction with the rise in big data and IOT. At the CXO level, executives are beginning to recognize the value of data, and as our world incorporates more and more sensors and real-time analytics, data will continue to be a booming business.
A Logical Approach for Data Monetization
Raw data needs to be systematically converted into actionable insights so that it can be continually monetized and the output is in line with the expectations of target customers. The quality and consistency of the insights can be assured through a Data monetization framework such as the one below:
Businesses need to undertake the fundamental transformation of its big business data through a scientific analytical process and intelligent presentation into a set of actionable insights. This forms a new information value chain which can become a differentiator in discovering new opportunities within and outside the organizations ahead of the competition.
Strong technical and domain expertise are the key ingredients for activating this information value chain and convert business data into revenue. Therefore, CIOs need to closely assess the readiness of their teams and equip them with the necessary tools before embarking on the profitable path of data monetization.
There are several challenges that businesses need to overcome before realizing the full potential of their Data monetization efforts. They need to adhere to data protection and privacy regulations of respective countries when selling or bartering data. Any breaches, intentional or otherwise can have adverse impact on how a business is perceived by the ecosystem.
Time to Act is Now!
Data monetization offers a new business opportunity for organizations, especially their internal IT departments. It is starting to bring about a paradigm shift in the CIO mindsets on how to transform their IT departments into profit centers. The time to act is now as mature tools and processes are becoming widely available.