How to Monetize Your Data PDF

How to Monetize Your Data SPRING 2017 ISSUE These days, most companies are awash in data. But figuring out how to derive a profit from the data deluge can help distinguish your company in the marketplace. Barba...

How to Monetize Your Data SPRING 2017 ISSUE These days, most companies are awash in data. But figuring out how to derive a profit from the data deluge can help distinguish your company in the marketplace. Barbara H. Wixom Jeanne W. Ross Vol. 58, No. 3 Reprint #58310 http://mitsmr.com/2jb5c2V FRONTIERS [DATA AND ANALYTICS ] How to Monetize Your Data These days, most companies are awash in data. But figuring out how to derive a profit from the data deluge can help distinguish your company in the marketplace. BY BARBARA H. WIXOM AND JEANNE W. ROSS immediate. Executives often underesti- mate the financial returns that can be generated by using data to create opera- tional efficiencies. Companies see positive results when they put data and analytics in the hands of employees who are posi- tioned 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 T he possession of rich amounts of Theoretically, companies can pursue right tools and systems, they could im- data is hardly unique in today’s more than one approach to data monetiza- prove the productivity of their salespeople world. Indeed, data itself is increas- tion at the same time. In practice, adopting by 30%. To do so, Microsoft’s sales leaders ingly a commodity. But the ability to each approach requires management com- sought to deploy tools that would help monetize data effectively — and not mitment to specific organizational changes salespeople spend more of their time simply hoard it — can be a source of com- and targeted technology and data manage- engaging with customers — and in petitive advantage in the digital economy. ment upgrades. Thus, it’s best to identify more effective ways — by arming them Companies can take three approaches your most promising opportunity and start with key computed insights, such as to monetizing their data: (1) improving there. In doing so, you will enhance your how likely a sale is to close and when. internal business processes and decisions, data in ways that will accelerate subsequent To deliver actionable insights, sales (2) wrapping information around core efforts related to the other approaches. executives first had to define shared products and services, and (3) selling in- More importantly, you’ll build your com- concepts (for example, what is meant formation offerings to new and existing pany’s capacity for monetizing its data. by “a lead”). They then needed to locate markets. These approaches differ signifi- data sources that could be used to calcu- cantly in the types of capabilities and Improving Internal Processes late performance. They quickly learned commitments they require, but each Using data to improve operational pro- that sales data was located in too many represents an important opportunity cesses and boost decision-making quality different systems to easily create a com- for a company to distinguish itself in may not be the most glamorous path to prehensive snapshot of a salesperson’s the marketplace. monetizing data, but it is the most business. Within a year, they created a 10 MIT SLOAN MANAGEMENT REVIEW SPRING 2017 PLEASE NOTE THAT GRAY AREAS REFLECT ARTWORK THAT HAS BEEN INTENTIONALLY REMOVED. THE SUBSTANTIVE CONTENT OF THE ARTICLE APPEARS AS ORIGINALLY PUBLISHED. new, integrated customer system that Wrapping Information the credit card and more likely to use it could produce 360-degree views of Around Products more often. Microsoft’s relationships with corporate Most companies have opportunities — often Johnson & Johnson has discovered the customers, including what those custom- quite significant ones — to enrich their value of providing pattern identification to ers bought, what issues they encountered, products, services, and customer experiences users of its health-monitoring products, in- and how the company engaged with them. using data and analytics, a phenomenon cluding those for diabetics. The company The new system saved 10 to 15 minutes that we call “wrapping.” Companies are offers its OneTouch Verio Sync Meter cus- per sales opportunity by eliminating the wrapping their offerings with data to escape tomers historical reporting on their blood need for Microsoft salespeople to manu- commoditization and satisfy increasingly glucose levels, along with tools to help them ally search for and prepare data. The hard-to-please customers — with the goals understand patterns of changes. The re- system also helped sales executives more of generating sales increases, higher prices, porting is intended to help customers accurately manage their pipelines; it and deeper customer loyalty. FedEx Corp. identify the possible causes for the glucose used predictive analytics and machine was an early exemplar of wrapping when it level variations and thus identify behavioral learning to compute the likelihood of a introduced online package tracking as a free changes that can result in healthier living. successful sales engagement based on service in the 1990s. Now examples abound Wrapping activities are best viewed as data that the salesperson provided about as companies bundle reporting, alerts, and extensions of a company’s product manage- an opportunity. For example, buying and other information to add value to products ment processes. This means offering data deploying enterprise software is complex ranging from credit cards to health monitors. and analytics to customers at the same level of quality as the core product. Doing so requires comparable levels of scrutiny and Selling represents the hardest way control. Most companies don’t manage and cannot deliver data and analytics in this way. to monetize data, mainly because it In fact, exposing data to customers could requires a unique business model reveal quality problems and a lack of analyt- ical sophistication. Thus, in most cases, that most companies are not set up wrapping requires companies to “up their game” in their information capabilities so to execute. that wrapping doesn’t damage their reputa- tion or undermine their value proposition. This effort may entail heavy investment in and often requires a partner’s involve- Wrapping is a creative exercise in which data-quality programs, advanced comput- ment, so the system may calculate a companies identify what problems their ing platforms (for instance, Hadoop), or higher likelihood for success when cus- customers have and then find ways to solve data-science talent. tomers already have partners involved. those problems using data and analytics. Information about an opportunity’s like- For example, Capital One Financial Corp., Selling Data lihood of success, along with suggestions a diversified bank based in McLean, Many executives are eager to sell their com- on how to advance engagements along Virginia, learned that many of its credit pany’s data, convinced that it has inherent the sales pipeline, helped salespeople card holders are concerned about fraudu- value and can generate important new rev- prioritize their leads and act in ways lent transactions but find the task of enues for the company. We caution that most likely to achieve their goals. Over examining every charge to be tedious. So selling represents the hardest way to mone- time, Microsoft salespeople learned how the company helps customers identify tize data, mainly because it requires a to forecast more accurately (for example, fraud more easily and quickly by displaying unique business model that most compa- the accuracy of forecasts regarding global merchant logos and maps with each trans- nies are not set up to execute. Yet it can be accounts has risen from 55% to 70%), action in online statements. The visual done to potentially great effect under the which has led to better sales-pipeline cues jog cardholders’ memories about right circumstances. data and, in turn, improved pipeline whether they made a purchase or not. As State Street Corp. is a Boston, management. a result, customers are more satisfied with Massachusetts–based financial services SLOANREVIEW.MIT.EDU SPRING 2017 MIT SLOAN MANAGEMENT REVIEW 11 FRONTIERS How to Monetize Your Data (Continued from page 11) company that reported $10.4 billion in addition, the information business re- who can redirect the behaviors of employ- 2015 revenue. It provides products and quired salespeople with different selling ees to deliver an important new value services to institutional investors such as experience and skills in selling stand- proposition. mutual funds, corporate and public re- alone data and analytics-based products. Your inclination may be to solve the data tirement plans, and insurance companies. State Street understood that establish- quality issue first with big investments in In 2013, State Street announced a new ing an information business is hard and new infrastructure. We propose that ad- information-business division called takes time. State Street Global Exchange dressing the second issue of accountability State Street Global Exchange that would had to learn to achieve balance between will create urgency and commitment to combine existing State Street data and maintaining key ties with State Street (to addressing data quality issues — and so analytics capabilities with new research create benefits from being a part of the we recommend starting there. to develop information-based solutions larger organization) and responding Data monetization through process that clients would be willing to buy inde- quickly to new markets and new needs. improvement requires strong process pendently of the company’s core services. Executives believe that State Street Global leaders. These leaders systematically use State Street established a new division for the information business in recognition of its unique business model needs — something the company had not done Only about a quarter of companies in 30 years. Even though it started out as a dis- offer employees and customers crete unit, State Street Global Exchange easy access to the data they most need. You can’t monetize data no focused on developing products that were tightly associated with State Street’s core business. For example, State Street is one of the largest administrators of one can use. private equity assets, which means that it collects data about the financial capital that is not noted on a public exchange; Exchange is gaining significant traction data to analyze the outcomes of existing this kind of data is of great value to with its clients — and that their commit- processes and test hypotheses about pro- markets that require an accurate repre- ment will pay off. But we caution that posed improvements. At Microsoft, for sentation of the private equity industry. such a model is not easy to replicate. example, sales managers designated State Street Global Exchange appreciated Other companies should think carefully specific people to reshape and institu- that the data was not automatically mon- about the operational capabilities, invest- tionalize new ways of selling. Process etizable. Executives secured permission ment, and commitment required to leaders are ultimately responsible for the from 3,000 private equity clients to successfully sell data. design of best practices, the capture of aggregate and anonymize that data — the right data, the availability of tools, and then created an index that conveyed The Importance of and the training of all staff regarding how the financial performance of the private Accountability to use data to do their jobs. equity industry. Chances are you have two major obstacles Data monetization through wrapping State Street leaders realized that they to monetizing your data. The first is the requires strong product leaders. These would need an entirely new operating accessibility and quality of your data. leaders treat the data that accompanies a model to support the information busi- Our research has found that only about core product or service much like any ness. For one, sales processes had to a quarter of companies offer employees other product innovation — they hold it change because, although State Street and customers easy access to the data to the same quality standards. At Capital Global Exchange often sold to State Street they most need. You can’t monetize data One, product leaders know the value of clients, a buyer of Global Exchange prod- no one can use. adding a data or analytics feature to a ucts was frequently a different person or The second obstacle is lack of account- credit card because they predict — and cost center than the kind of buyer tradi- ability. All three approaches to data then track — the lift in revenue from tional State Street products attract. In monetization require committed leaders the information as well as the cost of 12 MIT SLOAN MANAGEMENT REVIEW SPRING 2017 SLOANREVIEW.MIT.EDU providing it. Product leaders assemble teams to design experiments and method- ologies that help analyze the impacts of information features and make appropri- ate adjustments. Monetizing data by selling it requires a strong business-unit leader. That leader, in turn, must assemble a team that can launch and grow what is for most companies a new line of business. The head of that business will start by ensuring the value of the data and related services to potential customers. But the business head and his or her team must also design data, analytics, and dash- boards to monitor the business and enable a rapid response to new business opportunities. Each of the data-monetization strate- gies requires new processes, skills, and cultures to generate maximum returns. Companies with data-monetization expe- rience have learned that it is insufficient to simply put data and tools into the hands of employees. Microsoft refined goals, cleaned up data, honed reports and algorithms, grew talent, and changed habits. Capital One and Johnson & Johnson reshaped product-management talent, platforms, and capabilities. State Street redesigned its organization and created a new profit formula that would generate stand-alone revenues from information. Impressive results from data monetiza- tion do not transpire from single “aha” moments. Instead, they stem from a clear data-monetization strategy, combined with investment and commitment. Barbara H. Wixom and Jeanne W. Ross are both principal research scientists at the MIT Center for Information Systems Research in Cambridge, Massachusetts. Comment on this article at http://sloanreview.mit. edu/x/58310, or contact the authors at [email protected]. Reprint 58310. Copyright © Massachusetts Institute of Technology, 2017. All rights reserved. PLEASE NOTE THAT GRAY AREAS REFLECT ARTWORK THAT HAS BEEN INTENTIONALLY REMOVED. SPRING 2017 MIT SLOAN MANAGEMENT REVIEW 13 THE SUBSTANTIVE CONTENT OF THE ARTICLE APPEARS AS ORIGINALLY PUBLISHED.  MIT SL SLO OAN MANA MANAGEMEN GEMENT T REVIEW DATA & ANAL ANALYTICS YTICS PDFs Reprints Permission to Copy Back Issues Articles published in MIT Sloan Management Review are copyrighted by the Massachusetts Institute of Technology unless otherwise specified at the end of an article. 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