Data can be a tool to achieve your goals, it can be a resource to exploit, it can even be a burden because it introduces regulatory risk. But the most successful companies will be those that treat data as an asset, something as tangible and important as cash reserves, inventory and intellectual property.
Some companies are now including data in their profit and loss statements, and data-heavy companies are achieving valuations far in excess of their non data-focused peers.
Too many companies think about data as something peripheral, non-core to their central business. But the truth is that how you use data can transform your company and its value.
The competition will leave you behind because they already have a data-focused culture.
With care and investment data can transform how you meet your customers’ needs and how your business functions. But it can also increase the value of your business and make you more attractive to buyers or investors.
“Many organisations are starting to see data as an asset,” said Robin Sutara, UK chief data officer at Microsoft. “They are using it to transform their business as they respond to Brexit, the pandemic and the supply chain issues they caused. Some are even listing it in their profit and loss calculations because of the monetary value they derive from their data.”
“They are using it a wide variety of purposes: changing how they engage with their customers; empowering their employees; changing their internal processes for everything from supply chains to the delivery of services. Organisations are starting to think about how they create and develop new products and services by leveraging data as an asset. And they are using data to help think about sustainability goals, as that becomes part of every board conversation, how the organisation is positioned in relation to the impact they have.”
Many companies will be taking some action on improving how they use data and might congratulate themselves on their progress. But competitive risk comes less from other established companies like them, and more from companies that were data-led from the start, said Sutara.
“The competition will leave you behind because they already have a data-focused culture, particularly those newer organisations that are born in the cloud. You can see clear examples over the last couple of decades, like Uber versus traditional taxis, of organisations that harness the power of their data are moving much more quickly than those that aren’t taking action.”
Recognising that your company is not making enough of its data assets is one thing, but how do you become a data-led company that realises all of that value?
You have to start with your people and culture, said Sutara.
“It is not just about technology, you have to think about people and processes – how do you ensure your organisation realises the value of data, thinks about the quality of data going into the system, measures the investment in data quality and turns this into value,” she said.
“The data culture is the hardest part of the transformation at any organisation so it’s getting people to change the way they’re doing their job and that is hard,” she said.
Discipline on what data is collected and how is crucial: you can’t capitalise on data if you have broken regulations in collecting or storing it. And ensuring the data is timely, relevant and accurate has a commercial imperative as well as a regulatory one: you will get better results with better data.
For established companies this can be daunting and the temptation to resist change until weverything is perfect is common, said Sutara.
“The biggest advice for organisations is: you are not going to solve every issue with one piece of technology or data solution. So start small, identify one business use case, one consumer value you can deliver, one employee process you can automate. Every organisation wants to talk about the sexy AI, machine learning, process automation and those things but getting the basics right for all of the data that exists in your organisation is what matters first.”
“I worry when organisations say ‘we can’t change anything across the business because we don’t have all of the data in a single platform or aggregated in a single source’. So my advice is always: start small, identify the one thing you can tackle,” she said.
All of this represents a significant investment. In some cases it will mean rewiring the whole organisation. So it is important to protect that investment by ensuring that you collect, store and use your data in a way that protects it and ensures it is not exploited by competitors.
This can be difficult because you can’t really ‘own’ data, said intellectual property expert Iain Connor of Pinsent Masons.
“Very often data is just a fact – you can’t own and control a fact. What’s important is who invests in pulling the data together. That can give you rights through database rights and rights to confidential information, but those rights depend on you behaving in a certain way,” he said.
You can’t own a fact – what’s important is who invests in pulling the data together
Database rights give you the right to exclusively exploit data where you have expended significant effort in gathering and verifying it, and where you continue to invest that effort in keeping it up to date.
“If a database is not maintained and managed and refreshed this undermines your ability to exploit it commercially,” said Connor.
Confidentiality rights are another protection available for data but the burden is on you to keep the information confidential. If it is released or legally obtained by someone else then you can’t usually stop them using your data.
It matters how the database was developed. Was it created in-house or by contractors? Where was it developed? Not every country recognises database rights. When was it created? If it goes out of data it loses protection. How was the data collected? That can affect what you can do with it.
These mechanics of data collection and storage have a direct and immediate effect on your ability to commercially exploit data as an asset.
Technology and data expert Nils Rauer also said that data ownership issues could be a barrier to obtaining full value from data as an asset.
“There are numerous ways that data can be proprietarily linked to a person or company. Personal data is linked to an individual. Trade secrets are linked to a company. Banks are linked to data through banking secrecy laws. But all these examples are not the same as ownership of a physical item. And proprietary allocation of data can overlap, such as in customer databases which might contain data that is personal data and is also subject to database rights. The database might also contain trade secrets,” he said.
“Lots of people take for granted that ownership of digital assets like data just exists, but that’s not always true. It’s the reason, for example, that NFTs (non-fungible tokens) have to have guidance about what the buyer can and can’t do with it written into the contract embedded in the NFT.”
Technology expert Mark Marfé said that these issues have operational impacts. If a company wants a third party supplier to use an artificial intelligence (AI) tool to optimise its factory then it will have to give the supplier access to lots of commercially sensitive and proprietary data – without good data the AI tool will not produce valuable results.
“Some of this data might be of core importance and highly confidential, such as factory design and layout and process algorithms,” he said. “The manufacturer will understandably wish to limit access to the data, both in terms of personnel and purposes. But the supplier will want to be free to work on other projects in the future including for the manufacturer’s competitors”
“The challenge for the manufacturer is that data are not really owned rather, there are ownership-like rights that subsist over them. The manufacturer needs to build and maintain data ‘ownership’ into its contract with the supplier.”
This means detailed management of how the data is used; whether it is combined with third party data; where it is stored and processed, and what limits are placed on its use.
And Marfé said that some knowledge and insight will be built up by third parties and suppliers just form exposure to your data. This is not something that can be stopped.
“While it is possible to restrict the use of confidential information you cannot prevent the supplier’s staff from using the skill and knowledge they honestly acquired during the course of a project,” he said.
“This makes it all the more important that confidential information and trade secrets are documented and identified as confidential,” he said. “The English Courts have held that ‘confidential information’ can typically be traced to a particular source and it’s not something which has become so completely merged in the mind of the person that it’s impossible to identify the precise source of their knowledge in a particular area.”
“This makes it all the more important that confidential information and trade secrets are documented and identified as confidential,” he said.
“A common definition of a data trust is that it is a legal structure that provides independent stewardship of data for an agreed purpose – that means it allows organisations to share data through an accountable, independent body for limited and specified purposes,” he said. “That really gets over the barriers between organisations which do not want to share data directly with each other.”
Partner, Head of Technology & Digital Markets
A data trust really gets over the barriers between organisations which do not want to share data directly with each other
Those three elements – that it is a legal entity; that it is independent; that the purpose is defined and limited – are all crucial, said McMillan.
“Historically data sharing has between just between two organisations, but this isn’t scalable,” he said. “Data trusts introduce scalability, which allows for data sharing at a scale never imaginable before. This in itself makes data more valuable as an asset, because once you aggregate your data with that of other providers of data, you can interrogate the combined data set and can make decisions and take actions based on the bigger picture rather than only your own data on a stand-alone basis.”
Data trusts allow access to data – or limited aspects of data – based on the agreed rules of the trust. This means that access can be granted to each data user according to the trust’s specific rules.
It also means that the data doesn’t have to be actually handed over to another organisation. Processing can happen without the data ever leaving the data owner’s system.
“Data does not necessarily need to be held in a central location by a steward,” said McMillan. “It can be decentralised so that no data leaves the servers of the provider, it becomes like an access protocol. Users can then query the data from multiple places and have their questions answered without data ever moving from one server to another.”
A data trust is just one emerging answer to the question of how companies better exploit their data assets. Data is transforming the economy and is now the major asset of many companies. Those that fail to change how they view data or fail to protect the data they have risk being left behind.