Welcome!

Related Topics: @DXWorldExpo, @CloudExpo, @ThingsExpo

@DXWorldExpo: Blog Feed Post

Economic Value of Data (EvD) Challenges | @BigDataExpo #BigData #Analytics

Data has a direct impact on an organization’s financial investments and monetization capabilities

Well, my recent University of San Francisco research paper “Applying Economic Concepts To Big Data To Determine The Financial Value Of The Organization’s Data And Analytics Research Paper” has fueled some very interesting conversations. Most excellent! That was one of its goals.

It is important for organizations to invest the time and effort to understand the economic value of their data because data has a direct impact on an organization’s financial investments and monetization capabilities. However, calculating economic value of data (EvD) is very difficult because:

  • Data does not have an innate fixed value, especially as compared to traditional assets, and
  • Using traditional accounting practices to calculate EvD doesn’t accurately capture the financial and economic potential of the data asset.

And in light of those points, let me share some thoughts that I probably should have been made more evident in the research paper.

Factoid #1:  Data is NOT a Commodity (So Data is NOT the New Oil)
Crude oil is a commodity. West Texas Intermediate (WTI), also known as Texas light sweet, is a grade of crude oil used as a benchmark in oil pricing. This grade is described as light because of its relatively low density, and sweet because of its low sulfur content.  WTI is a light crude oil, with an API gravity of around 39.6, specific gravity of about 0.827 and less than 0.5% sulfur[1].

And here’s the important factoid about a commodity: every barrel of Texas light sweet is exactly like any other barrel of Texas light sweet. One barrel of Texas light sweet is indistinguishable from any other barrel of Texas light sweet. Oil is truly a commodity.

However, data is not a commodity. Data does not have a fixed chemical composition, and pieces of data are NOT indistinguishable from any other piece of data. In fact, data may be more akin to genetic code, in so much as the genetic code defines who we are (see Figure 1).

Figure 1: Genetic Code

Every piece of personal data – every sales transactions, consumer comment, social media posts, phone calls, text messages, credit card transactions, fitness band readings, doctor visits, web browses, keyword searches, etc. – comprises another “strand” of one’s “behavioral genetic code” that indicates one’s inclinations, tendencies, propensities, interests, passions, associations and affiliations.

It’s not just the raw data that holds valuable strains of our “behavioral genetic code”, the metadata about our transactional and engagement data are a rich source of insights into our behavioral genetic code. For example, look at the metadata associated with a 140-character tweet. 140 characters wouldn’t seem to be much data. However, the richness of that 140-character tweet explodes when you start coupling the tweet with all the metadata necessary to understand the 140-characters in context of the conversation (see Figure 2).

Figure 2: “Importance of Metadata in a Big Data World”

The Bottom-line:
Data is not a commodity, which makes determining the economic value of data very difficult, and maybe even irrelevant, using traditional accounting techniques. Which brings us to the next point…

Factoid #2: Can’t Use Accounting Techniques to Calculate Economic Value of Data
The challenge with using accounting or GAAP (generally accepted accounting principles) techniques for determining the economic value of data is that accounting uses a retrospective view of your business to determine the value of assets. Accounting determines the value of assets based upon what the organization paid to acquire those assets.

Instead of using the retrospective accounting perspective, we want to take a forward-looking, predictive perspective to determine the economic value of data. We want to apply data science concepts and techniques to determine the EvD by looking at how the data will be used to optimize key business processes, uncover new revenue opportunities, reduce compliance and security risks, and create a more compelling customer experience. Think determining the value of data based upon “value in use” (see Table 1).

Accounting Perspective Data Science Perspective
Historical valuation based upon knowing what has happened Predictive valuation based upon knowing what is likely to happen and what action one should take
Value determination based upon what the organization paid for the asset in the past Value determination based upon how the organization will monetization the asset in the future
Valuations are known with 100% confidence based upon what was paid for the asset Valuations are based on probabilities with confidence levels dependent upon how the asset will be used and monetized
Value determination based upon acquisition costs (“value in acquisition”) Value determination in use based upon how the data will be used (“value in use”)

Table 1:  Accounting versus Data Science Perspectives

This “value in use” perspective traces its roots to Adam Smith, the pioneer of modern economics. In his book “Wealth of Nations,” Adam Smith[3] defined capital as “that part of a man’s stock which provides him a revenue stream.” Adam Smith’s concept of “revenue streams” is consistent with the data science approach looking to leverage data and analytics to create “value in use”.

We have ready examples of how other organizations determine the economic value of assets based upon “value in use” starting with my favorite data science book – Moneyball.  Moneyball describes a strategy of leveraging data and analytics (sabermetrics) to determine how valuable a player might be in the future. One of the biggest challenges for sports teams is to determine a player’s future value since player salaries and salary cap management are the biggest management challenges in sports management. Consequently, data science provides the necessary forward-looking, predictive perspective to make those “future value” decisions.

Sports organizations can not accurately make the economic determination of a player’s value based entirely on their past stats. To address this challenge, basketball created Real Plus-Minus (RPM)[4]. Real Plus-Minus is a predictive metric (score) that is designed to predict how well a player will perform in the future.

The Bottom-line:
We need to transition the economic vale of data conversation away from the accounting retrospective of what we paid to acquire the data, to a data science predictive retrospective of how the data is going to be used to deliver “value in use.”

Economic Value of Data Summary
Data is an asset that can’t be treated like a commodity because:

  1. Every piece of data is different and provides unique value based upon the context (metadata) of that data, and
  2. Traditional retrospective (accounting) methods of determining EvD won’t work because the intrinsic value of the data is not what one paid to acquire the data, but the value is in how that data will be used to create monetization opportunities (“data in use”).

To exploit the economic value of data, organizations need to transition the conversation from an accounting perspective (of what has happened) to a data science perspective (on what is likely to happen) on their data assets. Once you reframe the conversation, the EvD calculation becomes more manageable, more understandable and ultimately more actionable.

[1] https://en.wikipedia.org/wiki/West_Texas_Intermediate

[2] Edited by Seth Miller User:arapacana, Original file designed and produced by: Kosi Gramatikoff User:Kosigrim, courtesy of Abgent, also available in print (commercial offset one-page: original version of the image) by Abgent – Original file: en:File:GeneticCode21.svg, Public Domain, https://commons.wikimedia.org/w/index.php?curid=4574024

[3] “Wealth of Nations”, http://geolib.com/smith.adam/won1-04.html

[4] https://cornerthreehoops.wordpress.com/2014/04/17/explaining-espns-real-plus-minus/

The post Economic Value of Data (EvD) Challenges appeared first on InFocus Blog | Dell EMC Services.

Read the original blog entry...

More Stories By William Schmarzo

Bill Schmarzo, author of “Big Data: Understanding How Data Powers Big Business”, is responsible for setting the strategy and defining the Big Data service line offerings and capabilities for the EMC Global Services organization. As part of Bill’s CTO charter, he is responsible for working with organizations to help them identify where and how to start their big data journeys. He’s written several white papers, avid blogger and is a frequent speaker on the use of Big Data and advanced analytics to power organization’s key business initiatives. He also teaches the “Big Data MBA” at the University of San Francisco School of Management.

Bill has nearly three decades of experience in data warehousing, BI and analytics. Bill authored EMC’s Vision Workshop methodology that links an organization’s strategic business initiatives with their supporting data and analytic requirements, and co-authored with Ralph Kimball a series of articles on analytic applications. Bill has served on The Data Warehouse Institute’s faculty as the head of the analytic applications curriculum.

Previously, Bill was the Vice President of Advertiser Analytics at Yahoo and the Vice President of Analytic Applications at Business Objects.

Latest Stories
DX World EXPO, LLC, a Lighthouse Point, Florida-based startup trade show producer and the creator of "DXWorldEXPO® - Digital Transformation Conference & Expo" has announced its executive management team. The team is headed by Levent Selamoglu, who has been named CEO. "Now is the time for a truly global DX event, to bring together the leading minds from the technology world in a conversation about Digital Transformation," he said in making the announcement.
"Space Monkey by Vivent Smart Home is a product that is a distributed cloud-based edge storage network. Vivent Smart Home, our parent company, is a smart home provider that places a lot of hard drives across homes in North America," explained JT Olds, Director of Engineering, and Brandon Crowfeather, Product Manager, at Vivint Smart Home, in this SYS-CON.tv interview at @ThingsExpo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
SYS-CON Events announced today that Conference Guru has been named “Media Sponsor” of the 22nd International Cloud Expo, which will take place on June 5-7, 2018, at the Javits Center in New York, NY. A valuable conference experience generates new contacts, sales leads, potential strategic partners and potential investors; helps gather competitive intelligence and even provides inspiration for new products and services. Conference Guru works with conference organizers to pass great deals to gre...
DevOps is under attack because developers don’t want to mess with infrastructure. They will happily own their code into production, but want to use platforms instead of raw automation. That’s changing the landscape that we understand as DevOps with both architecture concepts (CloudNative) and process redefinition (SRE). Rob Hirschfeld’s recent work in Kubernetes operations has led to the conclusion that containers and related platforms have changed the way we should be thinking about DevOps and...
The Internet of Things will challenge the status quo of how IT and development organizations operate. Or will it? Certainly the fog layer of IoT requires special insights about data ontology, security and transactional integrity. But the developmental challenges are the same: People, Process and Platform. In his session at @ThingsExpo, Craig Sproule, CEO of Metavine, demonstrated how to move beyond today's coding paradigm and shared the must-have mindsets for removing complexity from the develop...
In his Opening Keynote at 21st Cloud Expo, John Considine, General Manager of IBM Cloud Infrastructure, led attendees through the exciting evolution of the cloud. He looked at this major disruption from the perspective of technology, business models, and what this means for enterprises of all sizes. John Considine is General Manager of Cloud Infrastructure Services at IBM. In that role he is responsible for leading IBM’s public cloud infrastructure including strategy, development, and offering m...
The next XaaS is CICDaaS. Why? Because CICD saves developers a huge amount of time. CD is an especially great option for projects that require multiple and frequent contributions to be integrated. But… securing CICD best practices is an emerging, essential, yet little understood practice for DevOps teams and their Cloud Service Providers. The only way to get CICD to work in a highly secure environment takes collaboration, patience and persistence. Building CICD in the cloud requires rigorous ar...
Companies are harnessing data in ways we once associated with science fiction. Analysts have access to a plethora of visualization and reporting tools, but considering the vast amount of data businesses collect and limitations of CPUs, end users are forced to design their structures and systems with limitations. Until now. As the cloud toolkit to analyze data has evolved, GPUs have stepped in to massively parallel SQL, visualization and machine learning.
"Evatronix provides design services to companies that need to integrate the IoT technology in their products but they don't necessarily have the expertise, knowledge and design team to do so," explained Adam Morawiec, VP of Business Development at Evatronix, in this SYS-CON.tv interview at @ThingsExpo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
To get the most out of their data, successful companies are not focusing on queries and data lakes, they are actively integrating analytics into their operations with a data-first application development approach. Real-time adjustments to improve revenues, reduce costs, or mitigate risk rely on applications that minimize latency on a variety of data sources. In his session at @BigDataExpo, Jack Norris, Senior Vice President, Data and Applications at MapR Technologies, reviewed best practices to ...
Widespread fragmentation is stalling the growth of the IIoT and making it difficult for partners to work together. The number of software platforms, apps, hardware and connectivity standards is creating paralysis among businesses that are afraid of being locked into a solution. EdgeX Foundry is unifying the community around a common IoT edge framework and an ecosystem of interoperable components.
"ZeroStack is a startup in Silicon Valley. We're solving a very interesting problem around bringing public cloud convenience with private cloud control for enterprises and mid-size companies," explained Kamesh Pemmaraju, VP of Product Management at ZeroStack, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
Large industrial manufacturing organizations are adopting the agile principles of cloud software companies. The industrial manufacturing development process has not scaled over time. Now that design CAD teams are geographically distributed, centralizing their work is key. With large multi-gigabyte projects, outdated tools have stifled industrial team agility, time-to-market milestones, and impacted P&L stakeholders.
"Akvelon is a software development company and we also provide consultancy services to folks who are looking to scale or accelerate their engineering roadmaps," explained Jeremiah Mothersell, Marketing Manager at Akvelon, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
Enterprises are adopting Kubernetes to accelerate the development and the delivery of cloud-native applications. However, sharing a Kubernetes cluster between members of the same team can be challenging. And, sharing clusters across multiple teams is even harder. Kubernetes offers several constructs to help implement segmentation and isolation. However, these primitives can be complex to understand and apply. As a result, it’s becoming common for enterprises to end up with several clusters. Thi...