Input 1: comprehending the new power of data
Data per se is not new. Legacy firms have long used data for insights and decision making. Sales data, for instance, identifies popular products and profitable geographies. Marketing and operations data similarly helps product development, capacity planning, advertising, and also assists in coordinating complex business models.
Modern digital technologies however allow for data to be used in far more expansive ways. A key reason for this is a shift from episodic to interactive data. Episodic data is generated by discrete events, such as the shipment of a component from a supplier, or the sale of a product. Interactive data, on the other hand, is streamed continuously through user interactions, such as posting likes on Facebook or conducting searches on Google. Digital platforms routinely use interactive data from their users to power their business models. In fact, Google, Facebook, and Amazon together control over 60% of the $200 billion-plus digital advertising market through this kind of data. Today, legacy firms too can use interactive data to track both their assets and product-user exchanges through sensors and IoT.
Interactive data from assets and their operational parameters can boost productivity. Sensors in furnaces that track and maintain temperature levels in the right range while super-heating molten steel for example, dramatically improve quality and yield. Interactive data from products and customers in addition can drive revolutionary user experiences. Babolat offers sensors in their tennis rackets that track a player’s skills and recommend ways to improve. Sleep Number, a mattress company, deploys sensors to improve sleep quality. With web-based sensors, the Washington Post recommends articles that may particularly interest their readers. Allstate Insurance’s app-based sensors help users adopt safer driving habits. Interactive data differs from episodic data in two important ways.
Firstly, it generates a new class of insights. Insights from episodic data mostly come from aggregating and analyzing it after- the-fact. Interactive data additionally gives real-time insights. Mattresses can know a user’s quality of sleep in real-time by tracking heart rates and breathing patterns. The information is used to dynamically adjust the mattress contours and improve restfulness. In addition, interactive data can be streamed from pin-pointed sources to develop powerful asset or user profiles that become richer over time. Steel plants can know the properties of every single component in their furnaces and use them to improve productivity. Mattress companies can track sleep patterns of every individual user. Indeed, Sleep Number uses these profiles to predict health risks for individual users, such as sleep apnea or restless leg syndrome. Partnering with the Mayo Clinic, it is expanding its business scope from selling mattresses to becoming a wellness company.
Secondly, real-time interactive data can be shared widely, even with external entities. In fact, sharing it widely amplifies its value. Mattresses improve quality of sleep when their real-time data is shared with other assets in a room to switch off televisions, music systems, or lights just when a user falls asleep. Excavators in construction sites reduce project costs by signaling to concrete pourers and other fabricators just as they finish their job in excavating. Episodic data, on the other hand, is closely guarded and shared selectively even within organizations. As its primary value stems from aggregated after-the-fact insights (such as product margins or market-share performance), this kind of data is kept confidential for competitive reasons. Notably, even aggregated after-the-fact interactive data and its unique user profile insights are rarely shared with external entities. It’s only real-time interactive data that’s amenable to sharing. Real-time data is intrinsically transient. Its value in sharing is realized only in real time – such as at the moment a mattress user falls asleep, or just as an excavator completes its job. Because the value of real-time data disappears after the fact, firms need not worry about giving away confidential information when sharing it. This facet of interactive data provides new value to legacy firms. However, to fully unleash its power, this data must be harnessed within digital ecosystems.