How To Value Your Data Assets
Understanding the value of your data assets
Data is often talked about as a lake — organisations are either building or sitting on data lakes, but the problem with this analogy is that not all data in the lake is equally valuable. From a valuation perspective it is much better to think about data pools. Independent data assets — that may be combined into larger pools — but each data pool can create value in its own right.
Your customer data pool, for example, is valuable if it provides insights in purchasing patterns and behaviours. Your employee data pool is valuable because it allows you to better allocate people with the right skills to tasks that require them. Your supplier data pool is valuable because it allows you to understand how best to flex capacity, bringing new capacity on stream as demand dictates.
Of course, these examples are all internally focused — they describe how your organisation could make better use of your data — either by providing better and more targeted service to customers or increasing the efficiency of your operations.
Both of these uses of data — providing better service to customers or increasing the efficiency of your operation — create value, but there’s a third category of value created by data pools that we also have to consider — namely the value your data can create for your stakeholders.
In the retail sector, for example, data on customer demand can be fed back to suppliers so they can better manage inventories. The same data can provide insights into whether new products are cannibalising existing products or winning business from competitors.
If you launch a new product only to see your existing customers switch from the products they used to buy, to the new one, it is arguably not as valuable as seeing your competitors’ customers start to buy your product.
In health, data from exercise apps could be used — privacy concerns permitting — to support personalised medicine. Data from treatment plans could be used to better support development of the next generation of drugs.
The point is that data in each data pool can create value internally and externally, so to value data we have to ask:
- How much value does our data create for our organisation? and,
- How much value does our data create for our stakeholders?
The total value of your data is the combination of these two items. The question, of course, is how would you do this in practice?
As with any valuation, data valuation is not a precise science. Instead what is needed is a structured and repeatable methodology that can be used to consistently develop data valuations, where the underlying assumptions and hypotheses are clear.
At Anmut, we have developed a five-step data valuation methodology for doing this.
(1) We start by understanding the total value your organisation creates — for private sector organisations a good proxy for this is the total market capitalisation. For non-listed organisations, including public sector bodies, a more nuanced approach is needed.
(2) We then explore what value initiatives you have in place, that is — what is it you are doing to create value for your stakeholders? — and how valuable each of these initiatives are.
(3) Next, we identify the datasets that exist inside your organisation.
(4) Fourth, we compute the extent to which your value initiatives are dependent on your data. This allows us to (5) create an overall data value reflecting the extent to which data supports the initiatives you are prosecuting on behalf of your stakeholders.
A practical example will bring this to light. Take Highways England, the government funded company who maintains England’s motorways, whom we have recently been working with to value their data. Read the case study here.
The total economic value of Highways England is £311 billion — this includes £115 billion of physical asset value (the strategic road network) and £196 billion of value created by users of the strategic road network.
Highways England are engaged in multiple initiatives designed to help their stakeholders extract more value from the road network — smart motorways, real time traffic flow information, advanced warning of roadworks, etc. These initiatives are all — to some extent — informed by data.
Putting a monetary value on your data assets
In Highways England’s case we have calculated that the total value created through data is £39 billion, that’s around 30% of Highways England’s physical asset value.
What does this mean for an organisation like Highways England? What would it mean for your organisation if you knew that the value of your data assets was a third of the value of your tangible assets?
If you really understood the true value of your data, and started treating data as an asset, how would it change the way you thought about your organisation and how you manage and lead it?
At Anmut, we believe that data is one of your most valuable assets and that if you don’t understand the true value of your data assets, they can never be properly managed.
Get in touch to find out how we can help you put a monetary value on your data assets.
