Happy 2018! This is Chris Halliwell, Executive Director of the Technology Marketing Center, kicking off the New Year by summarizing big data business model options for your consideration.
Working with clients and the University of California, Irvine Wayfinder incubator, there is a constant stream of interest in generating profitable growth based on data. Add in the prospect of AI-driven analytics and you’ve got yourself 1860’s style oil exploration mania!
How do intrapreneurial initiatives and startups organize to make money off data?
Data-Driven Start-up Business Models
A few years ago University of Cambridge (UK) used field research and statistical analysis of 100 firms worldwide to develop a taxonomy of 6 data-driven business models used by start-ups*. The findings from this study are presented here as a starting point for you to begin a strategic discussion about the money-making opportunity in data you are collecting as you pursue your core businesses. Note that over 80% of the firms in the research were targeting B2B markets.
Over 70% of firms use external data sources either solely or in combination with internal sources to package a data offer. For 76% of firms, analytics is a key activity, although over 70% of that analytics is descriptive rather than predictive or prescriptive. As you would expect, 62% of firms were subscription-based.
The Cambridge team used Business Model Canvas and related academic frameworks as a guide: a business model describes how your key resources and cost structure support the value of your offer to a specific market segment and associated revenue generating mechanisms. Basically, how are you going to make money?
Gartner provides a nice definition of “big data”: high-volume, high-velocity and high-variety information assets that demand cost-effective, innovative forms of information processing for enhanced insight and decision making.
Sources of Data
Data is the value, the resource to be acquired and exploited. The Cambridge study found 5 sources of data for offer development, with firms often packaging one or two sources together:
- Existing operational data culled from your core business
- Latent organizational data, such as emails, contracts, documents, etc.
- Commercial data available for purchase
- Social media data available for purchase
- Public data
The 6 Big Data Business Models
- Analytics-as-a-Service (29%), for instance, Sendify, Granify, and Augify
- Free data collected and aggregated (18%), for instance, GNIP
- Data generation (typically from customers) and analysis (17%), for instance, Go Squared (B2B) or Swarmly (B2C)
- Free data knowledge discovery analytics (15%), for instance, GILD
- Multi-source data mash-up and analysis (15%), for instance, FarmLogs
- Data aggregation-as-service (6%), for instance, Bluenose
As expected, analytics-as-a-service dominates business model organizations, but it is interesting to note that over a third of the firms (#2 and #4) make money based on free data.
*Although from 2014, I found the Cambridge University article unique and useful, using the familiar terminology of the Business Model Canvas, and giving us a global scope for exploration of innovative business models. Here’s to striking oil and successfully harnessing the value of information in your business!