Video: 10 Minute IT Jams - How to monetise & value data
Intangible assets are now the powerhouse of business value. So says Paul Adams, CEO of EverEdge Global, a specialist advisory firm that helps companies identify, value and monetise assets that you cannot drop on your foot – things like data, intellectual property, relationships, and trade secrets.
Speaking to 10 Minute IT Jams, Adams delivered a clear-cut message about the importance of data in the modern economy. "If we go back to 1975, intangible assets accounted for barely 17% of all company value. If you fast-forward to today, it's about 90%," he said. "These assets are now the primary drivers of virtually all company performance."
Founded in New Zealand 14 years ago, EverEdge has completed more than 2,000 client engagements, now operates globally, and boasts a net promoter score of plus 74 – a measure of client satisfaction that Adams says far exceeds the industry average of minus 22.
Adams explained that even in industries traditionally seen as 'tangible' asset-heavy, such as steel mills, the real value lies elsewhere. "Imagine a very physical asset intensive industry like a steel mill. If I gave you a free steel mill, but you didn't get to keep any of the intangible assets – all the software, industrial know-how, regulatory approvals, relationships, data – what becomes apparent is the real value is in the ability to run it safely and efficiently. The physical mill itself becomes a liability," he said.
The lesson, Adams argued, is that the assets differentiating successful companies – and driving competitive advantage and earnings growth – are intangible.
Two routes to data monetisation
Adams identified two main ways in which companies can unlock value from data. The first, and most common, is through internal operational improvements. "Companies use their data to run more efficiently, to price more effectively, to target their customers better. That's one way, and it's the most common," he said.
The second, often overlooked, route involves recognising that a company's data may have greater value for external parties than for itself. Adams illustrated this with a client case study: a financial services company being sold, where the investment bank valued it using a standard industry multiple based on its financials. EverEdge stepped in and realised "the most valuable asset in this business is its data, and that data is off balance sheet – nobody's even talking about it in the sales process."
By refocusing the sales pitch on the company's data and targeting data-hungry buyers rather than those interested simply in the business operations, EverEdge sold the company for eight times the value initially expected. "It was the difference between a good result and generational wealth for that owner," Adams observed.
Changing attitudes towards data
Adams believes companies must switch their mentality, viewing data not as a cost centre but as a strategic asset. "The first thing is that you need to identify what data you actually have," he advised. "It's not enough to simply say, 'we've got some data' – you've actually got to identify it, and understand its strengths and weaknesses."
After identification comes strategy – calculating how and to whom the data could be valuable, and selecting the right business model to extract that value. Finally, companies need to bring rigour to the process, carefully weighing up costs and risks before chasing monetisation.
"Any data monetisation exercise is going to have costs associated with it and risk. There's nothing you can do in business that doesn't have a cost or risk," Adams said. He drew an analogy between land development and data monetisation: "You wouldn't just choose the first idea that comes to mind. You'd go through a disciplined process just as you would with any other asset, to see how you can best use it and what model extracts the most value."
Technical, legal and reputational challenges
Of course, unlocking value is not without its pitfalls. There are significant technical, legal and reputational risks for companies navigating the data economy.
"The first thing is technical issues – people get hung up on the architecture or size of the data, or whether it's accurate and complete. Those things are important, because if the data isn't technically in a good state it's difficult to monetise," Adams explained.
However, Adams warned that businesses often overlook the crucial legal and reputational issues that come with data. "Are you allowed to even use that data? Did you collect it for the right purpose? You might have collected it for reasons A, B and C, but if you're now using it for X, Y and Z, you may not be able to do that. Some companies think they own the data, but they don't," he said.
Beyond legal compliance lies the threat of consumer backlash. "It might be technically possible and legal to monetise the data, but should you do it? What will your customers say when they find out you've used, what they consider to be, their data in a particular way?" Adams asked.
"Reputational and moral issues may more than offset any benefit you gain from monetisation," he noted.
A disciplined approach
Adams contends that all data strategies should start from a business case, not a hunch or a rush to monetise for its own sake. "It's not as simple as saying, 'I've got this data, it must be worth something, I've got to do something with it'. You have to go through that disciplined process of essentially building a business case to understand what's going on," he said.
He left listeners with a parting lesson: "The fact is, data at the end of the day is just like any other asset. It has a different format, it behaves somewhat differently, but the economic principles remain the same. It's about business cases. It's about understanding what it's worth prior to committing economic resources to it."
