Welcome!

@DXWorldExpo Authors: William Schmarzo, Rostyslav Demush, Jason Bloomberg, Greg Pierce, Stackify Blog

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” and “Big Data MBA: Driving Business Strategies with Data Science”, is responsible for setting strategy and defining the Big Data service offerings for Dell EMC’s Big Data Practice. As a CTO within Dell EMC’s 2,000+ person consulting organization, he works with organizations to identify where and how to start their big data journeys. He’s written white papers, is an avid blogger and is a frequent speaker on the use of Big Data and data science to power an organization’s key business initiatives. He is a University of San Francisco School of Management (SOM) Executive Fellow where he teaches the “Big Data MBA” course. Bill also just completed a research paper on “Determining The Economic Value of Data”. Onalytica recently ranked Bill as #4 Big Data Influencer worldwide. Bill has over three decades of experience in data warehousing, BI and analytics. Bill authored the Vision Workshop methodology that links an organization’s strategic business initiatives with their supporting data and analytic requirements. Bill serves on the City of San Jose’s Technology Innovation Board, and on the faculties of The Data Warehouse Institute and Strata. Previously, Bill was vice president of Analytics at Yahoo where he was responsible for the development of Yahoo’s Advertiser and Website analytics products, including the delivery of “actionable insights” through a holistic user experience. Before that, Bill oversaw the Analytic Applications business unit at Business Objects, including the development, marketing and sales of their industry-defining analytic applications. Bill holds a Masters Business Administration from University of Iowa and a Bachelor of Science degree in Mathematics, Computer Science and Business Administration from Coe College.

@BigDataExpo 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...
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...
"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.
"Infoblox does DNS, DHCP and IP address management for not only enterprise networks but cloud networks as well. Customers are looking for a single platform that can extend not only in their private enterprise environment but private cloud, public cloud, tracking all the IP space and everything that is going on in that environment," explained Steve Salo, Principal Systems Engineer at Infoblox, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Conventio...
"IBM is really all in on blockchain. We take a look at sort of the history of blockchain ledger technologies. It started out with bitcoin, Ethereum, and IBM evaluated these particular blockchain technologies and found they were anonymous and permissionless and that many companies were looking for permissioned blockchain," stated René Bostic, Technical VP of the IBM Cloud Unit in North America, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Conventi...
In his session at 21st Cloud Expo, Carl J. Levine, Senior Technical Evangelist for NS1, will objectively discuss how DNS is used to solve Digital Transformation challenges in large SaaS applications, CDNs, AdTech platforms, and other demanding use cases. Carl J. Levine is the Senior Technical Evangelist for NS1. A veteran of the Internet Infrastructure space, he has over a decade of experience with startups, networking protocols and Internet infrastructure, combined with the unique ability to it...
22nd International Cloud Expo, taking place June 5-7, 2018, at the Javits Center in New York City, NY, and co-located with the 1st DXWorld Expo will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud ...
Gemini is Yahoo’s native and search advertising platform. To ensure the quality of a complex distributed system that spans multiple products and components and across various desktop websites and mobile app and web experiences – both Yahoo owned and operated and third-party syndication (supply), with complex interaction with more than a billion users and numerous advertisers globally (demand) – it becomes imperative to automate a set of end-to-end tests 24x7 to detect bugs and regression. In th...
Agile has finally jumped the technology shark, expanding outside the software world. Enterprises are now increasingly adopting Agile practices across their organizations in order to successfully navigate the disruptive waters that threaten to drown them. In our quest for establishing change as a core competency in our organizations, this business-centric notion of Agile is an essential component of Agile Digital Transformation. In the years since the publication of the Agile Manifesto, the conn...
"Codigm is based on the cloud and we are here to explore marketing opportunities in America. Our mission is to make an ecosystem of the SW environment that anyone can understand, learn, teach, and develop the SW on the cloud," explained Sung Tae Ryu, CEO of Codigm, 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.
High-velocity engineering teams are applying not only continuous delivery processes, but also lessons in experimentation from established leaders like Amazon, Netflix, and Facebook. These companies have made experimentation a foundation for their release processes, allowing them to try out major feature releases and redesigns within smaller groups before making them broadly available. In his session at 21st Cloud Expo, Brian Lucas, Senior Staff Engineer at Optimizely, discussed how by using ne...
Vulnerability management is vital for large companies that need to secure containers across thousands of hosts, but many struggle to understand how exposed they are when they discover a new high security vulnerability. In his session at 21st Cloud Expo, John Morello, CTO of Twistlock, addressed this pressing concern by introducing the concept of the “Vulnerability Risk Tree API,” which brings all the data together in a simple REST endpoint, allowing companies to easily grasp the severity of the ...
Coca-Cola’s Google powered digital signage system lays the groundwork for a more valuable connection between Coke and its customers. Digital signs pair software with high-resolution displays so that a message can be changed instantly based on what the operator wants to communicate or sell. In their Day 3 Keynote at 21st Cloud Expo, Greg Chambers, Global Group Director, Digital Innovation, Coca-Cola, and Vidya Nagarajan, a Senior Product Manager at Google, discussed how from store operations and ...