Barrett’s Briefing: Building YOUR Data Business
by Richard Barrett
Data: Salt for the Information Age
Roman soldiers were often paid in salt; this was so common that the Latin root for “salt” and “salary” is the same – sal.
As important as salt was in ancient ages, just so is data in the information age. Data is the raw material for information. Just as salt improves food, today data enhances the value of products and services.
In the two previous posts we explored how “the data is the business.” For many information age businesses, the collection, maintenance and distribution of data is, in fact, the primary revenue source.
But, based on questions from readers, I’m not getting through, so let me spell it out.
Every business collects, maintains, and distributes data.
The better businesses use data to enhance the value of their products and service.
The smartest businesses use it to generate revenue directly.
There are only two types of Databases…
At a high level, databases collect information about only two things – population identities or activity trails.
For instance, the company accounting system may be the original business database.
- The balance sheet is a database of population identities – how many dollars in cash, accounts receivable, inventory, accounts payable, bank debt, equipment, and owner’s equity.
- The income statement is a database of activity trails – what was the activity in sales, in collections, in payments.
The accounting system integrates these two databases into a unified view of the entire financial situation for the company.
The Census Bureau is the granddaddy of population identity databases; others include Monster.com (resumes), Dun & Bradstreet (small companies), Hoovers (public companies), MarketWatch.com (mutual funds), Google (websites and search words), to name just a few.
Databases of activity trails are just as common: stock price websites (stock price activity over time). FedEx, UPS and other shipping companies offer activity trail databases for every package they ship.
Of course, just like the accounting system integrates population identities and activity (audit) trails, the most powerful databases integrate population identities and activity trails. See if you can think of five or ten more.
There is really only one type of Database that really matters—yours
This is the key point. Your company already collects population data and activity trails for every product and service you sell. You have a database of all the products and services for sale (the sales catalog) and a number of databases that support those products—bills of material, inventories, historical demand, price histories, revisions, replacements, and a cluster of support products and services.
Your company also has a natural user and customer base for the data you collect. Customers, suppliers, service partners, and competitors all have a great interest in that data. So here already are the beginnings of a data business—a database and potential customers for that data.
A Few Small Bumps
Externalizing a database can be a significant challenge. It’s worth investing some time and even a few dollars in developing strategies for these key issues before rolling out your new business. A little planning and caution in building a good foundation will pay handsome rewards later.
Operational Concerns
Who owns the data? Does your organization have clear, unambiguous title to the data? For instance, are prices negotiated as confidential in certain supply and delivery contracts? If ownership is not clear, then how can you anonymize the data to honor the agreements? Can you change the agreements so that your ownership is clear?
How is the data refreshed? Data gets old. As the database grows data maintenance rapidly grows and soon exceeds data collection as the primary challenge. Some companies, such as D & B and Hoovers, use an army of employee agents to check and update the data.
Historically this approach worked, but the scale of modern databases has rendered the “internal data army” impractical. Consider two other approaches
- automation and a
- user community.
Automate the data collection and refresh. Google uses automation to refresh its database of websites. By some estimates Google has several million computers (really just CPU data blades) crawling the web to update its website database. Many other databases receive data feeds periodically from their sources. For instance, foreclosures.com gets feeds of foreclosure information from almost every county in the United States. The conversion and translation must be a nightmare, but the resulting database is incredibly powerful and a great business.
Motivate the user community to collect and refresh the data. With the emergence of web 2.0 and social networks, many companies are creating and using a user community to do data collection and refresh. YouTube.com, MySpace.com, Facebook.com, and LinkedIn.com are good examples of social network databases created and refreshed by user communities. Wikipedia.org, Jigsaw.com, and credit reporting agencies have created or adapted user communities specifically to provide business data. Travel websites such as Expedia.com use both automated data collection and business user communities to collect and present their databases of airline and hotel prices.
How do users access the data? Online access is rapidly emerging as the only method to sell data. Intermediated purchases, which require you to process the purchase request, are simply too expensive. Customers want instant access. Put the database online and develop search/selection capabilities that allow customers to find exactly what they want.
How do users pay for the data? A la carte or by subscription. Subscription is emerging as the preferred approach, both for data suppliers and data consumers. Tiered subscription access appears to be acceptable, so long as it is not too complicated.
Legal Concerns
The law on ownership and distribution of data is under construction. Quite simply, these are brand new businesses—often there are no regulations, limited historical precedents and even more limited applicable case law. And since the web is global, multiple national laws may apply. It’s complicated, so invest heavily in the two basic legal agreements—Purchaser Agreement and Contributor Agreement – to protect your company and your data. Limit your liability and do not compromise on your exclusive ownership. Others have found that shared ownership is simply an invitation to an ongoing dispute.
There is Wisdom in Metadata
If the data is the salt for the information age, then metadata is the spice. “Best selling, fastest growing, most popular, most expensive, Top Ten and cheapest” are all metadata lists generated from databases. What trends are hidden in your databases? What trends do your customers and suppliers track?
Track the trends in database businesses to identify the best opportunities for your company.
Again, please feel free to call me at 925.858.9017 or email rbarrett@one-one.net for clarification on any points.
Hope to see you in the Top Ten New Database businesses soon!
