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The most recent NewVantage Data And Analytics Global Leadership (DAGL) Survey revealed that nearly every company surveyed reports delivering some measurable value with their data, up from only half of organizations responding in the affirmative just five years ago. More than 90% also report planned increases in data investments during 2023, despite (or perhaps, because of) heightened global economic uncertainty.
This progress may sound promising until you consider that, according to that same survey, 60% of today’s organizations still do not manage data as a business asset. This comes down to persistent uncertainty about what actual or potential value their data actually holds. A factory, for example, can generate value by more efficiently fabricating products for a business. Still, a company would never invest in that factory if they didn’t know the marketplace value of the asset itself.
This state of play begs the question: if murky understandings of data’s value are the norm, how can organizations possibly optimize accessing that value?
There’s a reasonable, if not sufficient, explanation for this gap between executive belief and operational reality: data assets don’t sit on financial statements. The accounting profession and insurance industry have roundly and explicitly stated that most data cannot hold auditable value, be capitalized, or even be considered property. Before throwing up one’s hands and accepting this status quo, however, a savvy executive might consider that this broad excision may have more to do with these industries’ direct interests than the realities of data’s role in the global economy or their businesses. One must only glance at the rapidly growing data marketplace to see that there are enormous opportunities to unlock the value of organizational data.
Data valuation is a critical step in understanding the costs and measurable benefits of both a company’s own data assets, as well as relevant exogenous data. Most directly, valuations can reveal what specific data assets might impact business outcomes or hold potential for monetization, but there are many less obvious benefits that companies that value their data can enjoy.
Data valuation fosters better data management and a data-driven culture
Fewer than a quarter of the companies surveyed in the DAGL survey consider themselves data driven, and nearly 80% cite cultural impediments as the greatest challenge to achieving their long-term data goals. Since data can come from, and affect, nearly every aspect of a company’s operations, organizational alignment is paramount to achieving long-term data goals. The process of simply acknowledging, measuring and reporting the value of your organization’s data assets can have a profound effect on how people capture, manage and treat that data.
Improving organizational data fluency through a comprehensive valuation process can also help determine which data projects to prioritize. Chief Data Officers (CDOs) are mandated to monetize and manage data – a massive undertaking with no true end point – and the majority report that the specific expectations of their role are still not well understood or established within their organization. Data valuation clarifies what to focus on and when in order to maximize return, helping CDOs plan and communicate that plan to the rest of the C-Suite.
Valuing data enhances overall corporate valuations
At a time when traditional capital is harder and harder to come by, organizations are looking to squeeze out any potential drop of value from their various assets. Enterprise asset evaluations in today’s information economy are not complete if they don’t take intangibles like data into account. A holistic account of value can offer better terms with potential investors, partners, lending institutions, and creditors, particularly those who are also embracing data-driven strategies. Moreover, on both sides of M&A transactions, knowing the value of a target company’s data assets can help more accurately value the overall transaction.
Data assets are also becoming increasingly popular collateral for companies looking to secure loans. Neo-lenders now offer non-dilutive financing backed by a copy of an organization’s data, leveraging a remarkable feature of data-as-an-asset: it can be easily reproduced and used in multiple contexts without depleting its worth. Valuing data assets is a crucial first step to exploring this kind of capital arrangement.
Lower risks and uncover vulnerabilities related to data assets
Global cyberattacks increased by nearly 40% in 2022, and cybersecurity experts warn that despite headline-grabbing mega-breaches like those at Microsoft and Crypto.com, the majority of efforts are targeted against small and medium sized businesses. Consider also the spike in zero-day threats (i.e. vulnerabilities that aren’t discovered until they have been exploited by an attack), and it becomes clear that companies of all sizes cannot afford to be merely reactive when it comes to protecting data assets.
Data valuation informs the structure and budgeting around information security by giving greater context to the assets at play. Knowing the value of the data assets being secured, as well as the potential expenses of a data security event like a breach or ransomware attack, will help leadership proactively plan and budget for better infosecurity.
Data valuation is key to deriving value from data assets
It’s not a lack of desire that keeps executives from understanding data less than other assets. Organizational data is complex, often siloed, rarely standardized, and requires significant investment to properly manage, maintain and monetize. Yet despite the challenges, nearly every company knows that their data holds significant value, even if they don’t know how to go about determining that value. Fortunately, data asset valuation models continue to mature and optimize, with some valuation services leveraging machine learning to combine real-time data marketplace insights with traditional valuation approaches. These innovations are making data valuations cheaper and faster, and therefore more accessible to SMBs.
If companies want to make good on their intention to maximize the return on their data investments, they must first understand exactly where that value lies. There are many reasons to perform a data valuation, but the ultimate goal is to recognize that data is a major asset and deserves to be treated as such. Companies that can get ahead of this curve will find themselves in a much stronger position to make the best use of all their assets, tangible and intangible.
