SHARING AMERICA'S TECH NEWS FROM THE VALLEY TO THE ALLEY
Data management can be among the most significant challenges CIOs currently face. Cleaning, classifying, mining, and analyzing data is becoming an important capability. Yet many organizations lack the data scientists and analysts they need to help identify and analyze meaningful patterns and trends in their vast data stores. Many studies indicate that demand for professionals with deep analytical skills will likely dramatically outstrip supply.¹
The explosion of data combined with a potential talent shortage has paved the way for a new business entity: the data market. Data markets such as Infochimps, the eponymous DataMarket, and Factual acquire, aggregate, manage, and sell or trade data. Some data markets broker trades of data between organizations. Others provide data management and analysis services to companies in exchange for their data, which they may then resell or trade. One example: a start-up that offers a travel app might source hotel location information from a data market that obtained it directly from the hospitality companies whose data it professionally manages.
“Data markets represent a compelling strategic opportunity, but many CIOs initially have reservations about the model,” says Marcus Shingles, a principal with Deloitte Consulting LLP. Shingles has been studying data markets—including conducting research in collaboration with the Grocery Manufacturers Association—since their inception roughly 2 1/2 years ago.
One of CIOs’ primary concerns is how a third party can obtain and maintain accurate data. But data markets use sophisticated techniques to discover and extract facts from billions of Web-based sources in real time, and then apply artificial intelligence and machine learning techniques to cross-reference and document those sources. As a result, data markets can be highly credible sources of data, according to Shingles.
CIOs also express concerns about sharing information with a third party that is likely to subsequently trade or sell it. This is especially true in the consumer packaged goods (CPG) industry, which historically has placed a high premium on data secrecy. While acknowledging these reservations about data sharing, Shingles also maintains the benefits can outweigh potential risks.
Benefits of Data Markets
CIOs can realize numerous benefits for their organization by engaging with data markets, including:
Access to open innovation. Many CPG executives express interest in becoming more innovative and taking better advantage of consumer trends such as mobility and social networking. Data markets can help by connecting CPG companies with entrepreneurs and software developers building innovative consumer apps and utilities.
“Rather than watch from the sidelines as an entrepreneurial renaissance takes place in Silicon Valley, CPG companies, through the brokering services of data markets, can fuel innovation from a vast ecosystem of creative thinkers,” says Shingles.
“By participating in the data market model, CPG companies can potentially enlist thousands of entrepreneurs and developers to essentially work on their behalf, building innovative apps that help showcase their products.”
Gil Elbaz, the founder and CEO of data market Factual, says the availability of consistent product information makes it easier for third parties to build new tools that ultimately help bring a company’s products or services to the attention of more consumers. As one example of an application that creates viral buzz for products, Elbaz points to a social bookmarking site that allows users to create virtual pin boards and post pictures of items they like, whether clothes, accessories, furniture, or food.
Low-cost data management services. Some data markets assume the fundamental tasks of cleaning and curating core data, which can free companies to devote scarce analytics staff to actual analysis, notes Shingles.
Eva Ho, Factual’s vice president of marketing and operations, points to product catalogs as one area where companies are enlisting help.
“Many big companies lack clean, unified product catalogs because the data associated with particular products or brands resides with the individual brand managers,” she says. “Data markets help brand and product managers synchronize product data across business lines, which can increase cross-functional efficiencies and transparency.”
Greater control. Some CPG companies are concerned they may lose control of their data if they share it with data markets. They fear a startup may use their product information to create an app that, say, lets consumers compare prices, resulting in lost sales or eroding customer loyalty.
Shingles says CPG companies should try to accept that they can’t control the apps software developers create. And regardless of whether they choose to do business with data markets, developers can likely find ways to obtain the data they need.
“Data markets are already scraping CPG data from e-commerce sites, and then trading or selling it,” says Shingles. “Data obtained in this fashion may or may not be correct.”
To illustrate, Factual extracted product information about a popular candy from 10 allegedly authoritative sources on the Web. Yet the information from each source was slightly different, including variations in product images, nutrition information, naming conventions, weights, and sizes. Had these 10 sources extracted their product information from a central source—a data market that in turn sources its data directly from the manufacturer—these discrepancies could be reduced.
According to Shingles, companies that steer clear of data markets may accept three risks: their product information can get into data markets anyway; software developers may incorporate into their apps inaccurate information about a company’s products; and when consumers use the app and discover discrepancies, they may blame the manufacturer or retailer, not the app developer.
“By pushing your data to the people who want it, you can gain control over its quality and build direct relationships with the developers using it,” says Elbaz.
Adds Shingles: “Companies may not be able to beat data markets, so they should consider joining them and take advantage of the paths to innovation they can provide.”
Thank you, TiA