How Industrial and Manufacturing Companies Monetize Data

Loraine Lawson
Slide Show

How to Monetize Data in Five Steps

Consumer information dominates discussions about how to monetize data, but customer-facing organizations aren’t the only ones profiting from the sale of data. Industrial companies, manufacturers and other B2B organizations are also looking for ways to monetize sensor and machine data.

For instance, tire manufacturer Pirelli collects data on tire pressure, temperature and wear-and-tear on trucks using sensors in its tires. It now offers that data as an add-on service for fleet managers and insurers, InfoWorld reports.

It’s not always such a clear path to monetization, though. While data monetization ranked among the top trends in Deloitte Consulting’s “Analytics Trends 2015: A Below-the-Surface Look,” it was with a big caveat:

“There’s an emerging perception that the more data you have, the better. In fact, more data brings more challenges. Capturing, storing, and protecting data comes with real costs.”

John Lucker, Deloitte Consulting principal and global advanced analytics and modeling market leader, says companies often underestimate the complexities of monetizing data. As I explored Thursday, monetizing consumer data requires companies to ask tough questions about privacy, ethics and data ownership.

B2B organizations tend to focus on machine-generated data or data from embedded devices, which is a bit less cumbersome than consumer data. While that may make it less complex to monetize — and certainly less creepy, Lucker adds — that doesn’t mean it’s simple. Just collecting, aggregating and summarizing data in a way that provides value to a third party is hard enough, he warned.

“The key is it’s a real multifaceted effort,” Lucker said. “I think a lot of companies I’ve talked to tend to underestimate the complexity of the effort.”

Even with sensor data, there can be questions about data ownership and release. For instance, parts manufacturers may embed sensors to collect reliability and performance data, as Pirelli does.  But Lucker asks what happens when that part is embedded into a larger product — say, an airplane? In that case, it’s likely the product maker will become the curator of the data. The larger product maker may be able to monetize the performance and reliability data by selling it back to the individual component makers who placed the sensors in the first place.

Intellectual property preservation and protection may also become a factor in deciding whether or not to sell the data. Manufacturers and industrial companies need to determine whether monetization might compromise the use of the data for strategic improvements that could create a competitive advantage.

For example, industrial company GE has invested heavily in machine-generated sensor data for its hardware. According to the Harvard Business Review, rather than selling that sensor data, GE is using it to create better turbines at a much lower cost than competitors.

Caterpillar, Komatsu and other heavy equipment makers are testing what might be called a hybrid approach, in which sensor data is given to customers to strengthen business ties but is also fed back into the company’s own analytics systems.

There’s one other question every organization should ask before investing in monetization: Is it really worth the time, cost and trouble? It’s not so easy being in the data content business.

ROI Value

“If you look at some of the data brokers who have monetized data for years, you’re talking about pennies per record,” Lucker said. “Obviously they're in the business of selling a lot of records, so those pennies add up to billions of dollars.”

That’s their business model. It’s not necessarily a strategy that will work for all companies, he warns. First, most companies don’t generate that volume of data. Second, data monetization might compromise their core business model.

“If you’re a company who may not have the opportunity to create that type of volume, then you need to think thoughtfully about whether or not whatever volume you can create is going to offset your costs and you're going to make this into a profitable the endeavor,” he said. "You probably need to also think about some of the intangible costs.”

In the end, it’s even possible that companies may monetize by becoming suppliers of data, he said.

“What we might see is a lot more companies monetizing data by selling it to professional data brokers, who know how to manage it better.”

Loraine Lawson is a veteran technology reporter and blogger. She currently writes the Integration blog for IT Business Edge, which covers all aspects of integration technology, including data governance and best practices. She has also covered IT/Business Alignment and IT Security for IT Business Edge. Before becoming a freelance writer, Lawson worked at TechRepublic as a site editor and writer, covering mobile, IT management, IT security and other technology trends. Previously, she was a webmaster at the Kentucky Transportation Cabinet and a newspaper journalist. Follow Lawson at Google+ and on Twitter.

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