The last few months have seen downward revisions for economic growth forecasts, mainly attributed to the Covid-19 economic shutdown. But there were other underlying causes, such as high corporate debt and stagnant wage growth. While economic downturns are painful, a category that will consistently see growth is data. The use of data drives innovation, turnkey business profits, and is also a virtual asset with very little hard cost, making it an obvious place for businesses to turn during hard times.
Data drives innovation
Data insights help companies enter new markets, launch new products, and engage more closely with customers. When the world is in the midst of rapid change, consumer behavior will change as well. Companies who understand their changing customers through data will be poised to succeed long-term. A good example of the ongoing innovation battle is in the hospitality industry, where Airbnb is competing with hotels. In such a distributed business, where you engage with customers globally and remotely, the corporate intelligence arm needs to understand the needs of customers. How are sanitation needs changing? How are traveling experiences changing? Are people still traveling to cities, or flocking to more remote destinations? Data on foot traffic from companies like SafeGraph, travel aggregators like Adara, and consumer sentiment tools like SocialGist help the travel industry rapidly make decisions to be prepared for the future of travel. Improved cleaning standards, friendlier refund policies, and adjusted amenities are all recent innovations pushed forward by the hospitality industry.
Exploiting data is profitable
During hard economic times, business profitability is naturally under pressure due to declining sales. Efficiency becomes the name of the game. But finding efficiencies isn’t always easy. With the digitization of pretty much everything, from sales data to supply chain to warehouse to R&D, it’s easier than ever to build a company-wide data lake and start to mine data for internal insights. A company that has $1 billion in annual operating costs can find tens of millions of dollars in savings by leveraging data science to optimize processes. These savings flow right to the bottom line and positively impact profitability. Without changing their core business or firing anyone, a business can use data about its operations to improve. A business can use a platform like Retain.ai to optimize their time spent with each customer to drive profitability. Or leverage weather pattern data from Planalytics to drive supply chain and inventory allocation optimizations, driving cost savings. Data should always be a focus, but when the economy is good, companies tend to invest in sales growth with new teams, new products, and expansion. A tough economy is about improving the bottom-line, which is a data-driven exercise.
Sharing data costs almost nothing
In a bad economy, companies don’t want to incur new costs. Hiring slows, capital investment spending slows, and the reverberations throughout the business ecosystem are significant. However, sharing data costs nothing and can drive revenue. Data is produced as part of a company’s core operations — unless a business shuts down, it is pretty certain they will generate data — sales & marketing data, supply chain data, financial data, and more. And sharing or selling data costs very little — a company can move its data to a third-party partner, or sell it on an open marketplace — all without incurring major new capital expenditures. Since data is all virtual and usually lives in the cloud, the cost to route data inventory is incredibly low. Companies like Amazon and Snowflake have launched data exchanges to streamline data sales and sharing. The returns on data sharing and sales can be immense, both in terms of revenue and value received for the use of data. An airline sharing data with travel partners to optimize route capacity, for example, is a much lower cost endeavor than buying new planes, expanding to new airports, etc. Data is an asset that can be exploited without any significant cash investment.
We will see a data boom
Data has continued to grow globally as an asset across business functions and industries. We expect the next 1-2 years will see an acceleration of that trend, as the economy enters a downturn. Companies will turn to data to drive innovation, profitability, and new revenue. Data monetization and data marketplaces will thrive, and new data businesses will emerge that power the “new normal” economy.