Data is an asset. In today’s digital world, it has more value than 20^th-century assets, such as buildings and equipment. The future will belong to those companies that elevate their ability to collect, analyze and gain insight from data to improve the customer experience and gain market share.

Smart organizations, of course, have always been data driven. What is different today is the means for gathering, the amount available and the unprecedented growth rate of data being generated by a range of sources, such as IoT (Internet of Things) devices.

Through the use of data, companies can contain costs by achieving greater workforce productivity, enhanced supply chain efficiencies, lower product defects, input optimization and asset utilization improvements.

It can also be used to create value through data monetization, improving existing products and services, discovering new product applications, improving product placement and messaging, and paving the way for transition to a subscription-based pricing model.

To illustrate this value creation, consider Uber. It’s a company making no money, but worth an awful lot. The company’s value doesn’t reside in its network of drivers and riders; after all, the market presently sees no path to profitability. What the company owns of great value is the information collected over many years of providing transportation to individuals. Where’s the value? That lies in the trillions of data inputs that could accelerate the Artificial Intelligence (AI) development that enables autonomous driving and inform transportation planners across the nation.

IoT devices are not the only driver of the new economy. Expanding storage capacity, AI, product and systems interoperability, mobile technology, drones, and the shared economy business platforms are all accelerating the transformation to a data-based economy.

And, all of this is a self-reinforcing, continuous loop thanks to the digital-network effect in which the information is used to make products, platforms and services more useful. This, in turn, attracts more users and creates more that can further improve existing offerings.

Oil is traded on an open market, and so too may data one day be traded. There are challenges ahead if this future state is to become a reality, including pricing, solving use of data and privacy protections. Today, these challenges are covered by complex individual contracts—and the emerging belief that individuals should control and be paid for their personal information.

Please reference disclosures: https://blog-dev.americanportfolios.com/disclosures/