MARKET | Jun 29, 2017

The datum, a precious good

Data Economy only for few businesses?

Some time ago, The Economist ran the headline “Data is giving rise to a new economy”, given that the five most important listed companies in the world are tech companies specialised in data analysis. Giants such as Alphabet (Google’s parent company), Amazon, Apple, Facebook and Microsoft are currently unstoppable: their profits are steadily growing and collectively account for over 25 billion dollars in net profit in just the first quarter of 2017. In the United States, Amazon alone collects half of all the money spent online, while Google and Facebook recorded the highest growth rate in digital advertising last year.

What competitive advantage is there for those who analyse data?

The benefits of exploiting data capital are real, though still concentrated in the hands of some large companies. Think, for example, of cloud data containing billions of user and business profiles, as well as consumer transactions: all of these data, though coming from a group or elite of companies, can be purchased from others to improve their efficiency In terms of marketing and/or redesigning customer communication and engagement strategies via social networks. The liquidity of data is now imperative for any company that intends to create new digital products and services, and to do so it needs to obtain the desired data in the most useful and convenient, as well as easiest, way. The most important challenge is specifically that of making data usable also for small and medium-sized companies, which can thus design new business models through data-driven governance.

How productivity grows in companies

A recent paper by the Organisation for Economic Cooperation and Development (OECD) showed that average growth rate in terms of productivity among the top 100 companies was 3.5% while for the rest of the entire market it was 0.5%. This gap is even more evident in the services sector. According to the study, an asset that would support companies would be the creation, processing and use of “unique data equity” not to be disclosed to competitors.

In terms of employment, international data show that rates have risen, but rather than increasing the labour productivity index they have contributed to per capita GDP growth in many economies, especially in recent years. The OECD states that productivity is a matter of “smarter work” that needs to be considered and measured in relation to “multifactor productivity” rather than on the basis of “working harder and longer”. Moreover, this growth in productivity reflects the ability of businesses to produce better results by more effectively combining inputs (hence data) through new ideas, technological innovations and new organisational processes.

Data and productivity

A study conducted a few years ago by some MIT and University of Pennsylvania researchers supported the concept of data as capital assets. Based on surveys conducted on nearly 180 large public companies, the researchers concluded that companies that claimed to have made data-driven managerial decisions (DDD) achieved the maximum in terms of production and productivity; between 5 and 6 percent more than the others. Overall, the results suggested that DDD functionality could be modelled as intangible assets valued by investors that increased output and profitability.

In this sense, in Italy, the “smart” use of data and technological innovation has rewarded one of the sectors still considered traditional, namely Agri-food.  In terms of productivity, the potential benefits for Italian commercial farms thanks to technological innovation in the industry range from 20% to 30%. These are among the first data disseminated by the  Smart Agri-food Observatory at the Polytechnic University of Milan, according to which over 62% of the solutions offered for digital innovation in the agrifood sector currently uses Internet of Things (IoT) technologies, which enable monitoring and controlling activities in the agri-food sector. According to the Observatory, 86% of the solutions offered apply to cultivation, but most are designed to be transversal in various livestock sectors; 15% are specific for wine production.

Moreover, the introduction of digital innovations could increase both company competitiveness and the transparency of processes, as well as the quality of end products, achieving benefits distributed across the entire chain.