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Data is the New Oil

It was everywhere in the news on Monday, August 24:  Salesforce was replacing Exxon on the Dow Jones Industrial Average.  (To be completely accurate, Salesforce, Amgen and Honeywell are replacing Exxon, Pfizer and Raytheon.)

"Wait," my wife said.  "Isn't the Dow Jones Industrial Average meant for companies that produce physical products?"

"I think I have a typo in my Excel formula..."
That's a great observation, I thought, especially considering that Exxon has been a part of the DJIA in some form since 1928 and Salesforce has "only" been around since 1999 and produces software exclusively.  Ignoring the word "Industrial," however, the DJIA has been the most recognizable, the most frequently reported, and the most easily "understood" (using that term loosely) measure of America's economic health.  And since Salesforce, which is the industry leader in Customer Relationship Management (CRM) and related solutions for 14 years (according to Gartner), is as close as you can get to longevity married with financial success, it shouldn't be surprising that this becomes part of our country's economic litmus test. 

So how did Salesforce establish itself as a bastion of economic growth?  For that matter, how is Facebook valued at over $750B (as of the writing of this blog post) when it doesn't produce anything tangible (ignoring, for the moment, its acquisition of Oculus in 2014)?  How is AirBnb worth over $385B when it doesn't own a single property?  How is Uber valued at over $80B when it doesn't own a single car?

In a word: data.

In 2015, Cap Gemini conducted a study that talked about the then-current impact of data on businesses.  In it, they surfaced some interesting observations:

  1. 64% of respondents said that big data is changing traditional business boundaries and enabling non-traditional providers to move into their industry;
  2. 65% of respondents see big data as a key enabler of their organization’s effectiveness / competitiveness; and
  3. 63% consider that the monetization of data could eventually become as valuable to their organizations as their existing products and services.

The last point is the most telling of them all, especially since this report is now 5 years old.  I have full confidence that, if you asked these same companies again these questions, those numbers would be higher now.  In fact, in 2017 Gartner predicted that by 2022 companies will be valued based on their information portfolios.

To summarize those three data points, "data is the atomic unit of value" in business today.  The disparity between a company's valuation and its tangible assets can easily be attributed to the fact that GAAP does not allow intangible assets to be put on a Balance Sheet (though, to be fair, the revenue generated by the use of that data should show up on the Cash Flow and Income Statements).

Back to the original point:  Salesforce has always been a company that believes in data, but until 2018 that interest has only extended as far as the boundaries of its own data about you and your customers.  In 2018, however, the company acquired MuleSoft, which specializes in unlocking the value of your data regardless of where that data resides.

MuleSoft's philosophy has always been that the constraints around data access is what prevents companies from realizing their full economic potential because these constraints slow down the delivery of new products and services, meaning that a business' ability to generate greater amounts of revenue through existing or new streams is hampered as a result.  Furthermore, the traditional approach of tightly coupled, point-to-point integrations between applications and the systems that house business-critical data substantially reduces business agility, meaning that companies are slow to adapt and more rapidly incur technical debt as a result.

Companies have tried to respond with the creation of a Chief Data Officer post, and the need for this role has certainly increased over the past few years - in June 2018, Visual Capitalist published an infographic that stated in 2019 over 90% of global companies would have a Chief Data Officer - but is this really having an impact?  Unfortunately, many companies use their CDO to regulate access to data by employees instead of using it to generate value and, conversely, few companies have a true data-oriented strategy in spite of the fact that the Facebooks of the world have demonstrated in no uncertain terms the value of developing one.

The net-net of this rambling is, simply stated, that your data is more valuable than you probably realize.  Getting easy access to that data is the first step in the journey to unlocking that value, but once you've taken that step you will quickly find yourself wanting to run like the wind.

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