Information Playground

Valuation and the Sale of Data Assets

In a recent post I highlighted five recommendations that enable a corporation to transition their business into an environment where the economic value of data is monitored systematically.

These recommendations have emerged from the Architecting for Value research being conducted by Dr. Jim Short of the San Diego Supercomputer Center.

One of the key recommendations by Dr. Short is to make data valuation part of your business strategy, and he proposes developing expertise in several areas:

• Formally evaluate (or build) and deploy tools that support data valuation
• Create new valuation business processes
• Design new products where data is the core product or service
• Offer data services
• Acquire new data assets
• Combine new with existing data assets
• Monetize and sell data assets

How does one get started? I would recommend contacting Dr. Short for a deep dive in industry best practices. His research is focused in two areas:

1. A survey of industry practices that includes the collection of public use cases where valuation activities are mentioned.
2. Business and IT interviews with individuals and companies practicing valuation.

One of the more interesting public use cases discovered by Dr. Short involves the sale of data assets.

In January of this year it was reported that Tesco was eyeing the sale of its data marketing and analysis division, dunnhumby. Dunnhumby refers to themselves as a "customer science" company. In regards to Dr. Short's advice to "make data valuation part of your business strategy", this article makes it apparent that Tesco was doing just that:

Financially troubled British grocer Tesco confirmed rumors it intends to offload its data marketing and analysis division, dunnhumby.

In documents released Thursday, Tesco said it has appointed Goldman Sachs as its adviser to explore “strategic options” for the US$756 million business as it embarks on a complete overhaul of its assets.

It’s hard to bucket dunnhumby. Some call it an agency. Others, a data platform.

In its 2014 annual report and financial statement, Tesco said it “uses our unique insights from dunnhumby to track how British consumers feel about the economy in general, as well as their own individual situations.”

This use case highlights a financially struggling company's strategic decision to unlock some amount of financial value from the dunnhumby data set, which at the time reportedly contained information about the buying habits of some 770 million shoppers. 

Less than four months later the deal was complete:

Kroger Acquires Dunnhumby Data Assets From Tesco

British grocer Tesco's customer data science and loyalty division dunnhumby, reportedly on the market for several months now as its parent company explored "strategic options," will transfer many of its employees and data assets to Tesco's US-based joint venture partner Kroger.

The agreement is evidence that Tesco has a business process for the sale of data assets. Gaining insight into the specific business processes used during transactions like this is a goal of the research.

It is important to point out that the sale of data assets is only one form of valuation. In previous weeks I have pointed out other forms of valuation that have been observed in the industry:

• Valuation of M&A assets during LinkedIn's acquisition of Lynda.com's video library.
• Valuation of data assets during bankruptcy proceedings, such as Caesar's Palace Total Rewards Customer Loyalty database.
• Monetization of data assets such as 23andMe's data transaction with Genentech.

In an upcoming post I will focus on another interesting valuation use case: data insurance.

Steve

http://stevetodd.typepad.com

Twitter: @SteveTodd

EMC Fellow

Valuation and Data Monetization

Over the last few weeks I have been documenting some of the work EMC has been doing with Dr. Jim Short of the San Diego Supercomputer Center (our Architecting for Value research). The research has allowed us to explore the topic of data valuation processes within the enterprise.

Previously I highlighted five different use cases where we are looking at how valuation occurs. These use cases include M&A, asset valuation, data monetization, the sale of data assets, and data insurance.

I have also discussed an example of valuation that is occurring as part of bankruptcy proceedings. The Caesar's Palace bankruptcy was chosen as a research use case partly because the data assets are being valued more highly than the real estate assets. One of the key insights from this bankruptcy is the lack of standardized data valuation processes.

In this post I'd like to take a look at another valuation area: data monetization. Bill Schmarzo argues quite persuasively that a more accurate title for the role of Chief Data Officer (CDO) would be Chief Data Monetization Officer (CDMO). One of the more important aspects of this role is the responsibility to leverage data assets as a means of generating additional revenue sources.

Dr. Short has been researching data monetization use cases and one of the more interesting examples is the case of 23andMe and Genentech. Consider the following statement taken from a Forbes article:

"According to sources close to the deal, 23andMe is receiving an upfront payment from Genentech of $10 million, with further milestones of as much as $50 million. The deal is the first of ten 23andMe says it has signed with large pharmaceutical and biotech companies."

The data assets owned by 23andMe were generated by selling DNA kits to customers for roughly $99 per kit. As of early 2015 the Forbes article asserted that 800,000 such kits had been sold, resulting in roughly 79.2 million dollars in revenue. Each customer has the ability to grant 23andMe the right to use the data for research purposes. By granting Genentech access to these data sets, 23andMe has opened the door for a potential 60 million dollars of additional revenue (without selling another DNA kit).

This use case raises several question about valuation:

• Are there economic algorithms which can predict the potential future value of such data?
• Is 23AndMe receiving fair market value for the data?
• How did they arrive at the $10 million down payment and potential $60 maximum?
• Does 23andMe have a sales department that markets their data?

In other words I am wondering exactly what 23andMe's valuation processes are. Understanding the evolution of these new business processes is a primary goal of the research, and indeed a survey has been formed to gather this data from a variety of industry sources.

Feel free to contact myself or Dr. Short to participate in the research or get access to the results.

Steve

http://stevetodd.typepad.com

Twitter: @SteveTodd

EMC Fellow

 

EMC Wilderness Monitoring

Things got pretty wild last week for two EMC technologists.

The first technologist is EMC Distinguished Engineer John Cardente. Just last week John announced (via the Reflections blog) the launch of the Whenology website:

The Whenology project brings previously separate data sets together to begin the process of studying relationships between climate change, phenology, and bird migration. This data is collected primarily by citizen scientists through different organizations such as Earthwatch, eBird, the Hawk Migration Association of North America, and the USA National Phenology Network.

John works as a researcher in EMC's Advanced Research & Development (ARD) division of the Office of the CTO. John, like myself, has a long history of building enterprise-class software running inside EMC's storage systems. As EMC continues to morph into a company that helps our customers build analytic applications, John's career has been augmented with analytic skillsets that uniquely qualify him to not only build storage systems but also write the applications that analyze data in those storage systems.

For the Whenology research project John built a "climate data lake". Vice President of ARD Ken Durazzo had this to say about the climate data lake and corresponding research:

This work is exposing some very important data, used to create a greater understanding of our planet. It showcases the value of analytics in a real-life use-case, using analytics to create new knowledge as well as put historical data into perspective / context.

If you are interested in some of the research output so far, I strongly recommend browsing the Explore link on the Whenology website.

The other technologist getting wild was myself!  Coincidentally, the same week that John was announcing his wildlife website, I was spending two volunteer days in the White Mountains of New Hampshire as a Wilderness Monitor. What does a Wilderness Monitor do? 

Hike to a pre-selected location on a trail accessing one of six Wilderness Areas within the White Mountain National Forest (round-trip hiking distances are between 6 and 12 miles). Observe and record the number of people encountered at a given location for a four-hour period, from 11am to 3pm. Hike back to your car.

On Thursday of last week my dog Jacoby and I monitored the Kate Sleeper Trail. We saw zero people and three bears.

On Friday we visited the peak of North TriPyramid and 16 people passed us by (the photo above was an east-facing picture taken from the top of North TriPyramid). 

Each year EMC gives employees 3 days off to become involved in community volunteer activities such as this (for more information see the EMC Gives Back website). I will head back to the White Mountains in August to monitor another trail. 

For now it's back to work exploring the new phenomena of Data Value. 

As a remembrance however I've included two more pictures below.

Steve

http://stevetodd.typepad.com

Twitter: @SteveTodd

EMC Fellow

The view from Whiteface Mountain in the Sandwich Range Wilderness Area

River Along the Kate Sleeper Trail in the Sandwich Range Wilderness Area.

Valuation During Bankruptcy

In partnership with Dr. Jim Short of the San Diego Supercomputer Center (in his Architecting for Value research) I've been exploring the topic of data valuation processes within the enterprise.

In a previous post I highlighted five different use cases where we are looking at how valuation occurs. These use cases include M&A, asset valuation, data monetization, the sale of data assets, and data insurance.

I've been diving into each of these five use cases and in my last post spent some time calculating an estimated value of the data that LinkedIn might have paid for during its acquisition of lynda.com. I posited that as more and more data assets are being acquired or sold, valuation practices will likely become more standardized and the industry will better understand whether or not the acquisition price of Lynda.com’s data (and others) was a fair deal.

In this post I'd like to explore a data valuation use case that is a result of a bankruptcy. The use case in question involves Caesar's Palace, and the data set under consideration is the highly valuable Total Rewards Loyalty Program database.

The Wall Street Journal ran an interesting article on the bankruptcy proceedings and made a remarkable statement about the value of the Total Rewards data:

The most valuable asset in the bitter bankruptcy feud at Caesars Entertainment Corp. isn’t the casino operator’s opulent Roman-themed resort at the heart of the Las Vegas Strip. It’s the company’s big-data customer loyalty program, valued at $1 billion by creditors.

Dr. Short has spent some time digging through the public bankruptcy proceedings of Caesars and several other firms, and made an interesting comment in regards to the value of the data versus more tangible assets (such as property):

Note that the value of the Total Rewards program exceeds that of any of the Las Vegas properties (by themselves), and is 17% of the total value of all CEOC operating assets (see table in article).

Perhaps even more interesting is some of the data uncovered in the bankruptcy proceedings. Dr. Short commented as follows:

I think for now the bottom line is that the valuation process and estimated value of program assets appears to be legally and financially contested, and will be matters brought before the court.   So I suggest what is accurate to state is that the valuation was undertaken by Caesars and its investment management and legal advisors, and that the exact valuation amount and procedures used will be contested in court. There are repeated references in court filings that Total Rewards enables Caesars to be one third more profitable than competing casinos. 

In essence we have two sides disagreeing on the value of the data assets in the Total Rewards program, due in large part to the fact that the industry does not have agreed upon valuation policies and practices.

In a previous post I had described five target outcomes of our research that should help companies "Architect for Value". In the case of bankruptcy (and even in the case of the data acquired from lynda.com by LinkedIn), at least three of these target outcomes directly apply. I have restated them below:

• Make data valuation explicit. Take today’s implicit processes that place an unsystematic value on data (e.g. retention, backup, etc.) and make them explicit.

• Make data value part of your business strategy. Bring in or develop tools for valuation, develop data policies and services, acquire and/or sell data.

• Manage your data value. Assess data risk and evaluate data insurance in the same way as other valuable corporate assets.

In an upcoming post I will focus on another way of valuing data referred to in the industry as data monetization. 

Steve

http://stevetodd.typepad.com

Twitter: @SteveTodd

EMC Fellow