What Is Data Worth?

September 8, 2017 Focus area: Digital Transformation , Continuous Innovation

We sometimes get asked a very basic question: what is data worth? Because professionals get bombarded with news and advice on data, it is very understandable that this question arises. But how much is it worth then? This seemingly simple question is difficult to answer, because it all depends on the context.

The first thing to research when determining what data is worth, is the cost of creating, storing and managing the data. Because if the costs are higher than the potential value, the data is essentially worth nothing to an organization.

The cost of data

What determines the cost of data? First the production and gathering of data. For instance, data needed for traffic management can be collected by cameras on the roadside, gathering data from mobile phones and navigation systems. Building and maintaining this infrastructure requires a significant and continuous investment.

The second part of the cost of data is that data needs to be stored. This can be done on different media like harddrives or paper. But just like the rest of the infrastructure, storage requires capital to be bought or rented and to be maintained. And if organizations store large amounts of data, for instance multiple terabytes, the cost of storage increases rapidly. Quickly reaching into the tens of thousands of euro’s for a medium sized organization, for professional storage and usage.

And the third and final part for determining the cost is data management. The quality of the data has to be ensured and maintained to be usable at any stage. For instance, the error rate in the data, the way it is retrieved, or the way it is structured all have influence on the usability of the data.    

The value of data

After determining the cost, the value should be defined. But this is much harder to determine than the costs, because it fully depends on what the data is used for. Data in itself has no value, it only becomes valuable if it serves a purpose. Just like oil would have no value if we wouldn’t use if for transportation or making plastics. So, the value of the data is determined by the use case, and this can vary wildly.

For example, if the data in the earlier mentioned case of traffic management would make traffic run more efficient, this could potentially save countries billions of euro’s. In turn making the data that makes this possible also very valuable. Therefore, it is important for organizations to structurally and thoroughly explore what potential their data has. And this can be done by focusing on three different value drivers; increasing the efficiency of existing processes, reducing the risks for the organization and increasing the growth of the business. 

data growth

What is data worth to your organization?

Concluding, to answer the question what data is worth; it is the value minus the costs. But because the potential gains from data usage dwarf the potential costs, organizations should mainly strive to materialize those gains, instead of only aiming on reducing the cost of using data.