What Managers Need to Know About Data Exchanges

Abstract

The idea that many businesses rely heavily on data to produce or market goods and services is not new. Indeed, even in 2018, four of the six top companies in market valuation—Amazon, Alphabet, Facebook, and Alibaba — based their business models on the use of data to optimize advertising. However, data differs greatly from traditional factors of production, such as capital and labor. For instance, to achieve scale, companies need data about large numbers of customers—especially when algorithms are used in advertising and other revenue-generating models. Given that scale, data interacts with personal privacy—even national security—in ways that other factors of production do not. These special attributes of data hinder its efficient and transparent trade in data markets, keep it in closed silos despite its digital nature, and often stop organizations from maximizing its value. But this is going to radically change. We are embarking in a transition from the era of big data to the era of shared data, in which the insights that emerge from data are starting to move freely and transparently in the market, thanks to the implementation of data exchanges. This is going to profoundly change the way in which companies produce, and it is going to open the horizon for the next level of data-based value generation. Business managers need to understand which characteristics make data so special as a production factor, reflect on how data exchanges are going to change the way in which companies produce and interact (both in a B2B and in a B2C context), anticipate the creation of data unions, as well as prevent the threats and maximize the opportunities that data exchanges are going to generate.