Enterprise Data Valuation — What It Is & Why It’s Worth Doing
Let’s think about value for a few moments. We talk about value in all sorts of ways. You’ve no doubt heard of sentimental value, intrinsic value, entertainment value, shock value, educational value, practical value, emotional value, and other terms used to describe the worth of various things for a particular purpose.
In the business world, however, the most influential type of value is monetary value. It’s a fact of corporate life that money talks. Ideas, products, assets, and people associated with significant monetary value get more attention and investment than those without a clear payoff.
With that in mind, we want to ask you a question: what is the value of your data? You might be tempted to reply, as one engineer we asked remarked, that the value of data to your business should be clear to anyone or that there are simply no words to adequately describe the value of your data. If you’re completely honest, however, your answer is most likely, “I don’t know.”
The truth is most organisations don’t fully appreciate or understand the value of their data. That’s a problem because if you don’t understand the value of your data in monetary terms, you’ll find it very difficult to communicate it to others in a way that leads to the investment in data your business needs to succeed.
Fortunately, there’s a solution to this problem. It’s called enterprise data valuation. Keep reading to find out more about what enterprise data valuation is, how it works, and why you should do it as soon as possible.
What is data valuation?
Data valuation is the process of assigning a monetary value to your data. The monetary value doesn’t represent the cost of data or the price it would bring if sold. Instead, enterprise data valuation seeks to assign a monetary value that represents the economic importance of data to your organisation, shareholders, and stakeholders.
Enterprise data valuation assesses what your data is worth both to internal stakeholders such as employees and shareholders and external stakeholders including customers, suppliers, your community, and the environment.
The goal of enterprise data valuation is to better understand the value created by your data in the context of the broader organisation’s assets and objectives. It’s a tool to help you manage your data, maximise its value, and reach a stage of data maturity where data is an integral part of your strategy and operations and data-driven decisions support smarter business practices leading to faster growth and higher returns.
Why enterprise data valuation matters
It’s easy to assign a monetary value to tangible assets like buildings, product lines, oil fields, and manufacturing equipment, but what about intangible assets like data? Data has traditionally been treated as a business input or even a cost with no intrinsic value of its own.
In today’s world, the traditional way of treating data isn’t good enough anymore. For today’s most successful companies, data is a key competitive advantage and a source of business value. For example, Facebook’s market capitalization is approximately~$1 trillion, but the company’s net worth based on assets and liabilities is only ~$138 billion.
Where does the rest of Facebook’s value come from? It’s the data they collect from users and use to power their powerful advertising algorithms. Data is Facebook’s most valuable asset — and they know it and treat it as such.
Your data may not be worth quite as much as Facebook’s data, but it does have significant value. Enterprise data valuation is the first step to discovering the hidden value of your data and unlocking it to power smarter decisions, faster action, and higher returns for your organisation.
Enterprise data valuation matters because it explains the value of your data in a language everyone in your organisation can understand and compare with other business assets: money. This makes the value of your data impossible to ignore and builds a strong case for investment in data.
How enterprise data valuation works
Enterprise data valuation is complex and experts have developed several different data valuation methodologies — each with a slightly different approach. There are cost value methods, market value methods, utility valuation strategies, and use case approaches.
We don’t have room to cover the details of each one here, so we’ll get straight to the point — none of these approaches results in a valuation that both represents the importance of data to your organisation and places it in context with the value of your business as a whole.
Instead, the basis for our approach to enterprise data valuation is the stakeholder value method. The stakeholder value method keeps data valuation firmly in the broader business context and results in a monetary value you can use to make strategic decisions about investing in your data, prioritizing projects, and managing your data assets in a way that supports your most valuable business activities.
We’ve enhanced the basic stakeholder value approach based on our extensive experience with data and with advanced machine learning technology. The result is an advanced enterprise data valuation method that’s structured, repeatable, and designed to bring measurable results.
1. Start with understanding the total value of your company.
2. Explore how you create value for all your stakeholders.
3. Identify the data you use to create value.
4. Evaluate the data dependency of each value initiative.
5. Assign a value to your data assets.
Benefits of enterprise data valuation
Enterprise data valuation is the first step on your journey to being truly data-driven. Here are some ways enterprise data valuation helps you understand and unlock the value of your data assets.
- Enterprise data valuation allows you to take a big picture view of your data assets. You can compare the value of your data assets to the value of tangible assets. You can also compare the value of data assets for different use cases across your organisation to better understand your highest value assets.
- The results of enterprise data valuation give you a universal language to use when discussing the value of data with business teams and other stakeholders. When everyone speaks the same language, your chances of successful collaboration increase dramatically.
- Data valuation reshapes your organisation’s perspective on data. Instead of looking at data as a cost or a business input, it’s recognised as a valuable asset in its own right. This mindset shift is essential for establishing a data culture and becoming a data-driven business.
- Monetary value isn’t the only output of the enterprise data valuation process. You also receive a detailed map of how your business creates value for each of your stakeholders. This useful tool helps you better understand which parts of your business are most valuable and enables you to track and compare the ROI of investments in different assets — including investments in your data.
Getting ready for data valuation: Things to think about
We like to tell our clients to prepare themselves in two ways for an enterprise data valuation.
The first is purely practical. You should put some thought into gathering the inputs you’ll need. Ask yourself and your team the following questions: Who are our stakeholders? How does our company create value? What are our data sets and how do we use them? What are our data assets and how are they connected to the value we create?
Don’t worry — you don’t have to have all the answers on day one, but it makes the whole process go more smoothly if you’ve thought about things ahead of time.
The second way we advise our clients to prepare involves deeper questions and more impactful answers. You see, the real value of an enterprise data valuation is not in the numbers you get at the end — it’s in what you do with the numbers and how you use them to shape your business practices and decisions.
To get ready, ask yourself these questions: What do we want to accomplish with this data valuation? How will the results change the way we work? How will it change the way we treat data? Who will the results be most impactful for?
Don’t rush your answers. Think deeply about where this data valuation will lead and what you need to do to get yourself and others ready.
How enterprise data valuation supports data asset management (and why it's important)
We’ve mentioned “data assets” and “treating your data as an asset” several times without stopping to explain what we mean. At Anmut, we believe data asset management is the best way to manage your data and the only way to maximize its potential value.
Data asset management is an approach to data based on treating and managing data the same as tangible corporate assets. This means understanding the value of data, investing in it to improve its value, comparing it to other assets, managing it throughout its lifecycle, assessing risk, and measuring the ROI of data projects.
Let’s connect the dots. You can see how determining the value of your data is an essential first step towards adopting data asset management. Our experience has taught us that data asset management is, in turn, essential to achieve successful digital transformation and remain competitive in today’s business environment.
Ready to learn more about what enterprise data valuation can do for you?
We’ve packed a lot of ideas into this page, and we’ve barely scratched the surface of how enterprise data valuation and data asset management can transform your business for the better.
To see a real-life example of the benefits, read our National Highways (previously known as Highways England) case study. When you’re ready to learn more, contact us. We’ll be happy to answer all your questions and tell you more about how our data solutions can help you.
The benefits of treating data as an asset
The benefits of doing a data maturity assessment
Data maturity models – measuring the health of your data
Different data valuation methodologies
Data landscape – navigating the data jungle
Data quality vs data condition: the power of context