December 29, 2017 | Written by: Rami Ahola
Categorized: Industry Insights | Product Development
Data and insights are quickly becoming the dominant sources of competitive differentiation, as was discussed in Part 1 of this blog post series. But how do you protect that differentiation, potentially monetize it, and make sure it shows in your company’s valuation?
High tech companies have totally dominated the patent rankings for years, and there are well-established models for monetizing the patent portfolio. Companies like IBM and Nokia generate billions of dollars annually from their intellectual property licensing business. Data or insight cannot be patented, though, so how is this going to work going forward?
While data and insights alone cannot be patented, there are a couple of ways of legal protection: you can patent the product that includes and/or leverages the insights, or you can designate the insights as trade secrets. However, in order for a trade secret to have a chance to be treated as such by a court of law, the information must have been “subject to reasonable steps to keep it secret”. That is, the foundation to any sort of legal protection of your insights is understanding that the insights are confidential information, and should be protected as such. This should include at least strong security and IT protection of who can access the data – “a need to know”.
Building and maintaining strong security controls around data has a cost associated with it, so it doesn’t make sense to control everything. So how do you determine what should be protected? It is helpful to categorize data and insights in terms of its “half life”, i.e. the time it takes for the data to lose its value. Let’s start from both ends of the spectrum, as those are more clean-cut.
At the short end of the spectrum, we have real-time operational data such as the exact position of a printed circuit board assembly in a surface-mount pick-and-place machine. While such data is critically important for the operation of the manufacturing line, it becomes practically worthless in milliseconds, and therefore creating strong protection for it will probably not be worthwhile.
At the long end of the spectrum we have strategic insights derived from various kinds of data that the company owns or has access to, as well as data that can be monetized. These could be for instance long-term demand forecasts for consumer products, usage information supporting new business models for MRI scanners, or consumer profile data from a hotel smart mirror allowing the hotel chain to customize the traveler experience and boost customer loyalty. Such insights are valuable for several players within an industry, and they retain their value over a relatively long period of time. That makes it definitely worthwhile to protect them by strong access controls.
Between the two extremes, there’s a fairly broad grey zone where the answer to whether one should protect the data and insights will be “it depends”. Take the example of collecting user insights from medical devices and sensor data to help the elderly with reminders, support and emergency alerts. If the sole use of the data is to provide real-time reminders and alerts, then it might seem not worth protecting. However, the same data could be collected over time, and all of a sudden you have a very detailed profile of the individual’s health history that clearly has value to e.g. health care providers and insurers. Protecting such insights would seem like a good idea.
Just like in the medical device example above, the decision to protect or not to protect should not be based on the current uses of the data alone. Companies need to think about possible other uses for the same data, as well as insights that can be derived by combining the same data with other data sources. If there’s value to be derived from the data, it may be worth protecting the original data itself.
It is clear that data has tremendous value in connecting the organizational silos within a company, as discussed in Part 1 of this series. As discussed in this Part 2, protecting selected sets of this valuable data and insights derived from it is also of great importance. So what practical steps should your company take to be ready for the world of data? We will discuss that in Part 3 of this series. Stay tuned!
For more detail and the full report, please download the ExpertInsights@IBV report “Designer data: How product engineering approaches for electronics can serve insights for the entire organization“ from IBM Institute for Business Value.