Value Proposition #7: Industry Big Data

This is the seventh in my aging series of posts on the nine value propositions offered by B2B platforms/multi-sided markets.  You will be pleased to know that these last three posts will be brief!

Value Proposition #7:  Industry Big Data

Industry Big Data (IBD) providers bring transparency to industries that have been devoid of price, quality, or performance transparency.  IBDs provide information to help buyers and sellers make better decisions on these attributes.  There is some overlap between this value proposition and the value propositions of industry catalogers or credentialers.  After all, enriched and normalized catalogs provide transparency and performance ratings are a form of credentialing.  As a result, IBD providers I highlight below tend to focus on price transparency.

Examples:

Industry big data providers include:

• Costar in all aspects of commercial, and now some parts of residential, real estate.
• Castlight Health, Truven, and others provide price data, as well as quality and performance ratings for common healthcare procedures.
• Morningstar provides ratings based on price and non-price factors to investors in mutual funds.
• SmartProcure provides price data on purchases made by state and local governments.
• Solera and CCC Information Services provide price data in automobile claims processing.

Strategic Issues Facing Industry Big Data Providers

1. Prying the data loose.  Transparency is often lacking in an industry because someone wants it that way!  Figuring out a way around the defenders of the status quo is a key strategic issue.  IBD providers have to find the “side” of the market that values the data and get them to pay, while perhaps subsidizing the group that stands to lose from giving up their data.  IBDs can also go to public sources/regulators for price information.
2.  Gaining critical mass.   A little data on most subjects is worthless. There’s a critical mass necessary to draw conclusions, be statistically valid, and have the breadth that clients demand.  Getting to critical mass can take time and be expensive; investors in these businesses need to be patient.
3. Pricing.  All data businesses have price as a strategic issue.  Buyers know that the IBD provider has little or no marginal costs once they have built a database and tool, but none of them want to pay for the fixed cost of information collection or maintenance! Industry Big Data providers have to define and “fence” off their products in creative ways to maximize value extraction.
4. Privacy and ownership issues.  This issue relates directly to issue #1.  Many B2B platforms choose another value proposition (e.g., supply chain automation) and later realize they have an industry big data asset as a form of “exhaust”.  The problem with this approach is that the rights to the data have not been established so that clients find it acceptable to use the data for other purposes.  GXS and Sterling (the large EDI networks) could have made a lot of money predicting retail or auto sales, but their clients would not have appreciated it!  ADP aggregates its hiring data to generate publicity about where the economy is headed.  Presumably ADP does not trade on that information!  The recent news that Business Wire will no longer sell early access to their data to high-speed traders is just another example that will keep coming up as more industry big data providers succeed.  

Every B2B platform I speak with these days believes have a big data play.  But for most of these platforms, Big Data is a secondary business proposition spun off the primary value proposition–and it tends to be a “nice to have” (e.g., benchmarking) versus a “must have”– if for no other reason that participants did not get involved in the platform to have their data shared with others!

Up next, the eighth and penultimate B2B platform value proposition:  Collaborative Project Management.