Companies competing globally are finding they have fewer resources by which to distinguish themselves in increasingly crowded fields of competition. For most companies, there are really only two resources that matter: data and people. And although there is no shortage of either, there is scarcity in the business value companies are able to generate from both. Frequently companies do not know fully what they have in either their data or talent inventories, as ownership of the underlying assets is tenuous in the former, and remains non-existent in the latter. Both are foundational for creating value through mechanisms such as accumulation of intellectual property and formation of temporary monopolies, which belong to an entirely separate asset category often referred to as intangibles.
For over two decades, intangible value has been represented by staggeringly large dollar figures,[i] though seldom if ever is such value realized “out of the box.” Data is a major resource in most organizations. But unlike other resources, companies can actually create more data, which has brought about the phenomenon of big data. Yet for most organizations, data is a resource that remains very difficult to extract and refine, despite great advances in software app development, cloud computing, and the mathematical, algorithmic, statistical, and visualization techniques referred to as data science.
Assuming data it is readily retrievable, there are still two analytical steps standing stubbornly in the way: searching for relevant data, and then transforming it into consumable information. Both take time and ingenuity, along with a knack for separating signals from noise. Even if businesses are fast, their data may not be, as good data may remain latent for as long as a full reporting cycle, long past the time it can be useful to analysts and managers.
Regarding people, there is usually a development period that occurs before they achieve a level of proficiency sufficient to render value. They need to learn organization rules and customs, and become conversant in particularities of a business’ productive processes. They may also need to acquire specialized skills that apply uniquely to an industry segment or market opportunity. By the time they begin to render value they may decide that someone else can offer compensation more commensurate with their talent, or a more thriving work environment. Their new company enjoys the results of successful employee development while the previous one is stuck with the bill.
Both people and data have potentially increasing returns to scale, the former by requiring an extractive infrastructure, and the latter by network effects. But both can just as easily fail: data can get too complex to mine, and people can underperform. In either case, there are no assurances that even the savviest of IT and HR functions will be able to extract value from their respective resources. As big data becomes bigger, and talent becomes more mobile, businesses will have to work harder to determine what is unique in either resource stock, and ultimately what they can do better than everyone else.
Of course, anything one company can do, a competitor can eventually do cheaper, better, or faster. And so the importance of data and people will be more acute both in maintaining, and not just establishing competitive advantage. Yet a few years ago we were fond of saying that “data is the new oil.” The phrase has since fallen out of use, as companies now realize they need to develop extractive technologies in order to realize value, whether by software, collective intelligence, or data science. Simply having the resources, whether data or people, is not enough. Remaining competitive will likely be determined more by having a better drill bit, rather than by having the best prospectors or the most mineral rights.
[i] Corrado, C., Hulten, C., & Sichel, D. (2009). Intangible capital and U.S. economic growth. Review of Income and Wealth, 55(3), 661–685.; Nakamura, L. I. (2001). Investing in intangibles: Is a trillion dollars missing from GDP? Business Review, Q4, 27-37.