ICYMI: Leading Tech Services Increase Consumer’s Ability To Switch Services, While Reducing Entrepreneur Start-Up Costs
Tech critics have called for increased data portability to boost competition. Before the weekend, Google, Facebook, Microsoft, Twitter, and others announced a new standards initiative called the Data Transfer Project to do exactly that, noting, “Portability and interoperability are central to cloud innovation and competition.” The initiative will allow consumers to transfer data directly between participating services without having to download and upload data. With an open-source code, the initiative further encourages the developer community to help extend the platform to support more data types, service providers, and hosting solutions.
This development additionally cuts against the notion that “data is the new oil.” As we’ve detailed before, data is abundant and non-rivalrous. It’s the ability to analyze data — not merely access to it — that creates competitive advantages.
A few key points on this topic below:
With low barriers to entry and rampant multihoming, data is not oil.
As the Center for Data Innovation’s Josh New has pointed out, “Sharing data is not a zero-sum game and businesses and consumers choose to share data because it is mutually beneficial. And with cloud computing, it is increasingly cheap and easy. For example, over the past three years, most major pharmaceutical companies have begun sharing historical clinical trial data with outside researchers, including competitors, rather than hoarding this information for competitive advantage. Researchers can use this data to accelerate drug development, better understand diseases, and design more efficient clinical trials.” (Joshua New, “Why Do People Still Think Data Is The New Oil?” Center For Data Innovation, 1/16/18)
CCIA’s Jakob Kucharczyk notes: “Unlike oil, which is used once, then burns up in combustion, data is regenerative, meaning it can be used over and over again. It lives on and gains new life each time it is shared or used in a way that adds value to someone. It builds knowledge, meaning, and value the more it is interlaced with other data. However, data is only valuable if one can derive meaningful insights from it. Large amounts of data is useless if nothing meaningful can be derived from it. That contrasts sharply with oil.” (Jakob Kucharczyk, “Data Is Not The New Oil,” BlogActiv, 7/19/17)
As a voluntary effort, this portability project helps build a more dynamic and competitive economy. Where tech critics have asked regulators to demand portability, leading tech services have provided a market solution. Commentators like Joshua Gans of the University of Toronto have suggested that data portability will achieve a more competitive market; the Data Transfer Project provides this without cumbersome and costly regulation.
It’s not possession of data that makes firms successful, but how data are used.
Economists Anja Lambrecht and Catherine Tucker note, “Big data is not inimitable or rare,” with insight into consumer needs being the most critical component of startup success. “Our analysis suggests that big data is not inimitable or rare, that substitutes exist, and that by itself big data is unlikely to be valuable. There are many alternative sources of data available to firms, reflecting the extent to which customers leave multiple digital footprints on the internet. In order to extract value from big data, firms need to have the right managerial toolkit. The history of the digital economy offers many examples, like Airbnb, Uber and Tinder, where a simple insight into customer needs allowed entry into markets where incumbents already had access to big data.Therefore, to build sustainable competitive advantage in the new data-rich environment, rather than simply amassing big data, firms need to focus on developing both the tools and organizational competence to allow them to use big data to provide value to consumers in previously impossible ways.” (Anja Lambrecht And Catherine Tucker, “Can Big Data Protect A Firm From Competition?” MIT Initiative On The Digital Economy, 12/18/15)