Data-Driven business models

Background- Data-driven business models

We live in an era of big data – often characterized in terms of the 3Vs – volume, velocity and variety. Three simple examples illustrate the phenomenon. Volume – Tesco has data on the shopping habits of 15 million customers going back 20 years. Velocity – Twitter receives around 12 terabytes of tweets every day. Variety – over 200 million photos are uploaded to Facebook each and every day. These 3Vs neatly encapsulate the reasons why we are experiencing a data explosion, an explosion that is resulting in interesting developments in consumer markets. Increasingly firms are using the data they can access to develop new insights about their customers and their behaviours. Supermarkets analyse spending patterns, trying to work which bundles of products consumers tend to buy. Entertainment outlets use data on who is visiting their park to plan resource allocation and ensure that VIPs get preferential treatment.

Beyond consumer markets, big data is increasingly making its presence felt in the business-to-business and business-to-government sectors (McKinsey 2011). Work on smart cities – including using Twitter posts to monitor the state of urban infrastructure – is becoming commonplace. Some organisations are even innovating their whole business models, creating new services through the application of big data (McKinsey). Vestas – a wind turbine manufacturer, for example, has spent 12 years buying data on global wind flow patterns. Vestas uses these data to model how wind flows around the world and now advise their customers on where to locate the wind turbines they purchase to ensure the most efficient energy production through the turbine’s life. In essence they are using big data to create new sources of value and competitive advantage.Recent developments in European regulation mandate the deployment of smart metering infrastructures in electric grids (EC 2012) in which big data technologies will play an important role as enablers.

As data-driven strategies take hold, they will become an increasingly important point of competitive differentiation. According to a McAfee ( 2012) companies that inject big data and analytics into their operations show productivity rates and profitability that are 5% to 6% higher than those of their peers (McAfee 2012).

A recent report prepared by the world economic forum (WEF 2012) identifies uses for Big Data for economic development purposes (e.g. health care, micro finance, education, agriculture). The same report emphasizes the importance of developing adequate business models providing appropriate incentives for private-sector actors to share and use data for the benefit of society.

This call focuses on two main questions, (1) the question of how big data influences business and economic models and (2) what kind of business and economic models are required to articulate emerging data ecosystems as depicted in the following figure.

With regards to the first question, moving beyond the use of big data in consumer markets, we are interested in commissioning research that explores the role big data is playing today and is likely to play in the future in enabling new economic and business models (LRP 2010).

With regards to the second question we are interested in commissioning research that explores the potential application of current business model implemented by internet companies (e.g. Google search, Apple Appstore, Twitter) in the realm of these data ecosystems.

Themes for this call:

Despite the widespread interest in the phenomenon of big data, there is still relatively little discussion of the role big data is and will play in enabling economic and business model innovation in the Digital Economy.

This theme is especially interested in the development of research concerning:

  1. The role of big data in enabling economic and business model innovation.
  2. The constraints and barriers to exploitation of the value created by the use of big data in economic and business model innovation.
  3. The future potential of big data in economic and business model innovation, especially given the increasing shift to social and unstructured data.

Some interim outputs from this theme:

NEW! Big Data for Big Business? A Taxonomy of Data-driven Business Models used by Start-up Firms by Philipp Max Hartmann, Dr Mohamed Zaki, Niels Feldmann and Prof Andy Neely, Cambridge Service Alliance, University of Cambridge

Data-driven economic models: challenges and opportunities of big data  by Monica Bulger, Ralph Schroeder, and Greg Taylor, Oxford Internet Institute, University of Oxford

Capturing Value from Big Data through Data-Driven Business Models: Patterns from the Start-up world  by Philipp Hartman, Dr Mohamed Zaki and Prof Duncan McFarlane, Cambridge Service Alliance, University of Cambridge

Relevant Links

NEW! Introduction to A taxonomy of data-driven business models used by start-ups by Dr. Mohamed Zaki, Cambridge Service Alliance, University of Cambridge. From Creative Industries Knowledge Transfer Network

Big Data Science Blog by Professor Richard Vidgen, Professor of Systems Thinking in the Hull University Business School