Data is the New Oil

Announcements Blog Tech News Businessposted by Will Murphy June 5, 2017 Will Murphy

Data has supplanted oil as the fuel for creating big business value When I give talks on data strategy and AI...

Data has supplanted oil as the fuel for creating big business value

When I give talks on data strategy and AI strategy, I talk about data being the new oil. And, data being the fuel (oil) that is fueling the AI machine. I also talk about how to value data, since it is perhaps the most valuable modern business asset, yet is not yet accurately accounted for.

Oil is out, data is in

Check out the slide below that I present as part of my 40 minute talk. It compares the largest companies (by market cap) from 2006 vs. 2016. See something interesting?

Technology companies have moved into the top slots over the past 10 years

When you compare the orange (oil/ energy) with the blue (tech) companies, you can see that in just ten years, many energy companies dropped off the list (Exxon is till hanging on) and tech companies stepped in (Apple, Alphabet, Microsoft, Amazon, and Facebook).

Big tech companies with big data are making big bets on AI

These companies have been able to amass fortunes by building products and services using technologies driven by data expertise. Now, these companies are focusing on AI. This makes perfect sense given that they all have been able to amass large, valuable datasets about products and people that few other companies have access to. If you are an oil company, and are sitting on a lot of it, it’s time to refine it and push it out into the market in the many ways it can create value.

If data is oil, AI is advanced refinement

Oil is the foundation of a lot of things in the market that many people don’t realize (thousands of products). It’s really valuable because it’s the foundation of so many other things — like fuel, plastic products, fertilizers, asprin, crayons, gum, clothing, solar panels, etc. So, oil combined with the knowledge of how to refine it laid the foundation for our modern physical product production system. Data combined with AI will form the foundation of our modern service production system. It won’t be clear and self-evident how data an AI is improving everything. Most AI value will be hidden in the background, making everything we do with data (especially around pattern recognition, prediction, and automation) better. That’s why I kind of like the oil comparison — oil is a foundational, useful business product that makes so many things possible that people don’t immediately realize.

Oil combined with the knowledge of how to refine it laid the foundation for our modern physical product production system.

Data combined with AI will form the foundation of our modern service production system.

Data Oligopolies/ Data Monopolies

So, this creates an interesting issue for competitors and startups. Will future technology companies have a chance? These existing large companies may be able to carve out “data monopolies” where a single player that has the most data in a specific market segment can generate so much value from the data, they they are able to fuel (from profits and new data) business expansions that no one else can match. And, also “data oligopolies” may form, where just a few, existing large companies automatically get to own the future of AI in a lot of areas simply because they are currently sitting on most of the current valuable data “real estate”.

Implications for Innovators

So, there are things to think about for startups getting to in AI. For consumer apps, there are AI opportunities, but they live at within narrow consumer channels, like health and fitness. But as far as large, general consumer intelligent agents, for example; I don’t see how a startup would compete with Amazon (Alexa) and Google’s (home), or Apple (Siri). Or, many other consumer-facing offerings they can make where AI just improves current technologies.

It’s probable that many technology products, companies of the future will just create an additional technology layer on top of exiting data/ AI processing infrastructure provided by these large companies. Although there will be a bunch of niche areas that aren’t covered by the large companies, allowing startups to create unique value and unique full-stack architectures. The big companies will have the funds to purchase many upcoming niche AI companies in their infancy as they show up on the radar. But, I think a few will slip through and become multi-billion dollar companies pretty quickly. Either way, I think that all future/ nascent technology startups need to be aware of how the data and AI value chain gets structured in the next few years. Data is the new oil, so you need to understand if you are going to be able to lay your claim on your own unique dataset or if you will be getting it from a company that was able to collect the data before you got there.

Originally posted at Will Murphy’s blog