What Makes Data Valuable: The Truth About Data Network Effects

In practice, most of the valuable insights you will glean from a scaled-up dataset in a particular domain will come early on. More data just confirms those insights. Further, the number of insights that will matter enough for customers to pay you or choose you over other providers is typically small. So data scale can give you these early 1-3 key i... See more

Data Isn’t Always Valuable

4. Asymptotic (Diminishing) Value of More Data

Data network effects can be built and data can be used to create defensibility. So how do you actually do it? There are at least three broad approaches to using data to give your product an advantage.1. Data network effects2. Data scale3. Data embedding

Data embedding is the idea that by holding more and more of your clients’/users’ data, the harder you are to remove, and that gives you some defensibility.

Data is not inherently valuable. Most data doesn’t produce a real data network effect, and most data network effects aren’t that powerful even once established. Consider the idea that your data strategy, in terms of value creation, is overrated. It can be powerful, but it’s typically not.

Many Founders have a fantasy that data will be an ongoing insight engine — that as they collect more and more data, they will get more and more insights that will give their startup an ongoing advantage.

With AI/ML technologies making the leap in recent years, the seductive illusion of data has only grown. More Founders are falling prey to the idea we had at Tickle: the phantom value and defensibility of data. Collecting data is easy now, but turning that exhaust into value is not trivial. Further, a world of abundant data, it’s getting harder to d... See more

6. Customer PerceptionThe customer may not be able to perceive the difference — or value the difference — between you and the competitor. Your data advantage is not an effective advantage in the market, even if it is an advantage. It’s not doing the work of making you more defensible.