What should CDOs do with the value of connections?

In our previous blog, I described the terms: value of connections and value of information. The value of connections allows us to analyze the data generated from connected things, devices, and organizations to draw out significant business plans and strategies.

A real world example is that of Uber. The business of Uber solely runs on the network of connections. The service is dependent on, among other things, the quality of the data maintained by each agent (driver, passenger) as well as the stream of data flowing across the entire network. This data stream includes other non-active agents who are related to the financial settlement of the cab ride. Thus, there are several nodes or connections and many agents.

In this blog, I present you with what CDOs can do to make use of the value of connections:

1.   Create a Model

The value of connections is greater than the summation of the value of the information due to the use and reuse of that data in processing. It has a greater resulting impact on the outcome. CDOs and analytics leaders must quantify the change in outcome and consider it as a measure of improvement. In order to build the model needed to account for value, it is necessary that you address two important questions.

1. How do we measure the differential capacity of an agent to outperform others?
2. How do we account for the realized change in value?

The first question focuses on the agent and processing capability, while the second question focuses on costs and value from data and actions. To address these questions, you must evaluate the quality of data and tools used by agents to process information. We must also access the accounting models that can measure the value of data as input and the value of work performed by an agent on connections. As connections and their value will change over time, it is also important to include a feedback loop as part of the model. This will ensure that changes to the value of information are correctly incorporated.

2.    Value the Data

Before you can model the value of what takes place in the connections, you need to first model the value of data that enters that connection. You have to understand how the information will affect financial performance. Connections can only create value if the information improves financial performance. Maintaining the quality of your data is a difficult task. As networks get larger and larger, and many more of your connections are in a broader ecosystem, ensuring quality and consistency becomes troublesome. CDOs must now start looking at information as an asset, and explore appropriate accounting models.

3.   Remove Inhibitions

There are multiple elements that inhibit the processing capability. For example, today many of the tools utilized by the agents that work on connections are traditional analytical tools. As digitalization progresses, more and more agents are becoming digital agents, aided by machine-learning and algorithms that enhance their organization's data processing ability. It gives them a competitive edge over the agents using traditional tools. Thus, CDOs must identify the inhibiting elements and address such problems.