With data playing an increasingly important role in business and investment decisions, more companies are looking to invest in data to gain competitive advantages. There are many examples of how data can drive investment decisions and create value. By leveraging data analytics and insights, companies can identify new opportunities, make strategic investments, improve operations and risk management. With the right data strategy and capabilities, data can become a core business asset. This article will explore real-world examples of how leading companies invest in data and use it to guide investments and business strategy.
Using data analytics to guide mergers and acquisitions
Many companies use data analytics to identify acquisition targets and assess potential synergies. By analyzing market data, financials, customer bases, and operational data, they gain insights to make informed acquisition decisions. For example, Salesforce acquired Tableau, a data visualization company, to strengthen its analytics capabilities. By assessing complementary data assets and opportunities, deals can be structured to maximize value creation.
Leveraging data to optimize capital allocation
Data enables companies to optimize capital allocation across business units and investments. By using data to quantify returns on investment and avoid underperforming assets, capital can be redirected to the highest-value opportunities. For instance, companies analyze customer data to prioritize resources towards high-lifetime-value segments. Airline revenue management systems use data to dynamically price seats and improve yields. In private equity, data analytics guides decisions on where to deploy capital.
Investing in data infrastructure and capabilities
Leading companies invest heavily in data infrastructure, tools and talent to build competitive advantages. Data lakes, analytics platforms and data science teams allow companies to extract value from data. Investments in IoT and other sensors generate proprietary data assets. Overall, data capabilities support data-driven decision making across the organization. However, costs must be weighed against business value – the highest returns come from using data to differentiate core products and services.
Using alternative data to enhance investment analysis
In investment management, alternative data from new sources is increasingly used to gain an edge. Data on credit card transactions, satellite images, web traffic, social media and other novel datasets provides information on company performance ahead of traditional metrics. Hedge funds and other quantitative investors are mining alternative data to identify mispriced assets before the market catches up. But again, the costs of these novel, unstructured datasets must be evaluated against their investment value.
In today’s data-driven business environment, companies across industries are investing in data and analytics to support critical decisions on investments, strategy, operations and risk management. By developing the capabilities to generate business insights from data, organizations can make better capital allocation choices, identify new revenue opportunities, and build sustainable competitive advantages.