Analytics Based Strategy
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Analytics Driven Business Models

There seems to be an almost infinite way of deriving value from Data Analytics. To build a little structure will divide the models based on the entity directly benefiting from the usage of Analytics. Although the benefits of analytics spread around there will always be someone somewhere for whom the benefits are direct and striking. These business models are called Internal Enhancers. When the direct benefits are reflected on an external entity the business model is called External Enhancer.

Internal Enhancers

There is a plethora of combinations in which the company carrying the analytics process uses the results for its direct benefit by finding new or refining the old ways of doing business or by simply optimizing certain aspects of their operations. Companies have found ways to use analytics to discover new customers or new approaches (Blue Ocean Strategy), to optimize sales using customer segmentation, to reduce distribution costs or improve availability using supply chain analytics, and mitigate risk using advanced risk analytic models.

External Enhancers

Sometimes companies are specialized in a very narrow segment of analytics and can sell their services to other companies. Since the value of analytics depends primarily on the market size this separation of tasks makes perfect sense. A specialized company brings lower costs and a large company brings the access to a huge market. Based on the relation between costs and revenues an External Enhancer has three ways to monetize its analytic capabilities:

Provider of Premium Services: the cost of producing and distributing is much lower than the price charged for the analytics. This is the goal for most analytic providers but with very low barriers to entry it is difficult to achieve and maintain it.

Cost Plus Provider: the charged price is equal to the cost of producing and distributing the analytics plus a profit. This model transforms the analytics in a commodity crowning the buyer as king because of its access to a large market.

Differentiator Provider: the analytics are distributed under cost or even for free to find, acquire, or keep a customer. This model has become very popular in association with the internet because the distribution cost is negligible. With analytics most likely run in a black box model the overall costs are limited to the original investment plus a minuscule maintenance.