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Reprinted from informationarbitrage.com. See original post here.
By Roger Ehrenberg
In my role as a venture investor, I find myself spending lots of time speaking to “the enterprise”: Media companies, financial services companies, technology companies, retailers, Government agencies, etc., often assuming the role of “venture therapist.” “How can we engage with the start-up community?” “How can we structure ourselves to work better with small companies?” “What can we offer start-ups that can demonstrate real needle-moving value for us without killing them in the process?” These are simply a few of the questions I get in this vein every week from enterprises ranging from mid-sized to massive. What they are really asking is how can we access pockets of innovation to move our business forward that we either (1) lack the expertise to develop in-house or (2) can’t tap into from other areas of the firm because of politics and bureaucracy.
Regardless of the reason, many enterprises are trapped by legacy structures while fully knowing that they are in the midst of massive disruption that threatens their businesses to the core. Many also perceive an opportunity to re-invent they way they do business, less in response to a competitive threat but rather as a vehicle for delivering a non-linear improvement in the customer experience – product features, user experience, customer service, etc. So given these competitive threats and business opportunities, how can enterprises activate this need for innovation?
My answer generally involves a cultural shift that focuses on one salient point: creating an environment for opening up their data. So much innovation today stems from analyzing and monetizing a firm’s data assets, yet there is billions (and perhaps trillions when you consider health outcomes data and issues of national security) of value trapped inside of today’s enterprise due to myriad storage formats and locations, mis-allocated technology budgets and privacy concerns. And given the petabytes (and even great volumes) of data involved, the sheer amount of time involved spooling up the data from old systems and spooling down the data into a distributed, flexible storage architecture is a heroic undertaking. It is a big honking problem that even in the best of cases takes gobs of time and money to solve.
So rather than trying to do everything at once (and likely “boiling the ocean” and getting little accomplished except disdain for the project), how about creating a sandbox within which developers can play with anonymized firm data, searching for insights, mashing up the data with data ingested from other sources and building customer-facing applications? In essence, creating an “API culture” where firms start to think about how to open up their data rather than keeping it under wraps. Enterprises can either do this point-to-point by working with a small number of talented and highly motivated start-ups, or by using challenges and other crowd-sourcing techniques such as hackathons to stimulate innovation around their data assets. By getting some quick wins around usage and monetization of the the data, they can then expand their project to encompass even greater amounts of data, essentially creating a self-funding vehicle for solving their legacy data problem. Plus, the firms will be heroes within the start-up and developer communities for being good to work with and forward-looking partners in innovation. There are no half solutions here, however. Management is either all-in or not with this culture shift. Firms that simply dabble will be destined to failure, no different than the carcasses of angel investors past who did a small number of “vanity deals,” got their faces ripped off and decided that angel investing wasn’t so sexy, anyway.
Instituting an open data culture represents a sea change for many enterprises. However, the time is now for disrupting these sclerotic – but valuable – organizations and unleashing a new wave of data-driven innovation in the US and across the world. My sense is that once the enterprise gives open data a shot they’ll find it to be addictive, as there is nothing like getting not dozens, not hundreds but thousands of developers creating applications to help you better serve your customers. This will truly demonstrate the magic of this last leg of the Internet age: distributed storage and compute; crowd-sourcing; and APIs. I can’t wait to see the bold (and enlightened) enterprises that step up to the challenge.
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