A Pirate's Point of View
LOCATION-BASED DATA: COST, REVENUE DRIVER OR TABLE STAKES?
Treasure maps were the prized strategic assets of pirates, who fought fiercely over crudely drawn maps with directions to where the treasure was buried. Although the X was clearly marked, rarely did the map provide precise directions to the gold. It took luck, timing, perseverance, and the occasional skullduggery.
Mapping has become quite sophisticated since the days of high seas piracy. Computerized mapping in particular has enabled an unprecedented documentation of the world. When it comes to searching for new fortunes in the world of modern capitalism, a "treasure map" may offer more clues than charts, excel spreadsheets, business intelligence reports, and intricate layers of geographical data.
The Data Quest
Many organizations have become paralyzed by bureaucratic inertia. Rigid processes, procedures, financial metrics and IT structures dictate decision making. As storage costs have declined, data warehouses have become more affordable. Managers now find themselves increasingly overwhelmed by tsunamis of data—both internal and external data.
In the information age, market research companies, the media, and data companies feel compelled to push more and more data to people. With the ability to crunch massive volumes of data and to splice and dice consumer behavior and transactions, companies feel compelled to acquire more and more data in their quest for competitive advantage. As data-driven management strategies infiltrate the executive suite, managers are trying to balance information overload with the opportunity finally, after twenty years of pouring millions of dollars into expensive IT systems, to monetize the data that has been so costly to acquire, store, and manage.
Maps that tell stories of the past, present, and future are the most effective filters for understanding complex information. It's one thing to know (from columns and tables) that you have 7.5 million customers across the U.S., but another thing to drive that point by seeing it on a map. Companies like Netflix, with geographically dispersed customers operating in a hypercompetitive landscape, recognize that location data projected on a map increases the speed of insight and reduces the time required for action.
Where's the ROI?
"Most maps [are] created for an intended purpose and an intended audience. They include the details that are, or were, deemed significant and omit the ones that are, or were, not. No map has ever, nor can ever show ‘everything'," states Lez Smart in Maps that Made History. This is where IT may have taken the mapping business astray—as it relates to the enterprise market. Indexing geographic information (lat/long data) has been traditionally costly due to data acquisition, maintenance, and integration.
In particular, it has been presumed that with more data catalogued, virtually any business question could be answered as it relates to location. The costs of doing so are passed on to the customer. This is an important and noble exercise when funding is not an issue and when the goal is research, health, safety, and security-related analysis. Infrastructure companies such as utilities and telecommunications providers with regulatory mandates have justified the costs in the past. However, in today's cost-cutting environment, passing these costs to the customer is no longer acceptable.
Although most companies recognize that 80% of their business intelligence data is location oriented, they have yet to find a way to leverage that data in a systematic way. ERDAS CEO Bob Morris acknowledges, "The business world is driven by ROI, and traditional geospatial technologies have been limited to departmental deployments within an organization." Instead of dealing with IT and all the costs associated with acquiring, maintaining, and integrating the location data, many analysts and managers are experimenting with data and services that are freely available on the Internet.
Right now, "free" seems to offer a pretty good ROI. Morris believes, "By deploying geospatial technologies within a Service Oriented Architecture (SOA), the utilization of geospatial business systems will increase and will also drive a higher ROI for our customers." This ROI dilemma constantly reminds us that enterprises do not necessarily understand how to approach mapping, spatial imagery and location data as a systemic strategic asset. For business to leverage location, a new approach to cost, revenue or the perception of value is needed.
X Marks the Spot
Maps have served many different purposes over the years, from exploration to navigation to documentation to visualization, with varying levels of detail and sophistication. However, pirate treasure maps, with their crude sophisti-cation and simple objective, are exactly what businesses need to provide context to an increasingly complicated business environment. Where’s the gold? How do we find it? In the days of high seas piracy, a big "X" on a map meant gold. In today’s modern economy, the quest for new fortunes may take several forms as companies and financiers implement various performance scorecards. Nonetheless, if "X marked the spot" for the location of guaranteed revenue, customers, or other ROI, all organizations and individuals would be in the mapping business—or at least would be loyal mapping customers.
Data: Cost, Revenue or Table Stakes?
Two key trends are changing the perceived value and cost of location data. First, companies like Netflix, Amazon, Ebay, Harrah’s Casino, and Disney recognize that data are now part of a basic business infrastructure that needs to be thought of as core and centric to doing business. They claim data are the table stakes of doing business today. If 80% of data is location-oriented, then are location data also now "table stakes"? Is it just another part of the tool set that is needed to play the game? If they’re table stakes—no different than, for example, accounting software or a point of sale system—then they’re no longer a discretionary expense that merits the same ROI analysis.
Second, the perception of the "cost" of spatial imagery and location data is changing, but not because it appears "free" on the Internet. (What’s available for free on the Internet are map viewers, imagery and geocoding services. These consumer tools are not designed to handle, in a secure fashion, large volumes of enterprise data, and they most certainly do not address the costly issue of data acquisition, maintenance and integration. In addition, the timeliness, source, and accuracy of the data are not always clear.) Instead, the value and cost of location data are changing because the data can be monetized.
Data are generally monetized when companies derive revenue streams from sale of the data. The sale of customer lists has been a longstanding practice in profiting from data. However, when a "long tail" of fragmented customers are nested in what seems like a "find Waldo with $" exercise, location data can create new value for the company. (See "Monetizing the Spatial Mashup," Summer 2007.) Imagery and location data on their own are costs. When combined with other business intelligence information such as internal sales activity, market dynamics, and demographics, companies can suddenly see new opportunities for revenue (otherwise called data mining, revenue mining or revenue mapping).
The objective of a business is to create a customer. Once a customer is created, value is created and investments are monetized. In the past, direct mail, blanket advertising, nationwide marketing and direct sales provided brand recognition, but not a verifiable customer. Adding a mapping component to the sales and marketing budget appeared to be simply adding cost. Where was the treasure?
Figure 1 A Microsoft Virtual Earth aerial image of a development Vibrant Solar is evaluating for optimum solar access. X marks the southern facing rooftops.
Robert Quist, solar consultant for Vibrant Solar, a solar engineering and consulting company, and Xcel Energy’s implementation contractor for their Solar Rewards program, uses imagery from Microsoft Live Search and Google Earth to speed up the qualifying process when customers call inquiring about solar options. "What I’m looking for in the imagery is an idea of roof slopes, which is key to determining solar access. The image resolution isn’t perfect and it doesn’t give me the ability to measure the slope, but it’s enough to give me a rough idea of the opportunity, which maximizes the efficiency of sales calls and eliminates the need for unnecessary trips—which is particularly important with gas prices soaring," said Quist. (See Figure 1.)
To better maximize the inbound sales qualification process, what Quist would like to have is the ability to measure the slope and better resolution. However, what Quist would find to be particularly valuable is an image-based, aerial map that points him to a qualified customer lead by showing rooftop slopes that would work for solar power. "That would be worth shifting marketing dollars from direct mail to a subscription and data mining service," said Quist. Location-based business intelligence is the next-gen treasure map!
Next-Generation Treasure Map
Location data is the bridge between top-line revenue development and bottom-line cost management. Small companies are most adept at the balance of costs and revenue. Large companies, in contrast, have a number of business units, and product and service lines with their own P&L, which makes it increasingly difficult to balance. (Internal turf wars don’t help, either.)
Information technology has been used over the last twenty years to manage costs—ERP systems and cost accounting look for the cost of inventory, supply chain management, and human resources, for example—whereas topline revenue growth is generally a function of marketing and sales, with marketing relying on market research and demographics to target customers, and sales being incentive driven. Location-based business intelligence combines top-line revenue issues with bottom-line cost issues to deliver a context-aware business map—a next-generation treasure map for creating customers, growing businesses, and developing value.
There are exciting new ways to put location data into operation, but first it has to be seen as a search question, not a bottom-up mapping exercise. One needs to demand, with the pirates of old, "ARGGG… I need a map where X marks the spot!"