Maps, Pixels, & Code. Continually amazed by the geo-magic from my team at Sparkgeo.
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Is data the new oil? Is it air?
On a recent Canadian "Space Data" trade mission to the U.K., I found the use of oil and gas nomenclatures for data services striking. On reflection, however, I've found the market segmentation part of that analogy useful.
Upstream companies create data products. Downstream companies distribute data products. Vertically integrated companies do everything for one market.
This breakdown is straightforward. Even better, it makes sense as a division of labor. It also helps to visualize the different activities necessary to extract a resource and refine that resource into a marketable product. Unfortunately, most data creation companies I have come across are only interested in being "vertically integrated," except they want to sell to everybody — meaning they try to sell complicated data products to customers who do not understand them.
This is a problem for the entire geospatial community because we can end up missing opportunities to inject deeper geographic thinking into broader commercial communities. This pattern can also result in those broader communities not accessing better data products about human activities and our changing landscapes.
What Goes Up Is Not Coming Down
First, geographic data, either raster or vector, is universally complex. Given the complexity, it can feel more comfortable for the upstream company to sell the product itself because it knows it better. It knows how to talk around the data stream's idiosyncracies. It knows how to manage expectations. The problem is it knows its product well, but it might not know what its customers are buying.
Secondly, the upstream company tends to pride itself on broad applicability. With manipulation, countless potential commercial solutions could be created — a data panacea for every sophisticated company. We should remember that it is attractive for a venture-funded or publically traded company to list numerous market verticals to tap. It is, therefore, not unreasonable to try to sell into as many markets as possible.
Unfortunately, these two prevalent misconceptions are backward. Customers do not buy products because of the excellence of the production process; they purchase to solve a problem. Besides, a single upstream company cannot reasonably understand all the potential market verticals for a horizontal data source. If the upstream company is selling something that needs any manipulation to solve the customer's problem, then the data product will likely be too abstract for the final sale to close. There will be too much cognitive distance between the upstream company and the customer.
Imagery is a case in point. It has been commonplace to sell imagery products to government organizations that need little manipulation of the product to extract significant value. Also, many of these organizations are sophisticated enough to take on advanced manipulation techniques. However, selling imagery to markets beyond governments can be problematic. Often, the customer does not want to buy an image but instead a derivative of that image, but they will lack the motivation to invest in the complex geospatial activities necessary to create the appropriate technology pipeline.
We have upstream companies creating reserves of data, but we have forgotten that raw products need refinement for broader consumption.
New Strategy For Data Creators
This is going to be hard; it is going to involve trust. But this strategy will win.
First, in every market, there are domain experts; those will become the downstream links in the data value chain.
Upstream companies need to choose a handful of downstream partners in which to invest. Those investments will be in data, commitment and time. In return, the upstream company will become a hub for the spokes, which are the downstream companies. Each downstream company will sell its product, a derivative of the upstream product, into its market with all of its domain expertise. The upstream company will receive a royalty based on data consumption. The central, external role of the upstream company now becomes account management of the partner network.
The upstream company gets to assess if its downstream partners' sales teams are performing. The downstream companies get to determine if the product they are receiving is fit for purpose. This dramatic tension holds the relationship together. In between these data points are the negotiable factors of sector exclusivity, referrals, data usage, licensing and innumerable other possible contractual permutations.
Trust is a critical feature of this relationship. There is a dramatic tension between the partners, which could easily be broken by either side or through a simple breakdown in communications. Management of reasonable expectations is likely the best approach here. The role of account management will become central to the success of the upstream company. In many ways, that company becomes analogous to a venture investment company, building a portfolio of investments across numerous verticals. Only the investments are business relationships dependent on data flow.
Nevertheless, the basic strategy remains the same. Upstream companies should look for partners that understand their market vertical and sell derivative, relevant products through them. They'll want to manage a smaller number of accounts and enable the downstream partners to sell. Upstream companies should also provide limited data inexpensively for research and development. As the downstream partners innovate on the data stream, the upstream company will benefit.
Upstream geospatial companies, capturing remotely sensed or IoT data, have been very successful in delivering products to sophisticated geospatial organizations. In doing so, they have largely ignored the commercial sector. To access this new, data-hungry market, which is arguably bigger (albeit with smaller individual transaction sizes), partnerships with downstream companies will be necessary. It is impossible for the upstream company to sell into every possible market vertical itself; instead, it should build a curated portfolio of partners who have deep domain expertise that can develop and sell derived products.
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