August 2, 2015

Vertical Data Exchanges (VDE) : Are they key to powering 21st Century Business Models ? ( Part-1)

We live in interesting times ...The last 6 months at Flutura have been very exciting ... We  noticed an inflection point -  Specifically from Houston + Tokyo market places where we operate in the Energy + Engineering verticals. 

3 Propelling Questions

Customers in our specialized segment had an inkling that data is going to be a key  force to be reckoned with going forward. A mindset traditionally soaked in 'Physics + Engineering' had to accommodate 'Data' as the 3rd dimension... Their conundrum can ultimately be boiled down to 3 propelling questions
1. How can we use data to power new  business models ?
2. How do we go beyond the traditional product/services mindset to create entirely new blue ocean markets ?
3. Are there concrete real life examples of these "Data powered" business models which are truly transformational from a business outcome perspective in Industrial sector?
We must admit, initially it did catch us off guard ...We got inspiration from the gang of 4  in the B2C industry ( Amazon +  Apple +  Facebook + Google ). They paved the way to herald  partnership + platform mindset disrupting business models in B2C marketplace.

As the Zen folks  say when the student is ready, the master emerges ... For us the answer was apparent in a construct called Vertical Data Exchange where ecosystems get created to rapidly experiment and impact business outcomes.
For example , the industrial organisation can hold 15 minute interval data streaming in from millions of commercial, residential and industrial customers in a massive energy data exchange. A narrow and deep, partner created forecasting algorithm can help predict short term peak power needs for an REP and feed those signals into  trading systems for block purchase of energy from the markets 
This is best explained with more real life examples in the Industrial world

5 Real world Vertical Data Exchange Platforms in Industrial economy

1.Vertical Data Exchange in Energy  @ US markets : MDM providers are creating  vertical data exchange  which can stream in data from various smartmeter devices - Landis Gyr, Silver Spring Networks, Echelon etc. Partners are invited to co-create intelligent apps which solve specific energy problems like short term demand forecasting or outage prediction by getting access to rich data pools massive headroom exists to detect patterns previously unseen or solve new problems.
2.Vertical Data Exchange in Auto @ Ford : Ford has a vertical data exchange which gives partner read only access to vehicle state informationlike steering_wheel_angle , engine_speed , transmission_gear_position , gear_lever_position ignition_status , brake_pedal_status , parking_brake_status headlamp_status and accelerator_pedal_position to listen selectively to can bus messages . Partners can use rich historical vehicle state data to develop value added apps to forecast fuel efficiency or part failure using predictive algorithms
3. Vertical Data Exchanges in Oil n Gas @ Norwegian Continental Shelf :
The Norwegian Continental Shelf ( NCS) has one of the largest deposits ofPetroleum and Natural gas in Europe. Exploration and Production Information Management (EPIM)  is a vertical data exchange to share  drilling + production data with an eco system of licensed partners .Operators transmit daily drilling and daily and aggregated monthly production data in XML directly from the platforms on the North Sea using a secure network to EPIM. Analytical apps built by screened partners on top of EPIM allows  new possibilities for  operators to analyze massive data pools across different production fields and licenses.
4. Vertical Data Exchange in Retail Energy Provider ( REP ) @ Texas
As Tony, Sandi & Keerthana from our Houston offices found out, in the deregulated energy provider markets, REPs "dance delicatelyon a daily basis between demand and supply pricing . In order to calibrate pricing on a intraday basis REP folks need consumer micro energy consumption habits  to monitor 2 important drivers of demand - competitive energy pricing and ambient weather ( excessive heat  in Texas can trigger A/C usage spiking demand ). Fluturas REP Cloud provides thedynamic contextual signals required for calibrating pricing on a intraday basis.
5.Vertical Data Exchange in Heavy Engineering  @ Tokyo
Okubo San & Krish ( Saki in hand ) had a deep conversation with a leading Tokyoheadquartered Heavy Engineering company with a vision to create the Industrial  Sensor cloud  from high speed train sensors, industrial machinery. They were looking for ways to  monetizing data using partner co created apps
All the above are powerful signals of a subtle force @ work - A new era of verticalized data exchanges to solve business problems. We at Flutura call this the  rise of the  "Data Exchange Economy ( DEE ) " . Data Exchange Economy is the creation of new business models generating new revenue pools and powered entirely by unique access to 'rare to get' data.  So here is the important question

What are 3 Characteristics of DEE - Data Exchange Economy ?

It essentially involves 
1. A Partnership mindset
2. Moving from data streams to new revenue streams powered by dataproducts /algorithms
3. A non linear business model which goes beyond product license.
So how can one differentiate between an organisation which "thinks Platform" from a company which "thinks Product" ? It can  be visualized & contrasted on 4 significant dimensions outlined below
The world has changed now. Industrial organisations are moving away from product mindset to a platform mindset .
While there is a lot of ground to be covered,  our intent was to heighten the awareness of this new emergent trend. In Part-2 of the blog we would dig deep and look at 3 aspects of the emergent Data Exchange Economy in Industrial side
  • Business  Models : What is the economics underpinning vertical data exchanges ? 3 Examples of new revenue pools created in Engineering + Energy sector using data
  • Architectural Models  :  What are the key technological building blocks under the hood of a  vertical data exchange ?
  • Mental Models : What kind of 'fertile ground' needs to be created  from an organisational mindset perspective for data powered business models to 'bloom' ?

 In a nutshell

 The Data Exchange Economy ( DEE) is here to stay in the Industrial world and is irreversible. as value perceived by end customer is shifting from engineering to intelligence (atoms to bytes)
  • Creation of Verticalized Data Exchanges is  the first step to unlocking value
  • It requires a new thinking on 3 dimensions - Business Models + MentalModels + Architectural Models
  • The industriaB2B sector is following the  Gang of four ( Google+FB+Amazon+Apple )  B2C platform world with a lag
As always  curious to hear  how you see the world ...