Data is the new oil? No, it's more like dirt
The comparison of data and oil is leading to quite a few misconceptions about the true potential of data for organisations
What actually is data? Most understand that it's valuable, and the insights gained from good data management and analytics have driven a huge number of modern innovations. Modern businesses are constantly evolving to try to get the most out of it, but it's difficult to estimate how data can provide business value without having a fundamental understanding of what it actually is.
Data is often explained through analogies, and those who have read our book The Chief Data Officer's Playbook will know that I'm usually a big fan of this approach! Analogies are important to make sense of complex concepts, and help us to visualise data within a relatable setting. One of the most popular analogies we've been hearing for more than a decade is that "data is the new oil". It's an easy comparison to make on a superficial level and the similarities which can be drawn are clear: data is now used to power much of the transformative technology we see today, and the analogy is based on data being an immensely untapped valuable asset.
The thinking behind the metaphor is that, just like oil, raw data derives its value from being gathered correctly and accurately by a professional, who can then extract its value to great reward. So, similar to how oil has to be extracted, processed and changed into gas, plastic, chemicals, etc. before it can be useful, data must also be broken down, analysed correctly to make sure it is reliable and accurate and paired with other data for it to have value and become profitable.
However, the analogy is strained. Whilst it may seem superficially accurate, the comparison of data and oil is leading to quite a few misconceptions about the true potential of data for organisations.
Data is more like dirt
The first, and potentially most obvious problem with the analogy is that oil is a valuable commodity which costs a lot of money and investment to extract. This doesn't always translate to the world of data, where gathering digital behavioural data comes at (almost) zero cost. If we are to use an analogy, in this case, data is actually more like dirt, because it's everywhere and not bought and sold in the same way that oil is.
A second reason that data and oil are traded so differently is because data, unlike oil, has no intrinsic value, or at least it's very hard to put a price on. Whilst data gathering, acquisition and storage have become commonplace, value creation has been much harder, mainly because the value of data is created when it's applied to solve a specific problem.
So, in terms of basic supply, data is, again, more similar to dirt than oil; the nature of data allows it to be turned into or grow lots of different, brilliant things, but that takes a lot of input and effort, and sometimes... it's just messy and awful!
Everyone owns data
Data and oil are actually almost opposites in how they are valued, treated and traded. In my head, the most important factor differentiating data and oil, and the reason that data isn't seen to have an intrinsic value, is because there are infinite amounts of it. For example, when you agree to the cookies on a website, you are technically giving away your data, but nothing is actually being taken away from you and you still have the exact same amount of data left to continue sharing. New data is generated constantly, so it can be used many times and by many organisations. The infinite amount of data, of course, contrasts to oil, which is finite and tangible.
Despite its infinite generation, the actual ownership of data is a complex issue. Unlike oil, which is controlled and officially owned by individuals, companies or states, many people aren't even ware of the data they have to share, or even sometimes the true value of the data they've collected. In theory, data is owned and controlled by the user; while users often transfer ownership of their data, they do have the ability to own the rights to their personal data, manage access to this data and negotiate data agency. This regulated, reserved rights approach to data ownership could not be more different to the private ownership model of oil and the negotiations and trading which comes alongside this.
While the data/oil analogy has some relevance, it is fundamentally flawed and could be leading to us misunderstanding some of the core concepts around data value, generation and ownership. In order for organisations to continue to understand data and to use it to improve their business processes, it is important that we move on from this analogy and transition to one which is more appropriate.
For me, no analogy is perfect but that's not the point of them. Data analogies are there to help us make sense of something or to give us a deeper understanding of something that we can't put our arms around. Data in its purest form is actually really simple, but we spend so much time overcomplicating it; it's time to shelve the idea of data as oil, and get back to our data basics.
Caroline Carruthers is co-founder of Carruthers and Jackson and co-author with Peter Jackson of The Chief Data Officers Playbook