1. An Economic Cause of Data Strategy Failure
Richard Howey
Founder and Principal, Data Value Services LLC
Doctoral Candidate, Metropolitan State University

2. Data Sharing is an Important Goal of Data Strategy
Many businesses need to share data across organizational boundaries inside the business enterprise
Data Strategies are often intended to enable that sharing

3. The Negative Impact of Poor Data Sharing
So many copies of the same data is expensive!
Where is the data that I need?
Why do we get different answers to the same question?
Database
Extract Program
Source: Inmon, W. (1996). Building the data warehouse, second edition. New York, NY: Wiley.

4. Many Data Management Technologies Enable Data Sharing…
XML
DW/BI
ODS
DaaS
MDM/RDM
EAI
JSON

5. … But the Success Rate is Low
Source:
Source:

6. Have We Uncovered the Real Root Cause?
Most proposed solutions focus on the technology…
…or the project
What about the business environment in which IT operates, projects execute and data must be shared?

7. Data Sharing is a Form of Corporate Resource Allocation
How does your business enterprise manage the allocation of resources across business units?

8. Two Methods of Managing Resources in a Business
Top-Down Management
Internal Market Mechanism

9. Internal Markets – Business Within a Business
Market: A system that “allows individuals to exchange goods and services voluntarily, based on prices, without knowing one another”
Source: “Market Theory” in Encyclopedia of Science, Technology and Ethics (vol. 3) Detroit, MI: Macmillan
Characteristics:
Competition
Chargebacks for goods and services
Management rewards based on internal market success

10. Question
Does the “invisible hand” of a market always produce an optimal supply of a good or service?

11. Efficient Markets and Market Failures
(Market May Function)
Private Good or Service
(Efficient Market)
High
Rivalry
Public Good or Service
(Market Failure)
(Market May Function)
Low
Low
High
Excludability

12. Market Failures for Public Goods or Services
Externality – Effect of a market transaction on a third party who does not participate in the transaction
Non-Rivalry and Non-Excludability -> Externality
Third parties get to benefit as “free riders” without paying
Removes incentive for anybody to voluntarily pay
Typically financed through taxes and supplied by government
Classic Example: National Defense
Would you be willing to voluntarily fund your country’s military budget from your own pocket if you weren’t taxed for it?

13. Private Good or Service
Where is Data?
Corporate Management will want data to be here to maximize value of shared data
“Buyers” and “Sellers” of data will want it to be here to make market functional
(Market May Function)
Private Good or Service
(Efficient Market)
High
Rivalry
Public Good or Service
(Market Failure)
(Market May Function)
Low
Data
Low
High
Excludability

14. Is There a Data Excludability Paradox?
Corporate policies and culture that reward managers for internal market success tells managers with control of data resources to make the data excludable, i.e. withhold data
Corporate sponsorship of data sharing initiatives, e.g. DW/BI, MDM, etc. tells managers with control of data resources to make the data non-excludable, i.e. share data
Can you blame a manager whose pay and career depend on obeying the first message for deciding to obey it rather than the second message?

15. Symptoms of the Paradox
Managers who need to use shared data:
“We need to build a [enter organizational silo name here] [data warehouse, MDM system, etc.]”
“I won’t pay to fix the enterprise data warehouse but I will pay for my own system”
“That [MDM, DW, Metadata, etc.] system is a great idea – so long as I don’t have to pay for it”
Managers who need to supply shared data:
“We’ll help you get that data from our systems … in the 4th quarter 2 years from now”
“It will cost you [enter exorbitant amount here] for us to help you get that data from our systems”

16. Why Is It Important to Know that this Behavior Comes from a Market Failure?
“No decentralized pricing system can serve to determine optimally levels of collective consumption.”
Paul Samuelson:
First American to win the Nobel Prize in Economics (1970)
Source: Samuelson, P. (1954). The pure theory of public expenditure. The Review of Economics and Statistics, 36(4),

17. The Solution MUST Come From Centralized Corporate Leadership
It is theoretically impossible for business unit management, project leaders, etc. to solve data withholding behavior problems without centralized intervention
If you have repeatedly had poor results with data sharing initiatives and nothing your projects have tried solved the problem, then the data exclusivity paradox may be the root cause

18. Corporate-Level Solution Ideas
Corporate policies must make data sharing more attractive to business unit managers than data withholding
Fund data sharing initiatives from an enterprise budget
Reward business unit managers who contribute to enterprise-level data sharing initiatives
Do not hold business unit managers accountable for not meeting business unit goals if the reason was that they put resources into enterprise-level data sharing
Give credit (bonuses, subsidies, etc.) to business units who share data that is used by other business units
Create and enforce data sharing contracts between business units to make supplying data to other parts of the business part of the normal job
Implement an executive-level data sharing/governance/strategy committee that makes the final decisions on data sharing conflicts in the best interest of the enterprise overall

19. Summary
Internal markets are a good way to manage the allocation of many resources in large, complex 21st century businesses
Unfortunately, data is not one of those resources
Because data is non-rivalrous and preferably non-excludable within the borders of the business, an internal market will fail to optimize the supply of data
This market failure may be a reason why so many data sharing initiatives repeatedly fail no matter what technology or project structure is used
The market failure can only be corrected by centralized corporate management action

20. Upcoming Research
A web-based survey to collect data on this phenomenon will be conducted during the winter of These data will be used in a doctoral dissertation that will explore the degree to which this effect actually occurs in practice. If you would like to participate in this research, please Richard Howey at:

21. Questions?