Not every data partnership involves equals. Often, a smaller company with a new idea, or a new take on an established idea, will offer partners the ability to revise their own business strategy. These small but creative firms are often looking for what we call an innovator data partnership, which means they have a potentially revolutionary dataset, but they need someone else to help them create value.
What does a data innovator need to succeed? Distribution, champions, reporting, data protection, and promotion. In the next two blog posts, we’ll examine each of these needs in detail.
Distribution and Sales
As we’ve explained, innovative data companies have a dataset, a product, or both with unique capabilities. They also typically have intellectual property or trade secrets to protect their derivative or calculated data. When they approach a larger company, they are likely seeking a partnership around the sale and distribution of their data. The structure of these partnerships can range from a “data marketplace” to a more integrated experience.
When an innovative firm approaches a Bloomberg, Thomson Reuters, Factset, Acxiom, Infogroup, Pitney Bowes, or any of hundreds of other data markets, it must stay focused on the objective. If a dataset is truly innovative, the terms of a distribution deal may be difficult to swallow. You’ll encounter demands for large percentages of revenue, strict terms surrounding what constitutes a sale or introduction made by the larger company, and a right of first refusal. This is a precarious situation, because large platforms typically know that they hold the upper hand during these negotiations, which is how many an exclusivity provision has been born.
You have to prioritize your responses. Focus on the ongoing revenue share and terms of renewal. Place limits, not just on the scope of revenue share, but also the timeframe. Try to limit the scope of revenue share to only the data actually delivered through or by the larger distribution company or platform. In other words, if you empower the larger firm to sell a finite type of data or subset, you should not need to share revenue on additional datasets or deeper service levels to the customers they bring you. Renewal terms should allow renegotiation of revenue share amounts. It is great when these relationships work out, but in case the larger sales organization providing distribution adds no ongoing value at renewal or in the years beyond the first introduction, renewal terms should not remain the same or become less favorable.
Despite the challenges, there are real benefits to this type of relationship, because proper distribution can accelerate the smaller, innovative firm’s exposure and revenues. Many data platforms combine established data with a unique dataset to improve their value. Weather data combined with financial data on stocks, through time and across geographies, is more valuable than weather data alone. Product adoption data is more valuable when integrated with social data feeds. Customer segmentation data is more valuable when integrated directly with content engagement data. There is great value in the mere proximity of a newer data company’s products to more established datasets delivered through a globally recognized data exchange. This is why the larger data platform company’s distribution can legitimately ask, and get, highly favorable terms.
To be fair to the larger data platform companies, there is a good reason they seek favorable terms from these smaller innovative companies. If a global data marketplace is able to recognize the value of your data, and then help you distribute and sell that data to their clients and prospects, they are increasing the value of your company. You must pay for that increase in enterprise value by sharing significant portions of the revenue or offering them favorable terms should they seek an acquisition. Don’t allow yourself to be forced into an overly restrictive or exclusive arrangement when flexibility and scalability are what you need most.
There are a couple of ways to handle this from the innovator’s perspective. First, if you can segment, refine, or alter the dataset to make it unique for each different reseller platform, you may be able to strike more favorable terms while maintaining more control. In other words, to use an example from market investment research, if one platform has the rights to resell historical data, while another platform has the right to sell only forecast data (forward looking), you can get more favorable terms from each. By presenting some unique form of your innovative data to each partner, you can maintain more control by limiting the distribution.
Another way to handle this is to rapidly line up several different data partnership platform negotiations at the same time. By pitting the larger firms against each other, you make them compete for access to resell your data to their audience. Negotiate specific marketing activities to be contractually provided by the data platform. For example, insist on webinars, email marketing campaigns, website ads, platform ratings or recommendations, and, bundled offers. If you press for bundled offers, the distribution deal requires the reseller or distributor to include your innovative data asset as part of their offering. In this way, as they sell their platform to customers, your cost is bundled into their cost, usually to the tune of a guaranteed amount of revenue. This type of guaranteed income is a great way to build the revenue stream for a small company.
In nearly every deal between an innovative dataset company and a larger platform, someone at the platform company acts as an internal champion for the deal.
With new datasets and innovative data, the process of educating a potential partner can be very difficult. Someone needs to spell out the value proposition repeatedly, explaining it to each successive decision maker. An internal champion at the platform company can dramatically improve this frustrating and demoralizing process. The champion guides your efforts and your pitch. They are the critical access point to the right decision makers.
At most large platform companies, internal champions are in business development and strategy departments. Many larger companies also now have “data partnership” teams whose mission is to identify new datasets. Like business development people, these teams are a great starting point for the introduction and dissemination of information throughout the organization, but don’t typically have all of the necessary momentum to create urgency. The secret to working with these teams is to leverage them as your first internal champion, who will then lead you to the next champion in the revenue or sales organization.
Along those lines, you must also find the internal champion in the revenue organization at a major platform company if you want to succeed. Revenue, sales, and marketing all need to see the value and opportunity in your dataset. Remember, these departments are paid on sales and typically don’t care what your revenue split is within the data partnerships contract. This means you must work with sales leadership to explain the unique value your data can provide and help train their teams for success. Once you find this champion in the revenue organization, you will see substantially higher urgency and interest from the data partnerships team or the business development team.
Last, don’t neglect the data champions on your own team or identifying who they are in a potential partner’s team. Too many innovative data companies assume that everyone can see the genius in their concept or dataset, which is nearly never the case. Building case studies, gathering testimonials, and building a comprehensive and solid data book (as we’ve discussed here) will empower your champions properly. They need ongoing support to ensure that your data product continues to receive the attention it deserves.