Proprietary Data: Information May Want to Be Free, But Ours Will Cost You
Companies today suck up data like a Hoover sucks up Christmas tree needles, investing tens of thousands of dollars to answer questions about their customers, markets, and industries. Once that data is collected, however, few businesses look hard for ways to package and sell it.
Restaurant Technologies is an exception. The $150 million company, based in Eagan, Minnesota, supplies cooking oil to fast-food chains, grocery stores, and restaurant chains. A few years ago it equipped the tanks in its customers' restaurants with telemetry systems that track their oil usage. The system sends alerts to Restaurant Technologies so that if a chicken joint is running unexpectedly low, a delivery person can be at the door before the first drumstick of the day hits the fry basket.
After eight months using the system, Restaurant Technologies' leaders realized they were amassing a wealth of data on oil usage that could be valuable to customers. So they began posting information about each restaurant's consumption to protected websites. Now management at a restaurant chain can track anomalies in the usage at outlets, and Restaurant Technologies sells its own expertise to help them diagnose and fix problems. Are restaurants unintentionally using too much oil, thereby wasting money and producing unacceptably greasy fries? Are they dumping excessive amounts of oil at night, perhaps because careless employees are letting contaminants fall into the vats?
Restaurant Technologies is also aggregating and comparing data to identify best practices--when to change the oil in a french fryer, for example. The company plans to use those benchmarks to offer menu-consulting services.
"We're making customers more efficient in how they use oil and reinforcing our own position as experts in oil management," says Jeff Kiesel, the company's CEO. That expertise is something clients will pay for: Restaurant Technologies has successfully raised prices 20 to 25 percent on the basis of its enhanced services. Customers have been so receptive that last month Restaurant Technologies acquired the company that developed its sensor and data-management systems and will soon offer monitoring and consultation services on everything from refrigerator temperatures to drive-through times. "We're developing an operational dashboard for restaurants," says Kiesel. "This is going to be a major value-add."
Other businesses use data to raise their profiles rather than profits. Three years ago, SurePayroll, a $16 million provider of online payroll services, based in Glenview, Illinois, was mulling how to compete with industry behemoths ADP (NYSE:ADP) and Paychex (NASDAQ:PAYX). "We realized we had something of extreme value that we could tap into," recalls co-founder and president Michael Alter. Payments from 17,000 small businesses to contractors and employees course through the company's systems, providing answers to questions of urgent importance to economists and financial analysts: Are small businesses hiring or firing? Are they more reliant on contractors than in the past? Are new employees commanding higher wages? "Even the statistics from the Department of Labor don't accurately answer these questions," says Alter. "Those statistics are based on surveys, and surveys never give entirely accurate results. Paychecks, on the other hand, never lie."
After analyzing its data, the company packaged the results under the label SurePayroll Small Business Scorecard. It now publishes the scorecard every month and sends it to members of the financial community and the press. SurePayroll's economic indicators have appeared in prominent business publications, and that recognition has helped the business secure partnerships with banks and insurance companies, through which it offers its services. "By packaging something that we owned but had overlooked, we created something of value," says Alter.
HomeGrown Products and Processes: We Do Things a Little Differently Here
Some things companies invent to make their own lives easier can make others' lives easier also. Licensing a homegrown product or process can produce a nice revenue stream--if it doesn't squander competitive advantage.
Consider Morpheme, a nine-employee London-based developer of video games for wireless devices. The company designs products like Wizard Pinball and the cell phone version of The Fast and the Furious and sells them to both consumers and major carriers like Sprint (NYSE:S) and Verizon (NYSE:VZ). The games run on all kinds of mobile devices--trouble is, they run much better on some than on others. Morpheme's leaders grew tired of spending time and money developing games for platforms that handled them poorly. "Rather than try to hand-tune every game for every device, we wanted to know what was good and bad on each phone in advance," says Morpheme's CEO and co-founder, Matt Spall. "That way we could develop the game to make it run better on a particular device or decide not even to bother."
So in 2001 Morpheme's chief technical officer developed software that tests a phone's ability to run games and other programs. (There was already such a product on the market, but Spall judged it imprecise for his purposes.) Soon Morpheme began licensing its product, dubbed MorphMark, to two large wireless-service carriers, which use it to gauge whether devices can run their own content offerings. Since then a game publisher and a handset manufacturer have also licensed MorphMark. Those licenses produce just a smidgeon of revenue, says Spall, and that won't change unless Morpheme decides to offer customer support. "But it's created recognition in the marketplace that our programming is of very high quality," he says. "It's created a higher profile for us."
