“Around a decade ago, we first heard the expression ‘Data is the new oil’. It was coined by Clive Humby, the man that built Clubcard, the world’s first supermarket loyalty scheme. He was using the metaphor to explain how data is a resource that is useless if left ‘unrefined’: only once it’s mined and analysed, does it create (potentially extraordinary) value.
When Humby presented his proposal for a loyalty scheme to the directors of Tesco in 1994, its chairman famously replied: “What scares me about this is that you know more about my customers after three months than I know after 30 years¹.” The launch of Clubcard doubled Tesco’s market share within a year to become the UK’s biggest supermarket chain. It was also, arguably, the world’s first example of what’s now known as big data”
It is only right to say that data is to the digital economy what oil is to the industrial economy. But how does it stack up? Is there even a real and direct link between the two. Let’s break it down.
The link between Data and Oil
Recently, we put out posts about how RPA (Robotic Process Optimization) and Big Data are playing a huge role in industries such as healthcare. There’s no denying that ‘all roads lead to data’, but how is it similar to mainstay fossil fuels such as oil? Is it enough to say that ‘Data is the new oil’? Well for starters, the comparison is metaphorical.
Data is an essential resource that powers the information economy in much the way that oil has fueled the industrial economy.
Just like oil was (and still is) the cornerstone of industry, data is everything when it comes to the information age. IT or information technology literally means Data Technology, which is why as long as we have IT, we will always need data.
Once upon a time, the wealthiest were those with most natural resources, now it’s knowledge economy.
Successful economies such as the UAE have shown their prowess in the balance of natural resources, and the use of technology. But as crude oil reserves run low, the tilt towards the use of technology in powering various citizen and tourism initiatives shows how data is quickly becoming crucial to their growing knowledge economy.
Information can be extracted from data just as energy can be extracted from oil.
The entire reason why we are constantly ‘extracting’ data is so that we can distil actionable information. The same way China used actionable information derived from surveillance data to monitor and contain the outbreak of COVID19. While some may find the continuous government surveillance debatable, what is not debatable is the results it showed in contact tracing and law enforcement.
Traditional Oil powered the transportation era, in the same way, that Data as the new oil is also powering the emerging transportation options.
It’s 2020 and we were supposed to see flying cars. But instead, we’re seeing autonomous automobiles – close enough. We still need to take of what’s happening on the ground before we look up to the sky, and to that effect, data is playing a huge role in the safety and advancement of automobile engineering. One company that embodies this is Volvo. In their continuous effort to make vehicles safer, they recently showed how large transport trucks can autonomously decide how to react in the event of a collision by bringing the vehicle to a complete stop.
Traditional oil is finite, Data availability seems infinite.
The first of our actual differences, though it’s pretty obvious. As we saw earlier in our example about the UAE and other Middle Eastern countries that have relied on crude oil for decades, oil is running out, and as the world looks at other fossil fuels, data, on the other hand, seems infinite.
Data flows like oil but we must “drill down” into data to extract value from it.
This is a great analogy, especially if you consider how both are used in production. In the same way oil has helped produced useful plastics, petrochemicals, lubricants, gasoline, and home heating among others, data has and continues to help in diagnosing diseases, figuring out traffic patterns, and most recently, slowing down a pandemic like COVID19
Oil is a scarce resource. Data isn’t just abundant, it is a cumulative resource.
Another difference between oil and data. As oil reserves dip, the data well only seems to be growing, and this is because data is not mined in isolation. Open source and crowdsourcing is proof of how data is a cumulative resource. Linux operating systems such as Ubuntu and even mobile operating systems like Android are a testament to the fact that the advancement of technology is the result of community.
If Oil is being used, then the same oil cannot be used somewhere else because it’s a rival good.
This follows through from how data is a cumulative resource. Unlike oil which can only be used in one instance, and not reused in another, data on the other hand, can be used simultaneously. The same data that a loyalty card company uses to push offers out to existing customers, can be used by a bank to gain new customers. It’s the same data, just a different application.
As a tangible product, Oil faces high friction, transportation and storage costs. As an intangible product, Data has much lower friction, transportation and storage costs.
This is rather self-explanatory, given that data does not suffer the same costs in ‘transport’ and ‘storage’. This is due to its intangible nature, allowing for easy ‘flow’ between users regardless of its application.
The life cycle of Oil is defined by process: extraction, refining, distribution. The life cycle of Data is defined by relationships: with other data, with context and with itself via feedback loops.
Data is only useful if it is meaningful. Data is being mined continuously, and the future of this data is based on its application in the real world. Since data can be vast and complex, filtering data based on context, and using feedback solutions to further ‘refine’ it is what makes the cycle of data different, and yet in some ways similar to that of oil.
What are your thoughts on the discussion that Data is the new oil? Let us know in the comments below.