Why Data Standards Matter

Key Takeaways

  • Data becomes significantly more valuable when it can be linked to other datasets through shared join keys.
  • Standards succeed through adoption, not perfection. “Good enough” and widely used beats technically flawless.
  • Effective standards are SIMPLE: storable, immutable, meticulous, portable, low-cost, and established.
  • Open, low-cost standards lower barriers to adoption and accelerate ecosystem growth.
  • Lasting standards act as platforms that unlock value for entire industries, not just their creators.

Learn more about running a data business on our new podcast, World of DaaS.

DaaS Bible 2.0: How Standards Increase Data Flow and Benefit Everyone

Data is all the rage these days. Yes, we’ve heard that it is the new oil.

But a single dataset on its own has limited value. The real value from data comes from connecting it across multiple disparate datasets. To accelerate the connecting of data, it is really helpful if data producers and data consumers agree on a common standard.

In this piece, we will dive into:

  1. How to make data more valuable
  2. What makes a good standard
  3. What standards have worked well in the past
  4. How new standards in the future can accelerate collaboration around data

If you want to stop reading right now, the tl;dr is:

  • Linking data to other data makes all the data more valuable
  • Standards (also known as join keys) are the most valuable ways to link data together
  • Good standards are platforms that create value for everyone (because everyone uses the standard)
  • Successful standards have some common traits both in product design and go-to-market execution
  • Perfect is the enemy of the standard — it is better to focus on something that is good-enough
  • Metcalfe’s Law also applies to standards: the value of the standard increases exponentially with adoption
  • Non-openness and collecting rents impede the success of a standard, because it impedes adoption
  • Standards should be SIMPLE

Join keys are the secret to connecting datasets.

Join keys are really valuable. They are just simple connectors that make it super easy to take many different datasets and bring them together.

If you are an investor trying to value a dataset, the easiest thing you can do is first recognize how many join keys there are in this dataset that can allow end-users to bring in additional data.

By definition, join keys are derived. They’re also fairly simple, and as a consequence, also imperfect. Join keys get their power not from solving every problem or working on every use case, but from the fact that they are used by many other organizations. Remember Metcalfe’s Law? The more organizations that use the join key, the more valuable it is.

Data Is Most Powerful When It’s Standardized

Case study: Unix time as a standard.

Unix time is a standard convention around time. It is represented by a simple integer that is the number of seconds since January 1, 1970. To reiterate, the power of Unix time is that everyone else uses it. This means applications and computers all over the world can easily share and receive information about time.

Case study: the Meter and measuring distance

The meter has conquered the world (at least everywhere except the United States) as the standard for measurement. Like all standards, the meter isn’t perfect. Its main reason for success is that everyone else has adopted it.

To standardize a data set, it helps to be Free, Open, and Usable.

One of the advantages of Unix time and the meter is that the standards are free and open. It is much easier for something to become a standard if it is free and open because the barrier to adoption is low.

Case study: FICO® Score as standardized data.

The FICO Score has become a standard to measure the overall likelihood that someone will repay a loan. The FICO Score is simple and storable, making it a very good predictor of a person’s ability to repay a loan.

Standards unlock massive value for the networks that use them.

Standards create a common language to foster communication. They are both the glue that connects datasets together and the grease that make data flow between organizations.

Standards accelerate collaboration around data

The easier it is to join data, the more data will be transacted, moved, and used. The more connected a dataset is to other data elements, the more valuable it is.

What makes a great standard?

The very best standards act as join keys that unlock data in multiple datasets. Data becomes much more valuable the more additional datasets it can be joined to.

The best join key standards are SIMPLE.

The SIMPLE acronym for data companies helps guide the creation of a universal identifier that is:

  • Storable.
  • Immutable.
  • Meticulous.
  • Portable.
  • Low-cost.
  • Established.

Some ideas on creating a standard in your industry

If a standard does not already exist in your industry, it might be a good idea to help create one. Here are some ideas:

  • Your standard should lift all boats.
  • Your standard should be low-cost.
  • Your standard needs the support of industry competitors, regulatory bodies, etc.

When standards disappear, entire ecosystems can die.

Once standards get going, it is important that they last. If they do go away, it is important there is a reasonable replacement.

Adding standards is hard ... and humbling

The more the standard is SIMPLE, the higher chance it has of success. But that does not mean it will be easy to achieve ubiquity.

Your standard should be built to exist forever

Creating a standard is really hard. The chicken-egg problem exists tenfold when one is developing a standard. Your standard should be thought of and built so that it will last forever.

Your standard may need to continually adapt

Some standards require evolution and improvement, while others can be more stable. The more your standard is in the “set it and forget it” camp — the more you need to get it correct.

Make your standard SIMPLE.

If you want to create a standard, try to keep it as SIMPLE as possible. The perfect is the enemy of the standard.

FAQ’s

  1. What is a join key in data?
    • A join key is a shared identifier that allows different datasets to be connected.
  2. Why are data standards important?
    • Data standards create a common language across systems.
  3. What makes a good data standard?
    • A strong standard is widely adopted, easy to store and use, stable over time, low-cost, and simple enough to integrate into existing systems.
  4. Why is adoption more important than perfection in standards?
    • A technically perfect system has little value if few people use it.
  5. How do open standards benefit data ecosystems?
    • Open standards reduce friction, increase participation, and encourage innovation.