The Vertical Integration of Knowledge

Vertical integration typically refers to the degree to which an organization owns (or controls) its own suppliers and/or consumers of its products or services.  The more vertically integrated an organization, the more of the value chain they control.  There are benefits to vertical integration including the ability to more closely match supply and demand, thus better controlling pricing and reducing uncertainty.  Detriments include more difficulty changing to suppliers who may offer competing raw materials at lower costs.

Vertical integration of knowledge, the way I’m defining it, similarly refers to the degree to which an organization obtains facts about their marketplace, and the extent of the value chain that was used to derive that knowledge.  Vertical integration of knowledge doesn’t require owning or controlling companies either upstream or downstream; it simply requires an agreement to collect data from organizations up or down the value chain.

For example, the company Above The Treeline collects sales data from independent booksellers and makes that information available to publishers, distributors, reviewers and librarians across the country.  While the purpose of the company was originally to help independent booksellers analyze their own sales and compare their sales to industry averages, the company now also provides vertically integrated knowledge (and collects revenue from providing that value) to:

• book distributors, who previously could only track sales only until booksellers bought books for their stock, and
• publishers, who previously could only track sales until distributors bought books.

Think of how the knowledge now available to these two groups can help them better manage their own businesses.  Now they can see when books were bought, if they were bought in specific combinations, how sales and incentives impact sales performance, and explore a variety of other factors.

At Dataspace we’re not only technologists, we’re strategists.  Talk to us about the data you have available (either from your systems or up/down the value chain), and we’ll work with you to integrate it, format it, and turn it into a strategic asset.  Who knows – you may even be able to sell it.

How can you use the concept of the vertical integration of knowledge to benefit your business?