Information services businesses (Info services businesses) which continually innovate to go deeper into their core customers’ workflows create the most long-term value. We refer to this as “true value creation” – continuous innovators who focus on this achieve Net Retention Rates (NRR) of over 110%, with each percentage point increase in NRR leading to a 7% increase in enterprise value.
Significant opportunities to create value in information services
Subscription Info services businesses exist in almost every industry vertical, and their purpose is to make their customers more successful by helping them achieve at least one of three outcomes:
- Revenue growth
- Increased efficiency
- Reduced risk
Info services businesses tend to have features which make them uniquely positioned to create value for their customers. They typically:
- Address one of their customers’ core activities: for example, all kinds of capital allocation, private markets fundraising, media buying, financial and commodity trading, and the practice of Law.
- Have proprietary datasets or solutions.
- Require sector/vertical specialist approaches.
- Address high-value or complex decisions, which means they can generate clear and tangible ROI.
This combination of factors can create businesses with strong market positions and often with significant potential for value capture, i.e. effective capturing of the value already generated for users, for example, through pricing, go-to-market optimisation, market penetration and maximising usage.
After analysing the aggregated revenue data of a group of businesses over three years, we discovered that the group’s revenues had increased by two-thirds. It was found that over half of this growth was driven by value-capture activities.
True Value Creation comes From Going Deep
Based on the same analysis, true value creation represented only 20% of growth. If there is one consistent insight from Plural’s work in the sector, it is that there is nearly always potential to go deeper with core customers. Info services businesses can underestimate the potential to do even more for these customers: solving more of their problems, addressing adjacent needs and ultimately becoming a decision-making companion.
This unlocks more economic value for the customer and, therefore, more value to capture. Information services markets are supply-driven: leaders in information services grow their markets by identifying and addressing unmet or underserved needs, helped by the increased supply of data, tools, and technologies (e.g., GenAI).
Info services businesses should ask themselves: if ARPC (average revenue per customer) is £10k, how can you get it to £50k? If it is £100k, what’s the route to £1m, then £2m, £5m +?
This approach then creates a virtuous circle of value creation, value capture, increased profits and growth, which can then be reinvested in and unlock the next wave of value creation (which can be accelerated through M&A). For example, increasing data depth, frequency, and granularity can unlock the opportunity for more predictive and analytical activities, in turn unlocking the opportunity to build or acquire tools to support these activities.
To test this thesis, we asked over 40 senior leaders in Info services, “What are they prioritising for growth and value creation?”. The answer was very clear: new products and deeper relationships with existing customers.
This is not to say that value capture and market penetration are not important. New logo capture and market education are critical capabilities with the level of focus depending on the business’ maturity. But all information services businesses should adopt a “going deep” mindset.
What do businesses need to go deep?
The starting point is to truly understand, from customers and users, how deep you can go. This requires building a view of:
- What are the customer’s current and future challenges, and what other data do they need?
- What are your core user’s main activities and use cases, and what are the data gaps and unmet needs?
- What are the inefficiencies in their functions and workflows that we can address?
Leaders in information services should then seek to define and quantify the value they can unlock for users and identify the core for whom this is most relevant. This should drive the product roadmap, the tech and platform strategy, the GTM strategy, and the M&A strategy that can accelerate it or unlock new growth pathways.
In this industry, more than anything, a deep “customer-first” strategy is critical, with a clear impact on enterprise value for those who achieve it.
Find out more about our Value Creation in Information Services event here.
