The value of information can be many things – monetary, evidentiary, historical – and means more than how much it costs to buy, or the £ amount for which it can be sold. Businesses today are increasingly ‘information centric’ with data and information management playing a pivotal role in successful business models. Some models are founded solely on data collection, value addition and sale. ‘Recordkeeping’, as a separate activity performed by intelligent people in quiet shoes, is being replaced by cultures where robust and efficient information management processes underpin all business activities. Interestingly however, despite the strategic role that information plays in modern businesses, it is still difficult to practically account for information as a business asset.
The valuation of information is an emerging discipline that provides an opportunity to gain competitive advantage; companies that don’t invest in their information in the coming years, may experience greater business hurdles than those that acknowledge their information holdings as a valuable asset.
Studies of the production and consumption of information, and the transfer of money to produce, sell or obtain it, can help determine a baseline value for information. This is known as Infonomics; the economics of information. Infonomics enables the measurement of information value over time and helps put a price tag on data, turning what was previously considered to be a by-product of business operations into a corporate asset.
Infonomics, despite its high-falutin’ academic credentials, can be simplified into six areas which will help any organisation understand the value of their information holdings. The methods focus on three non-financial or non-economic value calculations, and three financial methods that use established accounting methodology.
The intrinsic value of your information – This method quantifies data quality by asking the question “How good and easy to use is the data versus how likely are others outside the organisation to have it?” Information unique to your organisation and not available to your competitors has the potential to provide greater value to you. This is the presumptive value of information enabling apples-to-oranges comparisons in business.
The business value of your information – This method assesses value and characteristics such as information accuracy and completeness, and how applicable to the business or a particular business process is it? It seeks answers to questions including “How quickly can fresh data be supplied to the point of the business process”?
The performance value of your information – This method assesses the value of information to business objectives represented as key performance indicator (KPI) targets: “How much does having a unit of information incrementally contribute to moving closer toward all KPI targets over a given period?” An example of this method would be the value of competitor pricing information to your company sales.
The loss value of your information – This method measures the cost of not having information: “What would it cost to replace the data, and what is the financial impact to the business if the data were lost over a time period?” A replacement cost is assigned to the information which is a common methodology for measuring the value of intangible assets.
The economic value of your information – The bottom-line financial value for the information asset and how the asset contributes to the revenue of an organisation. Using the sales example again, it would consider the revenue generated by a given salesperson with competitors’ pricing data (as opposed to assessing the length of time per sale which is the performance value). Consideration must be given here to the cost of acquiring, administering and applying the information as well as the information’s lifecycle (competitor pricing information for example has a shelf life)
The market value of your information – The income that can be generated by selling, renting or bartering information, which is often considered to be one of the best ways to measure the value of an information asset. “How much is a business partner willing to pay for access to this information”?
With information increasingly considered a strategic asset that plays a key role in driving businesses, and emerging as a market in itself, organisations need to re-assess how they value their information. The availability of accessible evaluation approaches will enable businesses to measure the current and future value of their information assets; information projects are more likely to gain support from senior management if a return on investment is easier to define.
Information valuation is emerging as a key area of study which will evolve over time, however, businesses should begin now to consider valuation opportunities and gain a better understanding of corporate valuations that guide information based investments for improving performance.