Putting a value on your company information

In this age of digital transformation, it is obvious that the information assets of an organization are increasing, but putting a value on something so seemingly intangible isn’t easy – especially as information is fluid and doesn’t behave like other assets.

Data is growing at a mind boggling rate. Analyst firm IDC predicts that the digital universe will reach 40 ZB (40 trillion GB) by 2020, an amount that exceeds previous forecasts by 14%. A key driver, according to IDC, is machine generated data, which is forecast to grow from 11% of the digital universe in 2005 to over 40% in 2020. At the same time, the consumerization of IT, increased use of mobile and cloud, and the dawning of the Internet of Things, are adding to the data mountain.  The way we view information has changed forever.

Many enterprises believe that the data and information they hold on customers and prospects is key to the success of the business. Actionable insights drawn from the data are central to business decision-making and retaining a competitive edge.

You would therefore think that information assets would be assigned a value.  But the reality is that information is not yet viewed as an asset by accountants or as property by insurance companies.

Re-balancing the scales

Doug Laney, research vice president for analyst firm Gartner said that back in 1975, on average the tangible assets of a corporation represented 83% of its value. Today that number is 20%. As a result, over 50% of merger and acquisition exchanges can’t be accounted for.

Take for example the Microsoft acquisition of LinkedIn earlier in 2016. The tangible and intangible assets come nowhere close to the $26.2 billion the software giant paid for it. How can there be such a chasm between the accounting value of a company and its market value?

I put this unbalance down to our inability to properly value and measure the value of information assets within an organization. This is spotlighted in the growing gap between what we report about companies and what we inherently know about them.  This is linked to the way we continually undervalue investments companies make in processes to mine, optimize, protect and utilize information to create customer value and grow the business.

The big question is when will information formally get recognized as actually having a value on the balance sheet?

Infonomics as a discipline
Infonomics is a label that has been given to a discipline that examines information as an asset and treats it accordingly.

Earlier this year, AIIM brought together a number of leaders in information management from North America and Europe in two Executive Summits to discuss why information assets are not being managed with the same gravity as financial, physical and human assets and.  It also debated why ‘infonomics’ is seen as a difficult discipline to grasp by many.

You can’t manage what you can’t measure

It became clear that it is imperative that standard models to measure information are introduced as a matter of urgency in this digital age. But two major hurdles stand in the way: how to measure the value of information you don’t control and understanding that it can only realistically be measure in the context in which it is being used.

Laney believes that infonomics should be about incorporating the realized value of information, the probable value of information, and the potential value of information. Thus it isn’t about the actual value of the information itself, but the difference in value measured by all three of these indexes.

But, even global giants whose business models are built on data, such as Google and Facebook, don’t give information a separate line of its own. But it seems the market puts a premium on businesses that put a real value on information. These organizations such as Google, are often tagged with a high stock price.

The truth is that assigning a value to information just isn’t easy. Everything an organization does involves information in some way. But its value to one person may not be the same as to another.  The value of the information is in how useful the person finds it – and here lies the dilemma.

Moving forward

It will probably be some time before information appears as a corporate asset on the balance sheet. Organizations may be behaving as if information has a value and it is certainly on the agenda – although perhaps not high up enough – of forward-thinking CTOs.

The volume of information is only going to increase, along with its importance to organizations. So with an increased dependency on data and investment in tools to mine, analyse and secure it, it is vital for business to come up with a pragmatic way of valuing information.

Continue to examine this critical topic at: www.aiim.org

 

John Mancini

President at AIIM
John Mancini is an author, speaker, and respected leader of the AIIM global community of information professionals. He believes that in the next five years, a wave of Digital Transformation will sweep through businesses and organisations, who will face a fundamental choice between Information Opportunity and Information Chaos.

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About John Mancini

John Mancini is an author, speaker, and respected leader of the AIIM global community of information professionals. He believes that in the next five years, a wave of Digital Transformation will sweep through businesses and organisations, who will face a fundamental choice between Information Opportunity and Information Chaos.

Comments

  1. There is a danger to pushing for inclusion of the “value of information” as a formal component of a company’s balance sheets. Unless the company is actually buying and selling information, there is really no way to separate information value from the value of the outcomes of decisions made and actions taken based on the use of information.

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