{"id":8164,"date":"2016-01-08T14:55:58","date_gmt":"2016-01-08T19:55:58","guid":{"rendered":"http:\/\/www.iri.com\/blog\/?p=8164"},"modified":"2021-02-16T12:23:48","modified_gmt":"2021-02-16T17:23:48","slug":"infonomics-and-you","status":"publish","type":"post","link":"https:\/\/beta.iri.com\/blog\/iri\/business\/infonomics-and-you\/","title":{"rendered":"Infonomics and You [video]"},"content":{"rendered":"

Information is the commodity of the 21st Century, and data has inherent economic value. But because information is not recorded on balance sheets, it is often overlooked. And yet, one cannot discount the fact that big data has created industries worth even more than big oil.<\/p>\n

Although accounting and insurance firms largely fail to factor the value of data, information leaders are increasingly realizing that data — even in traditional, non-technological companies — is worth substantial sums. The Kroger Company, for example, which operates the second largest supermarket chain in the United States by revenue, generates \u201c$100 million a year in incremental revenue by selling its supermarket point-of-sale data on a subscription basis to consumer packaged goods companies,\u201d according to TechTarget.<\/p>\n

\"Economics<\/a><\/p>\n

Source: Denver Regional Council of Governments<\/em><\/p>\n

Infonomics Defined<\/strong><\/p>\n

Infonomics seeks to assign an accurate worth to data assets. As a term, infonomics is just the portmanteau of information and economics, and defined by the capture of real, demonstrable, and asset values of data. The word was coined in the 1990s by now-Gartner research VP, Doug Laney, who continues to develop the field of infonomics as a discipline.<\/p>\n

Laney created seven principles that govern the specialty of infonomics:<\/p>\n

    \n
  1. Information is an actual asset.<\/li>\n
  2. Information has both potential and realized value.<\/li>\n
  3. Information\u2019s value can be quantified.<\/li>\n
  4. Information should be accounted for as an asset.<\/li>\n
  5. Information\u2019s realized value should be maximized.<\/li>\n
  6. Information\u2019s value should be used to help budget IT and business initiatives.<\/li>\n
  7. Information should be managed as an asset.<\/li>\n<\/ol>\n

    According to the financial advisory firm Ocean Tomo<\/a>, the market value of the S&P 500\u2019s intangible assets rose from 17% to 84% of total assets between 1975 and 2015. Although Ocean Tomo anticipates the discrepancy will become marginally more balanced over the next decade, the dominance of intangible assets (not even including the unreported information assets) cannot be dismissed.<\/p>\n

    \"\"<\/a><\/p>\n

    \u201cWithin the last quarter century, the market value of the S&P 500 companies has deviated greatly from their book value. This \u2018value gap\u2019 indicates that physical and financial accountable assets reflected on a company\u2019s balance sheet comprises\u00a0less than 20% of the true value of the average firm.\u201d \u00a0— James Malackowski, Chairman, Ocean Tomo<\/p><\/blockquote>\n

    Laney\u2019s observations affirm the value gap that Malackowski addresses. He illustrated this point with Facebook (an S&P 500 company), which had a market valuation in 2012 of approximately $100 billion, compared to the less than $7 billion the company reported. Likewise, that same year, LinkedIn had a book value of $1.38 billion (according to the Centre for Economics and Business Research), which was notably less than the company\u2019s own valuation of roughly $20 billion. It should be made clear that these gaps are not recorded on company balance sheets. Rather, they exist largely in the unvalued information assets enterprises hold.<\/p>\n

    Infonomic Methods<\/strong><\/p>\n

    The goal for monetizing information is to close the gap between realized value and its potential, but untapped, worth. Laney named six ways to exploit the potential of information, and divided them into two categories:<\/p>\n\n\n\n\n\n\n
    Foundational<\/strong><\/td>\nFinancial<\/strong><\/td>\n<\/tr>\n
    Intrinsic Value of Information<\/td>\nCost Value of Information<\/td>\n<\/tr>\n
    Business Value of Information<\/td>\nEconomic Value of Information<\/td>\n<\/tr>\n
    Performance Value of Information<\/td>\nMarket Value of Information<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

     <\/p>\n

    The foundational category does not evaluate the monetary worth of information, while the financial category does by measuring information and comparing it with established accounting principles.<\/p>\n

    Foundational Methods<\/strong><\/p>\n

    Intrinsic Value of Information\u00a0examines the inherent worth of information. It looks at the quality of data and measures it against various criteria like accuracy, reliability, accessibility, and scarcity. An information asset competitors are less likely to have will have a greater intrinsic value to an organization. A simple assessment would be, \u201cHow good is the information?\u201d<\/p>\n

    Business Value of Information\u00a0evaluates data against business processes. An enterprise will decide which metrics to weigh, and analyze similar criteria to the intrinsic value method. However, this incorporates a business-oriented criterion, like timeliness. Laney posits, in Six Ways to Measure the Value of Your Information Assets, that \u201ceven if data is relevant to a business process, if it\u2019s not timely, how valuable is it really?\u201d<\/p>\n

    Performance Value of Information, as Laney describes, is \u201cmuch more empirical in nature\u201d than the previous methods. Here the evaluation becomes scientific. Data is measured and analyzed on how it impacts key performance indicators (KPIs) over time. For example, the method might examine how information affects customer acquisition or resource procurement.<\/p>\n

    \"\"<\/a><\/p>\n

    Source: Gartner<\/em><\/p>\n

    Financial Methods<\/strong><\/p>\n

    Cost Value of Information\u00a0measures how much it would cost an organization to acquire (or lose) specific information. This is the same way intangible assets with no market value are evaluated.<\/p>\n

    Economic Value of Information\u00a0is a KPI method that examines how information assets produce revenue for an enterprise. Equally, the cost to acquire and maintain an information asset, as well as its lifespan, must also be factored into the economic value calculation.<\/p>\n

    Market Value of Information\u00a0is the revenue created through the barter, trade, or sale of information, and only applies to that which can be marketed as such. Although most data does not have a market price, an organization can observe for how much competitors sell similar information. Laney notes the primary value lies in \u201ctracking over time\u201d — monitoring the value of information as it is distributed. As it is licensed rather than sold, the less scarce an information resource is (the more it is bought and used), the less valuable that resource becomes.<\/p>\n

    The Influence of Infonomics<\/strong><\/p>\n

    While assessing the value of information is difficult, it holds great worth for organizations. The economics of information needs to become a widespread, legitimate discipline to address the problem of unvalued information. Though the expansion of the field has been modest until recently, the reliance of global business on information and its utility will necessitate deeper study, especially when digital business becomes the norm for the economic world.<\/p>\n

    The University of Maastricht in the Netherlands has already created a BSc and an MSc program in Information and Network Economics, which it also calls Infonomics. The Facebook URL directly refers to it as such, as does this video produced by the university:<\/p>\n