Imagine a retail manager with no record of his store’s inventory and no way to gauge its value. Or consider a CFO who has no record of her company’s financial assets nor their value. Or an HR executive with no company directory, employee ratings nor compensation data. That’s the state of information management in most organizations today.
Business leaders and IT executives increasingly wax about how their company’s information is one of their most important assets. Research from Gartner, KPMG and others has shown how significantly investors and financial analysts favor information-savvy and information-centric companies. However, information is not recognizable as a balance sheet asset – even though information meets all the criteria, according to Douglas Laney, vice president and distinguished analyst at Gartner. “We are in the midst of the Information Age, yet information is still considered a non-entity by antiquated accounting standards,” he said.
This lack of formal recognition manifests in most organizations that collect, manage, deploy and value their information with far less discipline than they manage traditional balance sheet assets. Accountants and valuation experts lament the challenges in valuing a company today without any data on its data. Mr. Laney shared, “The head of information strategy for a major government institution proclaimed to me, ‘We have a better accounting of the toilets in the building than our information.”’
The “Infosavvy” Organization
In order for an organization to become information-savvy, it must begin by internally recognizing information as an actual asset. The old adage goes, “You can’t manage what you don’t measure,” and organizations need to start inventorying and measuring their information assets.
How do you quantify the value of information? You can start by using well-honed and established methods for valuing other kinds of assets. On the other hand, you may not (yet) be ready for, or interested, in financially valuing your information. In that case, consider metrics that assess information’s quality characteristics, business relevance or impact on non-financial performance indicators.
Gartner, in collaboration with clients, valuation experts, accountants and economists recently introduced the following six formal information valuation models—each with a different purpose. Some are financial measures while others are foundational metrics. Some are leading indicators, while others are trailing indicators.
The models include guidance on how to implement and adapt each, and they identify each of their benefits and limitations. The financial models, adapted from the established asset valuation approaches, accommodate some of information’s unique characteristics, namely: information’s non-depletability and multiple licensability.
Next Steps on the Road to Information Centricity
Accounting for information is just the start. Infocentric and infosavvy organizations, ideally under the leadership of a chief data officer (CDO) and other executives, must use these measures to change their culture, make information-related decisions, and apply well-established asset management principles and practices to managing their newly anointed information assets.