Industry analysts thrive on predicting IT’s future, but they are often accused of over-hyping the latest concepts. One of the best sessions at this month’s Gartner BI and Analytics summit focused on a surprisingly under-hyped concept: infonomics.
Quantify Your Information Assets
According to Gartner Research VP Doug Laney, infonomics is the study of the way valuable corporate data is used to further the business—specifically, the best ways to use it. Laney explained to a mixed audience of business and IT attendees that while 90 percent of surveyed executives list information as one of their most important competitive assets, fewer than 10 percent of them actually quantify it. Stranger still, Gartner found that only 30 percent of chief data officers surveyed actually quantify their information assets.
One exception that Laney cited was the U.S. grocery chain Kroger, which is a prime example of how to gain bottom line revenue by becoming info-centric. Kroger is generating more than $100 million in incremental revenue per year by selling its data—point-of-sale data, inventory data, seasonal sales data, and more. In doing so, Kroger has essentially become a syndicated data provider to its industry.
Protecting Precious Information
Prior to the 9/11 tragedy of 2001, most businesses outside of data brokers didn’t even consider the value of their digital assets. When the businesses inside the World Trade Center lost all of their data, they filed claims under their property and casualty policies. To their surprise, insurance carriers often denied claims, arguing that information assets didn’t constitute property.
That led to lawsuits, counter-suits, and court decisions that produced a mixed bag of court precedents, leaving digital assets largely in legal limbo. Only one month after 9/11, the standard templates used for property and casualty insurance policies were modified to exclude information as an asset. International accounting standards were also modified to prohibit the capitalization of information on balance sheets.
“While 80 percent of business executives surveyed by Gartner think that their information assets are listed as intangible assets or somewhere else on their balance sheets, they are in fact not listed on balance sheets,” Laney told the Gartner Summit audience.
On the positive side, companies that do quantify the value of their data as information assets, which Laney calls info-centric businesses, reap major returns on their corporate valuations—up to three times the norm. Yet, Laney continued, companies like Moodys, Dunn & Bradstreet, and Trip Advisor, which actively package and sell their information, enjoy more than four times the norm.
“Information as product has fascinating characteristics,” said Laney. Specifically, it has no inventory costs, no transportation and distribution costs, and it can be sold and consumed over and over again.
Gartner recommends that as a first step toward measuring and improving the value of its data assets, companies should assess the probable and future economic benefits of those assets. This is best accomplished by finding innovative uses for the information they own, creating a common language between IT and C-level executives, and considering using information assets as collateral and in the M&A valuation process.
While leading companies like Kroger, Nielsen, Dunn & Bradstreet, and others are successfully capitalizing on their stores of information, there are hundreds of others that haven’t recognized the value of what they have, never mind how to monetize it.
Yet, like all true-blue (Gartner) analysts, he couldn’t resist a prediction before the session concluded. Laney predicted that in the process of converting data into corporate assets over the next few years, IT itself will be split into separate information and technology organizations. In the same way chief data officers were formed out of the need to manage data across enterprises, IT will put greater emphasis on information stewardship.
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