Editorial
Information has been referred to as today’s digital currency. Without it, both tech and non-tech enterprises would struggle to exist.
Yet it still isn’t recorded on balance sheets and is — in general — ignored by insurance companies.
A Growing Asset, with No Assigned Value
Businesses are operating in an age of big data, and that data is ever growing. Market research analyst IDC predicts that we will produce an eye-watering 40 zettabytes (40 trillion GB) of information by 2020.
Information is a key part of digital transformation. Forrester data recently predicted that big data technology is in for a further growth spurt. The analyst firm found that almost 40 percent of firms are implementing and expanding big data technology adoption this year, whilst another 30 percent are planning to adopt big data in the next 12 months.
The consumerization of IT, cloud, mobile technology and the Internet of Things (IoT) and Industrial Internet of Things (IoT) are all driving data growth and change. Information has become a powerful tool in understanding customers, their behaviors and expectations, enabling companies to better cater to and anticipate their needs.
A Forbes Insights report found that “everyone is investing in big data analytics.” Of those it surveyed who identified big data as the single most important way to gain competitive edge, more than 80 percent were investing heavily in data analytics, data acquisition and storage.
But the stark truth is that few are taking this investment in information into account and assigning it a value as a company asset on the balance sheet.
Discord Between Valuations and Value
We have to move away from the guessing game that is involved in measuring information. You only have to look at today’s asset sheets and market values to see this.
According to an annual asset market value study by Chicago-based intellectual property merchant bank Ocean Tomo, in 1975 on average the tangible assets of a corporation represented 83 percent of its value.
Today that number is 20 percent.
As a result, more than 50 percent of merger and acquisition exchanges can’t be accounted for.
Take the recent Microsoft acquisition of LinkedIn. Compare the value of LinkedIn — its tangible and intangible assets — and the price paid by Microsoft, $26.2 billion. It's a big disparity.
Clearly Microsoft saw the information value. As did IBM with its purchase of The Weather Company the year before. At the time the tech behemoth had pundits scratching their heads, but with plans revealed that IBM is going to incorporate it into big data and learning tools to help retailers make critical pricing and buying decisions, it all makes sense.
Information is where it's at.
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Today, there is no correlation between market valuations and a company’s own book value because unvalued information assets don’t appear on the balance sheets. It seems to me that this discord is a direct result of our inability to measure and value the information assets a company holds.
This just doesn’t show up in market and own-company valuations. It is also consistently undervaluing investments companies make to optimize and protect their information assets.
Putting a Price on Information
Infonomics is a word that has been coined to define the discipline of measuring and valuing information assets. Gartner analyst Doug Laney is adamant that for an organization to become information-savvy, it must first internally recognize information as an asset.
The goal for monetizing information is to somehow bridge the chasm between its realized value and its potential value. Quite a conundrum.
To discuss the role of infonomics and why organizations haven’t grasped the necessity to manage their information assets in the same way as their physical and human assets, AIIM brought together heavyweight industry leaders from the likes of Shell, Accenture and Gartner to debate the issue.
One thing became clear: standard models to value information are needed as a matter of urgency.
As Randy Krotowski, VP and CIO emeritus at Caterpillar so concisely put it, “Measurement is critical. When you invest based on your belief in the importance of something, you don’t achieve anything. Value is contextual. Value can be calculated. You can calculate the value of anything.”
Although IP is taking up a larger chunk of organizations’ balance sheets and universities, such as The University of Maastricht in the Netherlands, are running courses on infonomics, we still have a very long way to go.
What we need is an effective and standardized methodology for valuing information. Until that happens I can guarantee you won’t see a column for "information assets" on balance sheets anytime soon.
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