Understanding the value of information as a business asset

Dr Hanlie Smuts

DECISION makers at all levels devote substantial e orts to making appropriate and applicable organisational decisions. Theorists and practitioners alike consider decision-making to be a core managerial function and as business decisions must often be explained, the best motivation for this is to have reliable and consistent supporting information that shows historical trends that may be applied to predict future business outcomes.

When considering these outcomes, then it is suggested that an organisation should design its structure and business processes to facilitate information processing and enable an information processing capability. When an organisation accesses accurate and complete information about the interrelationship between choices and consequences, then the organisation will be empowered to generate viable organisational strategies and ultimately enhance organisational performance!

Of all the organisational resources such as people, fi nances and fi xed assets, information is hardly ever included and probably the least well managed - if an organisation managed their fi nances as poorly as their information, they would probably be out of business. Traditional assets have application and transactional limitations which means they cannot be used simultaneously across multiple use cases or physical locations; fi xed assets’ value decreases with usage.

However, information assets are not impacted by these limitations, in fact, its value increases as it is applied and processed more, shared and manipulated. As information broadly meets the accounting defi nition of an asset, it is worth taking a closer look.

Information, a misunderstood asset

The organisational approach that measures the value of information by recognising, accounting and handling data as a business asset, is referred to as infonomics. Furthermore, organisations consider ways to optimally monetise the insights hidden in the data.

They achieve direct monetisation through creating an information based marketplace and indirect monetisation by extracting value from information which informs the business and generates value within the organisation. Information drives these business processes and decisions.

Gartner defines infonomics as “the emerging discipline of managing and accounting for information with the same or similar rigor and formality as other traditional assets and liabilities (such as financial, physical and intangible assets and human capital)”. Infonomics is the economics of information and it is increasingly inevitable for organisations to treat information as a real asset.

Account for information as an asset

Infonomics provide organisations with a foundation and methods for quantifying information asset value and formal information asset management practices. Infonomics posit that information should be considered a new asset class in that it has measurable economic value and other properties that qualify it to be accounted for and administered as any other recognised type of asset.

There are significant strategic, operational and financial reasons for doing so. In his work on Infonomics, Douglas Laney shared six information valuation models - three focused on non-financial valuations and three on financial evaluation models.

Non-financial information valuations

• Intrinsic Value – How accurate, comprehensive and exclusive is this information?

• Business Value – How e ective and relevant is this information for specifi c business purposes?

• Performance Value – How does the information a ect strategic business drivers?

Financial information valuation

• Cost Value – How much did it cost to collect the information and what would it cost to replace if lost?

• Market Value – What could the business get from trading, bartering or selling this information?

• Economic Value – How does this information contribute to revenue and expense savings?

Regardless of what financial reporting standards may dictate, quantifying the value of information assets offers a range of benefits to the organisation.