Dennis D. McDonald ( consults from Alexandria Virginia. His services include writing & research, proposal development, and project management.

Why Measure the Value of an Organization's Information?

Why Measure the Value of an Organization's Information?

By Dennis D. McDonald recently posted an interesting article by John Mancini titled Putting a value on your company information. In it Mancini says,

... it is imperative that standard models to measure information are introduced as a matter of urgency in this digital age. But two major hurdles stand in the way: how to measure the value of information you don’t control and understanding that it can only realistically be measured in the context in which it is being used.

Notwithstanding the real difficulty of measuring the "value of information" so that it can take its deserved place on a company's balance sheet, Mancini's second difficulty is the crux of the problem. The "value" of information, like the value of the structured and unstructured data that underlies it, is dependent on how the information is used. Sometimes that usage is planned, but many times information usage is unplanned or serendipitous. Plus, data and information can be used to support decisions and actions with negative outcomes as well as positive outcomes.

Even if we restrict our definition of "value" to economic value, we are still faced with the need to define what we mean by "information" and "data" given that metrics associated with their use would have to be reliable and repeatable.  Also, most companies don't consider buying and selling information their main business.  

Would it be possible to generate definitions of "information value" that would allow us to compare different companies' balance sheets in an unambiguous fashion? Perhaps that's a question better left to the  the accounting profession.  Discussions of "value" and "utility" can tend to become quite esoteric and academic.

My personal preference is to think of information value from a technology and IT management perspective. Examples of this are described by Gartner's Doug Laney as reported by Nicole Laskowski in Six ways to measure the value of your information assets.

Laney is practical. According to the article, 

The debate over whether data is a true asset won't be settled anytime soon, at least in the minds of insurers and accountants. In the meantime, Doug Laney, research vice president for Gartner Inc., believes CIOs can move forward -- even without their blessing.

The six methods proposed by Laney include:

  1. Intrinsic value. This considers information characteristics (g., currency, quality, timeliness, etc.) on their own, perhaps through a weighting scheme that values some information characteristics more than others.
  2. Business value. This relates data qualities (such as accuracy or currency) to specific business processes.
  3. Performance value.  This involves measuring the relationship between use of information and key business performance measures such as sales (e.g., shortening of sales cycle) and service (e.g., increasing customer revenue by reducing serviced equipment downtime).
  4. Cost value. This relates less to value than to the cost of acquiring or replacing the company's needed information.
  5. Economic value. This will require measuring the contribution that information has on the revenue of the company.
  6. Market value. This is an ideal scheme though it may be difficult to put into effect on an ongoing basis if the company is not already in the data publishing business.

Over the years in my consulting I've touched on most of these models in one way or another, often in the initial stages of project planning and selection where decisions must be made based on project priorities. Publishers of course are familiar with #6 and most companies (and IT departments) take some form of #2 and #3 into account.

Even before we choose a method for information valuation we need to understand why we need to do so. Are we looking for another way to compare companies' performance across an industry? Or, are we trying to select among competing data-intensive IT initiatives the one which will help generate the most revenue for the company? These different rationales may result in selecting quite different methods for calculating information value, starting with the possible need to define "information" in quite different terms.

Perhaps the most problematic aspect of measuring the value of information is how we deal with uncertainty. In deciding how to plan an improvement in how an organization manages and analyzes its information assets, it's not unusual to have to answer the question, "Why should I spend money on this system/project/program/tool if I don't know with certainty how useful the results of this new analytical capability will be?"

This is akin to measuring the value of improved collaboration within an organization; you can't really tell what the results are till you start collaborating and measuring the impacts of collaborating.

Copyright (c) 2016 by Dennis D. McDonald

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