Why See Data as an Asset?
Even at a simple level, information helps a company make decisions. A retail store would have no idea what stock to order without a basic inventory list. With a bit more knowledge of the brand’s sales history, the store can devise what items sell best and at what price point, as well as what promotions are most successful and even the best locations to open new stores.
Information is a road to economic success if harnessed and used correctly, and infonomics, defined as “the theory, study and discipline of asserting economic significance to information” (Pettey, 2017), helps a company to value and use information as an asset.
Companies are learning the importance of data as a valuable business asset – A history of making informed and well-supported decisions is well-favoured by investors and financial analysts for extra funding or valuation, and also leads to actions with more accurate results. Strategy is key in making effective business decisions, and basing decisions on historical data increases accuracy and offers a way to measure their effectiveness by creating metrics to compare human or machine decisions with key business objectives.
Businesses always need to balance risk assessment with the opportunity for success and competitive advantage. Information allows businesses to analyse the risk and potential hazards an innovation or strategic decision may pose. Similarly, data can predict the benefits an innovation can offer, including growth prospects, and financial success.
A popular way companies are generating and using data as an asset is via the Internet of Things (IoT) – this is a network of objects with the potential to invoke change within themselves or the environment though sense or communication (Pettey, 2017). IoT opens up a whole new realm of opportunity for both data collection and application in every industry. Farmers are now able to use ‘smart pills’ to study and analyse the health of their cows to ensure they are in prime health in order to maximise sale prices and ensure healthy calves. Mining companies, on the other hand, are adding sensors to their machinery to minimise downtime and increase performance, safety, and operating conditions (Heppelmann, 2014).
Companies can also further increase efficiency by communicating and responding to data in real time. Wind turbines can be designed to respond to changes in the wind strength and direction to maximise power generation, boosting production by up to 20% (Bughin, Hazan, Ramaswamy, Chui, Allas, Dahlstr.m, Henke, Trench, 2017). This information is fed back to power companies, who can follow in real time how much energy is being produced and accurately predict how much power will need to be sourced from fossil fuels to avoid creating excess energy and pollution from non-renewable sources. In the coming years, mastering IoT objects will be a way to guarantee high performance and business outcomes.
The first step to using information as a value-adding asset is to properly value it for its’ full potential while beginning to measure and track every source possible. Gartner has created the following infographic focusing on six different areas that can draw value from data, which is helpful in identifying how the data should be used (Levy, 2017):
Large organisations are now instating a Chief Data Officer (CDO) to lead the process of transforming data assets into actual enterprise assets – this is done by monetising data through optimising the information available to a company and finding new data sources to incorporate. Gartner predicts 10% of businesses will have a designated unit for commercialising information assets by 2020 (Pettey, 2017).
While valuing data as an asset sounds like a complex process for large multi-national organisations, let’s go back to the example of the retail store deciding what stock to order. Information insights are valuable for even the smallest businesses, and backing decisions with data is imperative to growth and success.
Bughin, J, Hazan, E, Ramaswamy, S, Chui, M, Allas, T, Dahlstr.m, P, Henke, N, Trench, M 2017 Artificial Intelligence: The Next Digital Frontier? McKinsey Global Institute
Levy, H 2015 Why and How to Value Your Information as an Asset, Gartner <https://www.gartner.com/smarterwithgartner/why-and-how-to-value-your-information-as-an-asset/>
Heppelmann, J December 2014 How the Internet of Things Could Transform the Value Chain McKinsey & Company <https://www.mckinsey.com/industries/high-tech/our-insights/how-the-internet-of-things-could-transform-the-value-chain> [interview]
Pettey, C 2017 Treating Information as an Asset, Gartner <https://www.gartner.com/smarterwithgartner/treating-information-as-an-asset/>