Treating information as a material asset

comment Information is consumed much like any other fuel, material, or financial resource. Treating it as a material asset is not so far-fetched.
Written by Doug Laney, Contributor
commentary Information is consumed much like any other fuel, material, or financial resource--particularly by decision-making processes and individuals. Treating it as a material asset is not so far-fetched.

Although data warehouse technology has matured and established itself as a core IT initiative and mainstream business tool, technical and business planners still struggle with the amorphous nature of information.

Is it a byproduct or product? Is it a material, or merely something that represents material objects and events? How is it consumable yet not depletable? Who owns it, or should it be owned? Moreover, to what extent is it an asset on par with financial or material assets? If so, what do the corresponding set of "generally accepted information principles" and auditing methods look like?

While these questions may be of theoretical interest, economic-imposed practicality through 2004/05 will lead enterprises to focus more on core information-related concerns, such as:

  • What information do we have (not have)?
  • How well is our information managed (e.g., What are its quality characteristics? How accessible is it?)?
  • How well is it leveraged by existing business processes? Conversely, what additional business functions could make use of our dormant information?
  • Leading organizations have emphasized that controlling their value chains while exploiting information resources results in direct bottom-line and indirect business benefits. The automobile, insurance, and consumer product industries continue to demonstrate the value proposition of formal data movement frameworks, with emphasis on external as well as internal information.

    Recently, retailers, financial services organizations, and telecommunications companies have begun applying the notion of information supply chains to express the flow of information from sources to business processes.

    Some respected data management thought leaders, shackled by academic notions, contend that information should not be treated as a material asset in this manner because it is not consumable, and -- unlike tangible assets -- its value cannot increase as it flows though a supply chain. However, our research indicates otherwise.

    Consumption of information
    First, information is consumed much like any other fuel, material, or financial resource -- particularly by decision-making processes and individuals. Information is not depletable in the same way as tangible resources, yet its shelf life is much shorter. Furthermore, users that leverage a unit of information first deplete its value for others.

    For example, multiple enterprises that have access to the same economic and market indicators or consumer information should be considered. Those that make sound strategic, tactical, or operational moves based on this information before others (e.g., target marketing/promotions, inventory adjustments, sales realignments, strategic acquisitions) gain an advantage over others using the same information.

    To some extent (notwithstanding vendor hype), this is where enterprise enthusiasm over real-time (and near-real-time) information flows and decision-making derives. During 2003/04, enterprises must increasingly formally consider the latency and currency of information as limiting factors in reaping value and making competitive moves.

    Second, we regularly witness information's value rise as it is processed or refined at each step of an enterprise's information supply chain. Raw data (much like any other resource) is inherently more valuable after it has been cleansed, enriched, transformed, organized, described (e.g., metadata), integrated, distributed, and secured.

    Those that imply data should be just as valuable in its raw form should consider the preposterous exercise of making a peanut butter and jelly sandwich with access only to a wheat field, peanut farm, and vineyard. Although exploring the potential value of available information is a valuable exercise, through 2006/07, enterprises should employ more of a top-down approach to determining the ideal form of information for a each business process, then design information supply chain links to accommodate it.

    By 2005/06, most leading enterprises will make a practice of periodically and formally auditing their information assets to drive toward higher levels of information value -- much the way they succumb to material inventory exercises and financial audits. These information audits (with methods that have yet to be crystallized and sanctioned by any authoritative body) that document information supply chains and linkages between information and business processes will enable enterprises to:

  • Better leverage dormant information
  • Reduce inventory carrying costs of information
  • Improve decision-making cycle times
  • Improve information consistency, cleanliness, completeness, and other quality characteristics
  • Uncover information-related fraud and enable information-related accountability
  • Identify opportunities and fuel for innovation
  • Compute the financial value of a unit of information, leading to improved IT investment decisions
  • Improve application and infrastructure performance
  • Enable information to act more like a balance sheet current asset than a contributor to goodwill
  • Identify opportunities to package and sell (or barter with) an enterprise's information assets
  • Historically, most information supply chain definitions consider only structured information (e.g., transactions, customer/product/employee/supplier information), wherein unstructured information (e.g., documents, e-mail, images) are managed separately. However, as enterprise content management solutions reach maturity in the near term, leading enterprises will co-join or meld their distinct information supply chains by 2007/08, reaping even greater value from structured and unstructured information assets.

    In addition to subtransactional data (i.e., granular activity between business events), the next boom in data warehouse volumes will come from the dimensional organization and indexing of enterprise content alongside transaction/entity information.

    Current hesitancies about the data warehouse being an enterprise's "single version of the truth" will be overcome once the bulk of an enterprise's information assets (70% in unstructured form) are similarly accessible via business intelligence applications, and leverageable via closed-loop, decision-support functions.

    Business Impact: When managed as financial or material assets, information assets will yield comparable or greater value.

    Bottom Line: The information supply chain metaphor continues to be a feasible way for enterprises to conceive, manage, and improve information flows. Information's ability to be refined and consumed is without question, and its value can be ascribed to how well these activities are performed. Compared to tangible assets, its nuances should not be glowered upon, but rather exploited.

    Doug Laney is a vice-president and director with The Meta Group

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