Information has been said to belong to that class of a company’s assets that can be defined as strategic. Studies have shown that organizations striving to obtain competitive advantage through information technology need to prioritize the information itself, not the technologies involved. A company’s IT strategy should  be focused towards enhancing and sustaining the value of information rather than the technologies themselves. To those ends, it is critical to value information as a strategic business asset in order to guide investment into it and the systems that support it.

As the world becomes more interlinked through ICT, the place of information in economy and society will become even more pivotal. As a result, companies are going to consume vast and ever increasing quantities of information which will lead to the consequent increase in demand for organizational resources  involved in managing that information. The costs of information capture, storage, processing, maintenance and dissemination are typically distributed across multiple employees and different departments in an organization. Most commonly the cost is hidden in multiple employee salaries as well as hardware and software costs making it difficult to quantify. However these costs are real and will only grow in the future as more information is consumed and produced. As such it is incumbent on a company to understand the nature of the information it deals in and from there determine its value as a first step towards formulating a strategy to maximize its utility.

In their seminal paper*, Moody and Walsh delved into the intrinsic qualities that characterize information and arrived at a set of laws that can be used to value information as an asset from a business perspective.  The authors compare and contrast information with other assets in a company and find that it shares certain attributes with classical assets but is radically different in a few respects. This discussion will take the structure of a comparison in order to accentuate the distinctions. The seven laws of information as defined by Moody and Walsh are:

Law 1: Information is infinitely shareable.

This is one of the unique features of information. It can be shared between any number of parties without reduction in its value. This stands in contrast to classical assets which tend to be appropriated and get exhausted the more the parties that use them. Information can be shared between any number of organizations or individuals and its value will not reduce as a result. Nor will it be apportioned. Each party will get the full value of the data as if they had exclusive access to it.

This law has a hidden consequence. Just as information can be shared, so can it be replicated. The same information may end up being collected by multiple parties if the systems for information sharing are non-functional. This replication in information is an unnecessary expense since the value of the information remains the same but its costs go up.

Law 2: The value of information increases with use

The second law is just as counter intuitive as the first one when it comes to asset management. Most assets depreciate with use as a factor of wear and tear. Information is unique in that rather than diminishing, its value actually increases with use. This property of information comes down to the fact that most of its costs are upfront, such as the cost of its acquisition and storage. Its marginal cost of use is almost non-existent. The value of information is realized during its use. And thus the more it used the more valuable it becomes.

Law 3: Information is perishable

Similar to other assets, information has a shelf life and exhibits diminishing value over time. The rate at which value depreciates as a function of time depends on the type of information. Some types of information may lose value immediately after a fact happens, while other types may lose their value over long periods of time.

Information is said to have three epochs of value over time. The first is how long the information should be maintained for operational purposes. The second is how long the information should be maintained for decision support purposes. And the third is how long the information should be maintained for statutory purposes. Each of these stages generally exhibits reduction in value over time.

Law 4: The value of information increases with accuracy

It is said that bad intelligence is worse than no intelligence at all. Erroneous information leads to incorrect decision making and consequent negative outcomes which can be very costly to a company. Generally, the more accurate information is, the higher its value. Emphasis is made here that the level of accuracy required for any piece of information is based on how critical its application is. Some applications such as aircraft maintenance or banking require 100% accurate information while other applications such as customer profiles are practically useful at 70% accuracy. The value of accuracy plateaus at some point, with diminishing returns being exhibited for increased accuracy. It is thus important to determine the level of accuracy required for each type of information used in a company in order to optimize the value.

It is said that for decision makers, reliably knowing how accurate some piece of information is, is just as important as its being accurate. This is because decision makers need to trust information before they can act on it. Therefore accuracy of information needs to be shown in order to convince users to trust it.

Law 5: Integration increases the value of information

It is said that information greatly increases in value when it can be compared and contrasted to other information. This is because where as disparate pieces of information are valuable in their own right, when put together their utility for decision making is highly amplified. As such they jointly have infinitely more value than when they are separate. This is a case of the whole being more than a sum of the parts. However, this law too has diminishing returns beyond a certain point as some levels of integration may not add more value, thus failing to justify their costs.

Law 6: Value reduces with information overload

For most assets, the more you have of something the better. However when it comes to information, having an over abundance of it can lead to information overload. Information overload is a psychological phenomenon that occurs when the quantity of information presented to an individual overwhelms their mental capacity for its processing. At such a time comprehension degrades rapidly and decision making performance equally degrades. As such there is an optimal point at which the information presented is neither too little nor too much, but just right for decision support. This is a law that modern information systems help with, since the volume of information collected and that presented can be orders of magnitude different. Modern systems are able to distill information to its essential elements and it is these that are presented to the decision maker, thus avoiding information overload.

Paradoxically, studies have shown that decision makers are emboldened by having as much information as they can when making a decision. As such, although the value of information for actual decision making only increases up to a certain limit, its psychological value does not have this restriction. The more the information they are presented with the more decision makers feel confident about the decisions they arrive at. The psychological primacy of information is clearly captured by this.

Law 7: Information is inexhaustible

The last law also stands in contrast to popular intuition about asset behavior. While most resources are depleted by repeated use, information is the polar opposite. Information has been described as having a self-generating nature whereby its use generates more of itself. This is because the act of using information typically leads to the creation of derived information from the original. The addition of this new information to the pre-existing base grows the overall information set. As such rather than getting depleted, information use actually increases the total amount of information. This is facilitated even further by the existence of information mining tools and techniques meant to enhance this multiplier effect.

In closing, it can be seen that information has some important differences from classical assets. Therefore a unique and strategic approach is needed to properly use it. These laws form the basis for formulating such a strategy.

 

 

 

 

Pima Smart is an information partner providing technology, training and consultancy to bring companies into Industry 4.0. Talk to us if you’d like to learn more about how to begin your Industry 4.0 journey. We are the partner you need as you embark on this adventure. Visit www.pimasmart.com for more details.


Kennedy Nganga

Analyst, Technologist and Writer. Founder: Pima Smart

Leave a Reply

Your email address will not be published. Required fields are marked *