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Guest Post: Valuation of Information

The following is part of our guest blog series.

Jane C. Allen and Brian Fox, who advise organizations on e-discovery, forensics, and a broad range of additional IG topics in their roles at PwC, wrote this piece, and it is published as it was provided. PwC is an IGI Supporter

Information valuation is the topic of the keynote address at the CIGO Summit. PwC will also be there talking about their model, and we also have a deep dive session on models and calculators that are in use now at several organizations. There are still a few seats left -  register here. 

The Information Economy

It’s often been said that we are in an information economy. But what is the actual value of the information that’s driving it, and how do you measure it?

Is your information an intangible asset such as goodwill? Is it related to the volume or recency of data? Setting aside the accounting implications of information value measurement on balance sheets and overall company valuation, the idea of being able to use valuation as a means of weighing the economics of our own efforts around information governance is compelling.

That’s why we created this framework, which we call VOI — valuation of information.

(Some) Information Has Value

The notion of information having business value is not new.

Consider the willingness of investors to buy stocks in companies that hold information — even in apparent contravention of their financial performance. Or the large-scale IPOs or acquisitions of data-based companies (often devoid of significant physical assets), even with formal accompanying statements that the company may never make a profit.

There are countless other examples (both legal and illegal) where data is valued — bought and sold, for commercial purposes. But there’s a missing piece to the discussion, which is the implication that information is somehow a monolithic thing. Anyone who works in the field of information governance knows that nothing could be further from the truth.

All Information Is Not Created Equal

Let’s look at some examples. Some information is highly valuable: Think customer buying activity data or the explosive growth of “Internet of Things” devices carefully collecting and curating data on our every move. These are the data we expend significant effort and resources maintaining, protecting, mining and analyzing.

Some information could be highly valuable, if only the attributes of the data were a little better — better quality, a larger population, a little more normalized, a little better managed. (Think of the potential, for example, of activity trackers that collect geolocation, activity, weight, demographics, etc.)

Some information has no value, or at least none that you can perceive today. (We’ve never met a company that argued when we showed them that a very large percentage of their enterprise information went unused for five years or longer.) Even if there were some “secret gems” hiding in the oceans of dead data, expensive work would need to be done — in forms of both time and money — before you knew if you could extract a net value.

Some information costs you money, either because it is misleading, inaccurate, too inaccessible or has too great a noise-to-signal ratio and therefore impairs your ability to find truly valuable information.

No Assets Without Liabilities: It’s True of Information, Too

Many companies employ third parties at significant cost to perform data analysis that is too difficult for them to produce on their own. Many are mindful of the potential risk exposure that could arise in the wake of a cyber-breach, and are forearming themselves with cyber-insurance.

Clearly, information valuation is fraught with practical difficulties. If the aim is to value information assets, we must also be willing to consider information liabilities. We must consider the ways in which information can be improved (or can deteriorate) — and how that could impact its value over time. And crucially, we must account for one of the particularities of information: the fact that, unlike other assets, the same information can be used in many different cases — with a commensurately accretive value.

What’s needed is a systematic approach that enables a company to evaluate units of information — one that acknowledges imperfections, reveals opportunities and guides our resource allocation in a rational way. In this spirit, we offer a framework for the Valuation of Information (VOI).

The VOI Framework

Our VOI framework is composed of twelve dimensions grouped into four categories. The attributes are used to measure the business value of the information in the service of a specific use case.

The four categories are:

  1. Information Scope. How closely does the breadth (in time and population), depth and completeness of the information match the ideal data set for a given use case?
  2. Information Quality. How well does the quality of data elements, their structure and the traceability of the information support confidence in the analysis for a given use case?
  3. Information Accessibility. How easy is it to access, analyze and manipulate the information for a given use case, and how easy is it to integrate the information with other key systems in that use case?
  4. Information Scarcity. Sometimes it is the scarcity of information that drives its value. In such use cases, this category measures how unique the information at hand is, both today and into the future.

PwC Valuation of Information Model

Put VOI to Good Use

We hope this new VOI framework will help companies think differently about their information and explore new use cases that could bring needed attention to potentially hidden value, previously unexplored. And while we acknowledge that there is much room for debate and refinement, we think this is a meaningful first step to the process of credibly tackling information valuation — with potential for real-world, short-term benefits.

Information valuation is the topic of the keynote address at the CIGO Summit. PwC will also be there talking about their model, and we also have a deep dive session on models and calculators that are in use now at several organizations. There are still a few seats left -  register here.