We know in our gut that data has value. No company can run without it. But what is it really worth? As CEOs realize that data is an asset that can be exploited as a new source of revenue, they will start to ask CIOs about its financial potential. Responding with a shrug and a shot in the dark won't exactly enhance your own value in the CEO's eyes.
Patents, trademarks and other forms of intellectual property have long been accounted for as intangible assets in a company's financial reports. But those numbers are only estimates that may or may not include more mundane kinds of information, such as customer profiles. That's partly because no standard method or accounting procedure exists for putting a dollar value on data.
(See Dollars for Data at the end of this article)
"It's frustrating that companies have a better sense of the value of their office furniture than their information assets," says Doug Laney, a Gartner analyst who studies information economics. "CIOs are so busy with apps and infrastructure and resourcing that very few of them have cycles to think about it."
But now is the time. The chief supply chain officer knows the value of his factories. The CFO knows the size of the company's debt and, to the penny, its cash on hand. The CEO knows the company's closing stock price on any given day. CIOs need to know the value of the "I" in their title.
You'll be a more strategic player if you do, says Andreas Weigend, a Stanford lecturer and consultant on data value and consumer behavior to Lufthansa, MasterCard and United HealthCare, among others. "Be curious," he urges. After all, information is a competitive asset to insure, secure and develop. And knowing its value means you'll have better answers when fellow members of the C-suite want to quantify the risks and rewards of creating new products and services from internal data. Here's how to get started.
Can't Touch This
in the 1930s, when the newly formed Securities and Exchange Commission demanded that public companies account for their true costs and profits in regular reports, most of their assets were physical--machines, factories, buildings, land--and assessing their value was straightforward. Now the most important assets for many companies are comparatively abstract and may include patents, copyrights and trademarks.
Increasingly, a good chunk of the value of a company lies in the fields of a database and in secret algorithms used to cut and combine data to reveal new insights. Think of Acxiom, Equifax, or Dun and Bradstreet, companies that only buy and sell information--nothing you can touch. These data brokers already know what their information is worth: whatever it will fetch in the free market.
It used to be that technology and data officers gave CEOs historical data so they could spot trends. That's not good enough now, says Paul Ballew, global chief data and analytic officer at Dun and Bradstreet. "This phase requires us to talk about business outcomes [from data]. If you can't do that, you are a cost center."
Top executives across industries, though, typically overestimate how much and how well they measure the value of their data, says Gartner's Laney. About one-quarter of 410 senior leaders surveyed recently by Gartner say their organizations quantify the value of their information assets as precisely as if they were on a balance sheet.
One-third say they measure the benefits that each type of information generates, and nearly one-quarter say their information assets are well cataloged and defined. But, Laney says, that's "an acute disconnect from reality."
He estimates that less than 5 percent of organizations calculate the value of their data, measure its benefits, or properly inventory their information, based on client interviews and his ongoing research. But the valuation itself may not be as important as tracking how it changes over time, Laney says. You want to keep increasing the value of your data, so you must know how much it was worth at the start. Then continuously assess your most important data to see how accurate, fresh, unique, complete and relevant it is, he says, to recalculate the data's value.
If CIOs can't or won't expend the energy, someone else will. Namely, chief data officers and other executives responsible specifically for data strategy. Years ago, a CDO, if you had one, reported to IT. Now they may belong to the COO, CFO or another non-IT leader, says Aditya Kongara, head of enterprise data management at the $6.8 billion American Family Insurance.
Kongara has worked in data management for 13 years, including in senior roles at Capital One and Discover Financial Services. Early in his career, he reported to IT. Now he reports to the chief risk officer.
"I'm not really sure the CIO can be a new-business or revenue generator," he says. "IT is a steward of data--integrates, stores, manages security. But who actually uses the data and can make strategic decisions? The business."
Next section: Absolute Value