Information is the new asset for the digital age. And we’re only just beginning to learn how to put a price tag on it.
In a recent report by CapGemini 65% of executives surveyed saw big data as a key enabler of their effectiveness or competitiveness. In practice, this most often means better identifying new opportunities, improving decision-making or reducing costs. Obviously, data and other informational assets are rising in value, as any list of the highest-valued Silicon Valley startups clearly shows, but exactly how much is it worth?
The strange thing about information, Maxwell Vessel, James Allworth and Aaron Levie point out in the Harvard Business Review, is that we can all agree that it’s valuable, but we still have little in the way of financial tools to quantify it. First, not all data has equal value. Second, some data becomes obsolete or depreciates over time. And third, we have few ways to test its usefulness until it becomes a revenue stream, as in the case of Facebook’s advertising business.
So if there’s no room for informational assets in traditional financial statements, how can we know its true value? A few answers are beginning to emerge, with some of the most significant figures coming from surprisingly non-digital sectors:
Incremental improvement adds up fast
In the U.S., the average speed of a long-distance freight train is astoundingly low – just 20 to 25 miles per hour. This makes a one-mile-per-hour increase, in the case of Norfolk Southern, worth an estimated USD 200 million. Since most of the sluggishness is due to congestion and maintenance issues, GE is currently implementing sensor networks to optimize a number of train operations nationwide. Their goal? To increase speeds by up to 4 miles per hour.
Small decisions make a big impact
For a UPS driver, cutting one mile of driving off an average daily route may seem trivial. But applied across the entire fleet, this would amount to as much as USD 50 million in savings. A big data analytics solution called Orion is now making this possible, giving drivers previously impossible route calculations in a matter of seconds. After implementing the system in less than 20% if its fleet, UPS had already saved 1.5 million gallons of fuel.
An “investment” that can be packaged and sold
American supermarket operator Kroger records purchase data at its more than 2,600 stores and keeps track of purchasing records of more than 50,000 loyalty card holders. By compiling and selling this data to vendors who not only stock the shelves but also tailor products to consumer preferences, Kroger is able to bring in an estimated USD 100 million in data sales a year. Actual figures, however, are difficult to come across since current accounting practices typically treat data as an investment, rather than an asset.
All of these examples suggest a pressing need to reconsider how data is valued, tested, leveraged and accounted for. They also point to one of the central truths of the Networked Society where connectivity fuels innovation: Whatever business you’re in, you’re in the information business – and now is the time to find out exactly what it’s worth.
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