Subscribe to DSC Newsletter

Q&A: Thinking of Data as Information Capital

Thinking of data as information capital and treating it much as a company treats other kinds of capital (such as financial and human) can get leaders thinking about information in a different way.

Guest blog post by Linda Briggs. TDWI article originally published here.

“I tell people over and over again that information is one of their most valuable assets,” says Information Builders’ Jake Freivald. In this interview, he explains why thinking of information as capital can raise its profile and help company leaders understand its real value.

Freivald is VP of corporate marketing for Information Builders, where he directs branding, marketing communications, events, Web marketing, and direct marketing. He graduated from Cornell University with a Bachelor of Science in Electrical Engineering in 1991. He writes periodically about business intelligence and information assets.

TDWI: What do you mean by the term “information capital”?

Jake Freivald: At Information Builders, we use that term to mean your most important information assets -- then figure out how to manage them more effectively according to specific goals, return-on-investment requirements, and so forth.

Company leaders understand the concept of “capital,” but why is it so much harder to explain the value of “information capital?”

Part of the reason we are talking about information capital is because we think it makes sense to start treating information that way -- as capital.

I tell people over and over again, “Information is one of your most valuable assets.” They generally nod -- everybody agrees with that, but when you start talking about behavior around that concept, that’s when they start to struggle with the concept. ...

Land, for example, is often one of a company’s most valuable assets. People understand that -- they understand that you need to do something with an asset like that. We can then say, “Well, you need to treat information the same way.” That’s what information capital is all about -- defining business goals, orienting yourselves toward how you are going to accomplish what you want to, the role that information plays in achieving those goals, and how you’re going to manage information to make that happen.

 

The term gets companies thinking about their information in a different way.

Yes, and it’s nice because it relates back to financial and human capital. If I go too crazy talking about information capital, people start to look at me in a bewildered way, but they get “financial capital” and “human capital” -- they generally understand how to manage those things.

 

If information is capital, how do we invest it?

With financial capital, you invest by spending on some resource or asset -- hopefully, one that relates to your company’s mission. You invest human capital by investing people’s time in training, workshops, and other ways to sharpen the saw, if you will.  If you have information capital, then you invest it by applying information to specific business problems and determining how that information will lead to better decisions or how information will lead to a better flow, streamlining processes between different systems -- that sort of thing.

What’s interesting is that each one of these forms of capital has a multiplier effect when applied to the others.  If you think about human capital, you invest not just your workers’ time when you train them for productivity, but you invest money as well… The same is true for information. If you put information and financial capital together -- where financial capital is buying an assembly line or a factory -- the information applied and invested in that factory will help you streamline operations and manage the products you create. 

If you apply information capital to people, then you’re providing them with information about how they’re doing.

Let’s back up for a second.  We talk about giving people information needed to make decisions, but if we apply it specifically to people, then we’re telling people how they are doing at their job, right? That provides them with motivation. The application of information capital and human capital together has a multiplier effect.

 

You made an interesting point about information capital in a recent blog entry when you pointed out that unlike financial capital, which gets spent down, information capital can be used over and over.

Right. It’s a non-depleting resource. Of course, it takes effort to apply it; it takes time and money to apply information capital to other projects, but the information itself doesn’t go away.

I think that’s one of the reasons that big data is so interesting to people. They know what they’ve collected; they know that there’s a ton of things they can do with it. They just have to figure out what.

 

Given what we’ve talked about, how are firms failing to capitalize on their information capital?

There are a number of different reasons. First is that they’re not using the information that they already have available to them in all the ways that they could. They recognize one use of the data, but don’t realize that they can invest it over and over again.

For example, look at some of our best customers. ...  I’ll use a large U.S. banking institution for an example. They’re quite a success story for us. They obviously collect a tremendous amount of information in doing business with their business customers. They know what size the company is, its locations, and what revenue flows through the bank and from where. 

Using that information, they’ve been able to say, “Here’s a set of information that a small business would like to know about how it’s doing compared to other companies of similar size, industry, or location,” so a small business customer can go to the bank’s scoreboard and see that they are spending more money on cutting paper checks than most organizations of their size or in their location, and therefore they should move more into electronic transfer -- that sort of thing.  They can benchmark themselves against others in the industry.

Where did that information come from? It’s information they were collecting already, but they took it, reoriented it, and said, “Who else could leverage this in a way that deepens our relationship with our customers, provides additional revenue, or provides additional differentiation from our competition?”

 

That’s a great example.  Do you have any others?

One example I like to use is a large automobile manufacturer that is an Information Builders customer. This company had a series of reports about warranty claims that they’ve printed for years -- back-office, green-bar-paper style. When they took that information, put it online, and put it out to thousands of dealerships across the country, the dealerships started noticing how they were doing compared to others. By competing with each other, individual dealerships raised their service quality higher and higher, saving tens of millions of dollars a year in warranty claims. All that was done by the power of the information itself -- it had nothing to do with the company putting in new incentives or anything else. Just by sharing information, they were able to give people incentives to do better.

Another example is a health department at a major U.S. city. ... When they began putting health inspection reports for restaurants online, that was an incentive for restaurants to clean up their acts very quickly.

 

So sharing information can have a lot of powerful effects.

It can be used in many, many different ways. What it really comes down to is, any company probably has a lot of information that isn’t being used to its full potential. Instead of looking at the next “big data” project where you’re doing big data because it sounds cool, because it’s talked about in <em>Forbes</em>, and because everybody thinks it’s neat -- instead of looking at that, how about looking at what you already have? How about maximizing your investment in information capital? That’s going to yield a quicker turnaround than some complex Hadoop project that you don’t really have the skills to pull off.

 

In each of the examples you gave, it sounds like the company already had the information -- they just needed a different way of looking at it, a different way of using it.

Yes. It’s not as if they had to invest in acquiring more information. Very often, you’re taking information you already have and making the most out of it. That’s what information capital is all about. If you think about financial capital and human capital, that’s about strategy and maximizing the effectiveness of using a resource, right? When you begin talking about strategy, that’s involves senior leadership and requires some kind of analysis of how well those things are being invested. That kind of mentality needs to come to the data world, to the information world, in order for us to become more effective at using the information that we already have.

 

Going back to your blog, you make a great point that we’re talking about big data all the time these days, but we’re often not doing such a good job of managing not-so-big data -- of realizing the information capital that’s hidden in small to midsize data. 

Let me make two points there. Yes, accessing the small to midsize data that we already have -- the normal data, if you will -- is a large part of information strategy and using information capital. Use what you already have before you worry too, too much about big data. 

The other point is that very often, big data is valuable not for what it is but for what small data you can extract from it. In other words, people talk about doing big data analytics. Well, the information that you get from big data analytics might be which type of customer profile is most profitable -- it may not be what you thought it was. It may be something fairly simple.

The information we share, the way we make decisions -- all of that frequently comes as a distillation of smaller data from big data. Frequently, it has to be tied to other existing small data before it’s really effective. Big data as a silo, I think, doesn’t really work.

In fact, big data as a concept, in some ways, is a little off-base because then we treat it like it’s something else. It’s not something else. It’s a resource. It’s land. It’s money. It’s people. It’s something that we need to use, think about, and apply to business problems.

Big data, by definition, is tough to handle, right? It’s complex and difficult to work with. Well, the only reason we should be working on big data projects, the only reason we should be moving it out of the “filing cabinet,” is if it’s providing something of tangible business value that makes it worth all that effort to extract value from it.

I think our approach to big data is kind of funny in that eventually we’re going to realize that it really is just all data, and we just have to figure out how to handle that data in the course of our normal business experience and apply it in ways that are going to get us a higher return. That comes back to information capital -- “I have a bunch of undeveloped land. What am I going to do with it?”

 

Would you say that it’s not a problem of technology -- companies have the tools but they just aren’t using them appropriately?

Sometimes companies need to think differently about what they already have, not necessarily invest in completely new technologies. It’s a mentality shift, not a technology shift per se.

I will say that at Information Builders, we have very good technology for reusing information in a wide variety of ways using a single platform. We think we have an advantage in our platform approach in that it reaches across business intelligence, analytics, integration, data integrity, data quality, and master data management. Having all of those things working together seamlessly helps you re-leverage the information you’re capturing.

Having said all that, the first question is, “What do you want to do with the information?” You need to ask that before you ever get to the technology questions.

Let me add one final point to our discussion. Very often, the unlooked-for use of information capital that ends up producing the largest ROI tends to be customer-facing -- thinking about the customer experience, giving customers analytics that they can use to look at your company or their relationship with you directly -- that sort of thing.  That’s a very common use case for Information Builders. It’s frequently something people don’t think about, but it becomes very high ROI. Maybe it’s the use that you weren’t looking for that can make a huge difference. That’s what you get from thinking about information as capital.

Views: 507

Comment

You need to be a member of Data Science Central to add comments!

Join Data Science Central

Follow Us

Videos

  • Add Videos
  • View All

Resources

© 2018   Data Science Central   Powered by

Badges  |  Report an Issue  |  Privacy Policy  |  Terms of Service