Response to – ‘Stop Trying to Put a Monetary Value on Data’

I’ve recently read a posting on the information management site questioning the value of data and suggesting this whole discussion is misguided. To quote
“… that trying to place a monetary value on data and information itself is a red herring and an effort that I highly recommend all avoid – unless you enjoy philosophical exercises that don’t translate to actual business value  …… The ‘data is an asset’ rhetoric doesn’t translate to putting a monetary value on a customer record, as an example, because data in and of itself has no value! “
If you’ve read my previous blog on this subject you will know that I am a firm believer in valuing data but I think the writer has miss understood (or is being tongue in cheek) the argument. So I thought it would be appropriate to re-iterate some of it as a response.
The argument goes that over the last few decades commerce has changed from being biased towards tangible assets (such as factories, stock, property and physical products) to more intangible assets (such as intellectual property, marketing brands, IT systems and the data that resides in them). Research from the US, has shown that the average market-to-book ratio of companies in the S&P 500 rose from just over one in the early 1980’s, 3.5 in the mid 1990’s to 6 by 2000, falling back to 4.5 by late 2003. A market-to-book ratio of 4.5 implies that the tangible assets of a business account for less than 25% of the value that investors are placing on a company. In essence intangible assets have supplanted tangible assets as the key value drivers in today’s economy.
During the same period traditional accounting has remained tied to tangible assets. This means, in my opinion that a significant percentage of an organisations assets are under reporting in the company’s accounts. It is a generally agreed management view that you cannot manage what you cannot measure. Therefore many of the assets that are most responsible for creating organisational value are not managed very well.
By valuing data we are raising the importance of data as an organisational asset and allowing it to be managed, enhanced, maintained, invested in and exploited. Questions such as:
  • How much money should be spent on protecting are data centre’s for example. If we lost all our customer data due to a natural or terrorist disaster what would be the impact.
  • Should we insure our data against loss. It is not beyond the realms of possibility that we would wish to insure various data assets against these possibilities.
  • How much should we spend on acquiring prospect data.
  • What is the impact of data quality problems in our data to the companies bottom line. 
Obviously I am only touching the surface of the arguement but would be interested in peoples views on this.
As an interesting side comment there are a number of businesses that have grown up over the last few decades that actually sell data. Some examples are IMS, Reuters, Bloomberg and Experian.

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