With infonomics, data is worth more than oil

Johannesburg, 17 Mar 2021
Doug Laney, data and analytics innovation fellow at West Monroe.
Doug Laney, data and analytics innovation fellow at West Monroe.

Contrary to popular belief, data is not the new oil, due to infonomics, the new economics of information, which makes data much more valuable than oil.

This is according to Doug Laney, data and analytics innovation fellow at West Monroe, and best-selling author of the book “Infonomics”, speaking at the Business Intelligence 2021 virtual event organised by ITWeb last week.

In a keynote address titled: “Infonomics: The new economics of information”, Laney explained what he called the concept of infonomics – which is a new way of thinking about information, based on the principle of monetising information as an asset and deploying it in a variety of ways to generate economic benefits for the organisation.

Increasingly, IT business executives talk about information as one of their most important assets, but few behave as if it is, he commented. Executives often report to the board on the health of their workforce, their financials, customers and partnerships, but rarely report on the health of their information assets.

As outlined in his best-selling book, he explained the discipline of infonomics: “Infonomics is the concept that information is, or should be, an actual enterprise asset. Even though accounting standards still do not recognise it as one, it clearly meets the criteria because information can be owned and controlled, is exchangeable for cash, and generates probable economic value.

“Infonomics provides the foundation and methods for quantifying information asset value and tactics for using information as an organisation’s competitive-edge to drive growth.”

While data is popularly known as the “new oil”, Laney pointed out it is actually much more valuable than oil, which dissipates when consumed and can only be consumed one way at a time.

While data and oil share similarities, in that data has to flow, it can be purchased and can be refined, its unique economic characteristics make it more valuable than oil, he continued.

“When you consume a drop of oil, it doesn’t create more oil like data would. Data, on the other hand, is very different to oil – it is what economists refer to as a non-depleting, regenerative asset that can be used multiple ways simultaneously and it doesn’t get used up when we use it as part of a business process.

“This is because we’re in a position to capture more data and that way data has incredible characteristics, and the winning businesses today are the ones who are basing their businesses on those characteristics.”

Indirect or direct monetisation

Discussing information ownership, rights and privileges, along with alternative data challenges and opportunities, he noted that monetising data as an asset can be achieved by organisations either indirectly or directly.

“Doing it indirectly consists of adding value in the business by using data to improve processes and enhance relationships with stakeholders and the organisation’s ecosystems, while reducing risks.

“Directly monetising data includes selling data or licensing data. Licensing data includes, for example, providing customers with loyalty cards and rewards in exchange for free food. This approach allows retailers to exchange customer information for discounts and rewards, helping them to avoid tax-related obligations, which may apply if they sell it.”

While there are many organisations already taking advantage of the value and potential of data to enhance their existing products and services to improve competitive advantage, Laney pointed out that another way to use data for business value is by legally selling it through data brokers and data marketplaces.

“Another new way of monetising data, which emerged in the advent of General Data Protection Regulation, is that companies can sell data to other organisations without necessarily exposing their customer identities. For example, hospitals can share specific meal plans for diabetics with health organisations based on the severity of their illness at various stages. This enabled them to get a commission by safely sharing that information.”

Companies which are more data-savvy are in a better position to take advantage of infonomics and could in turn end up with data that is more valuable than the firm’s total net worth, he said.

Laney highlighted that to get started with their monetisation of data journey, organisations should generate and refine ideas for innovating with data assets; assess and prioritise data monetisation ideas based on a spectrum of feasibility characteristics; and specify technical, data, analytics, governance and organisational requirements.

“In addition, organisations should develop and test markets where the data is used, as well as identify potential buyers/users of data products, and assess data packaging and licensing options. They should also architect and engineer their data infrastructure, and implement and test new data offerings such as APIs, search and other components.”