Enterprise 2.0: Considering the Effect of Information Usage on Companies’ Market Cap
October 29, 2008 1 Comment
I want to tackle the issue of Enterprise 2.0 and its ROI for companies from a different angle today. I want to consider the effect of individual “information units” on a company’s growth, and hence its market cap.
“Information units”? Yup. In the information economy, success is guided by superior generation and use of data, with manufacturing as a commodity output of that information. In the manufacturing economy, companies’ success was predicated on their production lines, access to raw materials, and superior distribution channels. I don’t to overstate the case of information, as these manufacturing-based factors are still critical. But they have become commoditized, with easy global outsourcing and markets.
The differentiator for today’s companies is their ability to source and use information more effectively than competitors. And we now we return to what I mentioned before…”information units”. An information unit is a discrete piece of information. There are billions of these units inside companies. Examples of information units include:
- A customer reporting a problem with a product
- The contract for ordering office supplies
- How many days’ supply of inventory
- The agenda for an upcoming conference
- A project dependency and its risk of missing deadline
I’m taking the view that in the information economy, a company’s value is intrinsically wrapped in its ability to use the high value information generated everywhere in the enterprise. With a bit of mathematical license, here’s a simple equation for what I mean:
Let me break down the two parts of that equation.
Value of Information: Information Units Are Like Shares of Stock
Companies have billions of information units. The value of any single information unit varies, not unlike an individual stock. The variation is based on where a company is currently with regard to its markets, financial performance and product or service offerings. These factors change constantly for companies. What’s unimportant today rises in importance tomorrow, and vice versa.
This dynamic flows all the way down to the information unit level. There is no absolute value for any information unit. Rather, its value derives from how it helps companies at any given point in time in dynamic markets and circumstances.
I think this well describes a huge challenge for companies. There’s no shortage of information, of data. The question is figuring out what data is most relevant.
And this is a battlefield issue, not one that can be managed from army headquarters. The employees doing the daily work are the ones who have to execute on their part of the overall company objectives. They need to create and find the relevant information for where the company is right now.
There’s too much information, too many actions needed and markets are too dynamic to wait for senior executives to decide which information is important. Employees are tasked with this responsibility.
A problem for companies is flowing information (I’m using Stowe Boyd’s formulation of data flow). It doesn’t really happen. As new information affecting a company and its market is learned, most corporate information channels are poorly designed to get this out to everyone. Thus, the employees, those soldiers on the information battlefield, are not well-equipped to identify information that is rising or declining in value.
Email? Portal? There is too much new, dynamic information that can affect employee perspectives on the value of information units to be presented well in those channels. In other words, the value of existing information (tacit or recorded) is affected by external information coming in to the company.
In the mathematical equation above, the goal is to have employees better identify the value of information. If this is accomplished, much of the declining value information is ignored, raising the average value of a company’s production information units.
Propensity To Be Accessed at the Right Time
Here’s the thing about information units. Their value can increase in response to external events. But that value is never realized if no one ever finds them.
Every company has these. Valuable information that would have been great to know previously. It’s just that the information was inaccessible. It was trapped in someone’s inbox under an avalanche of emails. Or it was in an application that is accessible across the organization, but no one thought to check there. Or someone checks on of these apps, but the rising value information unit is buried in a sea of search results.
The basis to improving an information unit’s propensity to be accessed at the right time will be a mix of technology and people factors.
Technology: I’ll go back to Stowe Boyd’s flow as one element. Improving the way employees can consume an ongoing flow of breaking news, information from the front line and activities of colleagues. The goal here is not to memorize everything, but to develop an ambient awareness of what’s happening inside and outside the company.
The second technology component is making information units more accessible everywhere. If an information unit is rising in value as company circumstances change, it needs to be located. Cracking open apps with limited usage becomes more important. Oliver Marks has a piece up today on ZDNet in which he notes:
It’s not a stretch to see that the ‘aerobic fitness’ of free information flow though a company to its employees, partners and in some case customers makes them stronger and a healthier place to be. (Ever worked somewhere managerially opaque and secretive and tried to build momentum?)
We are entering a game changing era with applications…which provide technology bridges to other applications and systems.
People: The people is aspect is equally important. Companies can have thousands of employees, each producing plenty of information units. Information accessibility is the first step, but that unleashes a lot more information on employees. How to filter through it to find the important information?
There will be the wisdom of crowds approach, in which useful information is highly rated, clicked, saved. This will be a common basis for finding out what’s valuable. But that can be somewhat dated information, and cannot sniff out the nuggets that apply to specific situations.
Individuals become important filters. We naturally develop trust relationships with colleagues based on their past performance as curators of useful information. This isn’t an Enterprise 2.0 phenomenon, it’s a reality of our daily work. Hopefully your manager is one of these people, but there are always colleagues laterally in the organization to whom you turn for information and opinions.
With enterprise 2.0, use of these personal information filters is accelerated. It’s what others wrote in the wiki. Or their own blogs. Or tweet. Or tag. Or the documents they upload to the portal.
Improving the ability to track what others generate and find valuable is an critical component to improving the propensity to access information at the right time. Because it means you’re not on own to figure this out.
The takeway here is that Enterprise 2.0 touches on a couple levers for maximizing the value of information. First, recognize that there is no way for senior management to be there for every decision an employee makes. In fact, they shouldn’t be, as that would limit the flow of new information and ideas. But it does put the onus on employees to judge what information unit is valuable in the context of a company’s circumstances at that moment in time. The goal is improve the overall average judgment of what’s important right now for a company.
The second point is that accessing the rising value information – and its corollary, ignoring the declining value information – is just as important as recognizing the value of an information unit. After all, if you can’t find the piece of information, it’s pretty hard to assess its value to the company.
Maximize the value of information, and you increase the market cap of a company.