Information Economics

From MIKE2.0 Methodology

MIKE2.0 encourages the use of good information practices within organizations through the application of the principles of Information Development. While people readily talk about "information as an asset", the phrase is seledom turned into meaningful action.

With the transition to an information and knowledge-centric economy, those organisations that innovate with information will be the ones that are seen by their customers and stakeholders as differentiated. Information Economics is a branch of microeconomic theory which seeks to understand the motivations of different participants in a community which can be either internal or across organizational boundaries.

The discipline can be seen as theoretical, with some writers going so far as to suggest that it is the value of the business that is generated that has value rather than the information itself. This view reflects the immaturity of the discussion.

There are two things we can learn from the explosion in era of the information economy. The first is that new and truly disruptive businesses almost always use information in a new way (examples include the way new credit card issuers use loyalty schemes and Amazon’s ability to recommend purchases). The second is that the information associated with truly disruptive businesses more closely adheres to the Small Worlds principle that separation and complexity have a logarithmic relationship. That is, adding more complexity in the information only results in users having to navigate a small number of extra steps.

For instance, the telephone network of the early twentieth century was requiring a linear growth in telephone operators to keep growing, but by the second half of the twentieth century it had innovated to ensure that moving from the simplest transaction (calling next door) and the most complex (calling the other side of the world) only added a small number of exchanges. Similarly, iTunes doesn’t just allow you buy music online, rather it innovates by reducing the number of steps required to relate information on your iPod to the artist and album that you are interested in.

Implication for information handling in organizations

The trend towards thinking of information as part of the economy is happening in many different ways. Perhaps one of the most important is in the way that business is changing its attitute towards funding "publish and subscribe" information systems such as the enterprise data warehouse.

	During 2000-2010, information providers have had to pay for the privilege to have their information incorporated as part of the company information asset. The information consumers similarly have had to pay to extract and benefit from the same data resources. There has been little or no reward for value-adding to the information resource along the way.
	More recently, in some organisations, information providers aren’t being asked to pay. The information consumer pays for the data based on the economic benefit of the data and the information asset owner based on the value add that they provide (as shown by the ticks and increased charging). The model acknowledges the value of the information, while repaying the effort required to provide it.
	Ultimately, this trend will mean that the information asset owner will become an information “trader”, aiming to be a profit centre (selling internally or externally) – identifying information across the organisation that can be value-added and resold. The group function increasingly becomes part of the “cloud” with data as a service rather than providing a technology platform.

When to consider Information Economics

The information sharing motivations existing and required within and across organisations should be considered as part of phase one, particularly:

• the Overall_Business_Strategy_for_Information_Development
• the Future State Vision for Information Management
• Data Governance Sponsorship and Scope

Supporting assets

• Economic Value of Information

Selected References