The Value of Information – Worth its cost

4 Mar

The Value of Information

 

 

According to Curtis & Cobham as mentioned in my previous blog posts the characteristics of good information are as follows:

  • Accurate
  • Timely
  • Relevant
  • Just Sufficient
  • Worth its cost

Good information in order to provide an advantage for a business unit should be worth its cost. In the most basic of terms, the cost of gathering the information and putting it to use should be equal to or less than the revenue that will be gained from using the information. In essence “an appropriate relationship must exist between the cost of information and its value”. Is the information gathered valuable to the organisation, is it cost efficient? This is one such question that a business manager may have to answer. The cost of gathering and analysing information should be less than its benefit within the organisation otherwise the whole process was not a worthwhile endeavour; the process in this case made use of valuable organisation resources that could have been applied elsewhere, this observation is most applicable to organisations around the world given the difficult trading environment that exists in many sectors.

For example a firm is currently looking to invest in an Enterprise Planning Application for use within its organisation to improve work practices however before investing in the system a reorientation of thinking should be made particularly in the finance department. Such a system “should only be implemented when it is clear that the additional information costs will result in larger savings.” (http://www.butleranalytics.com/2012/12/information-cost/)

However this characteristic is subject to interpretation, many firms will choose to invest in project and products that may fail in the hope that they will eventually find one that will give them a competitive edge.

References:

Nicholas H. Luriea, Jayashankar M. Swaminathanb, Organizational Behaviour and Human Decision Processes, Volume 108, Issue 2, March 2009, Pages 315–329

Curtis & Cobham, 2001. Business Information Systems; Analysis, Design and Practice: Fourth Edition.

 

Thanks and my final blog post will be made before the end of this week which will provide a summary of the main characteristics of good information and the value that it contributes to an organisation.

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