Seamus Byrne
December 7, 2018

Getting data on the asset register

Dataconomy

Getting data on the asset register

Physical vs intangible: Is it the steel mill or the manuals that show how to use it that are most valuable?

Business leadership gets the real value of data wrong in such significant ways that boards may be negligent in their duty to protect the interests of their companies, according to Michael Masterson, managing director of EverEdge Australia.

As a specialist in helping companies to understand the value of their IP and ‘intangible assets’, Mr Masterson – who is speaking at the InnovationAus.com Dataconomy Sydney Forum – argues that too many companies make crucial errors in misunderstanding which data in their organisation is truly valuable, and which data holds existential risk for an organisation’s welfare.

While the discussion of a data economy is often focused on putting all the data housed within organisations to smarter use, Mr Masterson is quick to point out that knowing how to find the value of data in the first place, and therefore find the valuable data, is critical to knowing how such data needs to be managed.

“It's a bit like going back to the Gold Rush,” says Mr Masterson. “People were running out with their picks and shovels, digging furiously, trying to find pieces of gold. Data is actually quite comparable – you can dig a lot of dirt and not find much gold.”

While this leads to a lot of data collection and analysis taking place without necessarily much value, Mr Masterson sees the entire accounting system as playing a role in getting data management wrong. When we shift the focus toward understanding data based on its value as a company asset – and understanding who any given data set could be valuable to – we enter into a different set of discussions.

“Data is one of the greatest sources of intangible asset value that we see, maybe outside of brand,” says Mr Masterson. “Often it's the data driving the brand value.”

He points to what he sees as good examples of knowing data value, like the Qantas Frequent Flyer program and Wesfarmers customer loyalty data, where the companies value these data assets at as much or more than their very highly valued physical assets.

“If you think about your property holdings - why have people come to you? Often it's about the reason they're being attracted, which relates back to all of the intangible assets,” says Mr Masterson. “The data then enables you to understand why people are coming to you and increase the amount of frequency or purchase spend that they're doing with you within the shopping centres.”

“This is the danger. If you don't really know what the asset is, and you don't know what the value of it is, then how can how can you price it or protect it.”

Data is about a lot more than customer data too, and many companies fail to realise how much poorly secured internal documentation is actually at the heart of their organisation’s value.

“Often your operating manual can be incredibly valuable. Imagine if I gave you a steel mill. Which is about as tangible as it gets. You go, ‘Wow, you're a great guy! You just gave me a steel mill!’ But there's only one one thing. You're not going to get any of the intangible assets.”

“You're not going to get the customer data. You're not going to get the supplier data. You're not going to get the operating manual. You're not going to get the health and safety or the regulatory approvals. That's no longer an asset, that's now a liability because you can't actually operate that steel mill without the intangible assets.”

Yet in the face of this Mr Masterson points out that such manufacturers would have security on the ground protecting physical assets while they do little to nothing at all to protect their intangibles. Indeed he says he has worked directly with such companies, where after assessing intangible asset values it was discovered the most valuable assets were sitting in Excel spreadsheets anyone in the company had read-write access to.

An important step in the process of improving how we value data is knowing who it could be valuable to. Whether that’s knowing who would be willing to buy the data and at what price, or knowing what it could do to your company’s value if a competitor suddenly had that information.

In an example from his work, one company found that a supplier who built a specific system for their business was attempting to sell that same system to a competitor. So an analysis was conducted to put a real value on the system in order to understand what this intangible was really worth.

“It turned out the system was worth a lot of money – in the tens of millions of dollars – because they would have lost significant competitive advantage by that system being out in the open. All of a sudden people started to protect it.”

And the bigger the company, the bigger the problem, as board members may not have enough visibility of what is and isn’t being tracked, so intangibles are not being seen as critical assets.

“We've worked with nearly 1000 clients and in only one case did we see intangible assets even make the risk register. Once. In the few occasions it will make a balance sheet it's either put on at cost - and there is no correlation between the cost of that data and what it is actually really worth.”

When these questions are also applied to government, Mr Masterson argues there are some big problems because “open sourcing government data is literally like giving away your crown jewels.”

“They’re giving away valuable public sector assets that we as the taxpayer have actually created,” says Mr Masterson. “The government thinks ‘Oh, we’re getting this great saving by essentially outsourcing a business function’, but they didn’t realise they weren't just outsourcing the process they were outsourcing all of the intangible assets as well. Or giving them away. Which ended up being worth more than not just the contract but certainly the savings.”

“This is the danger. If you don't really know what the asset is, and you don't know what the value of it is, then how can how can you price it or protect it.”

InnovationAus.com’s Dataconomy Sydney event will be hosted in partnership with King and Wood Mallesons on December 12, 2018. For more information or to purchase a ticket click here.

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