Old Management Systems Stifle New Business Models
Even after they determine the right ways to use information to delight their customers, managers must address one equally important challenge.
They must update decades-old management systems so they can embrace new digital opportunities.
The Challenge of Investing in Digital Assets
Unlike their industrial peers, managers of asset-light businesses focus little on the balance sheet. Instead, they’re taught to focus on their income statement and optimize their operations around preserving profitability. It’s as simple as that.
The challenge? While we have tools and financial statements that help us manage investments in physical assets, we don’t have the same for digital assets and information. There’s no line item for information on your company’s balance sheet — despite the fact that we know information can be extremely valuable.
Often, venture capitalists help young, digitally native businesses achieve this rigor by identifying key metrics surrounding user activity, registration, and engagement that will help approximate the value of data over time. Things like lifetime customer value are closely monitored so data can be appropriately re-evaluated over time. As such, you rarely see lengthy discussions of traditional financial statements in board meetings. Instead, there is a new focus on the acquisition of return on digital assets. It’s this type of focus on information that needs to become more common inside established businesses.
The Challenge of Determining What’s Core
Some companies will make thoughtful decisions to monetize their digital assets by simply charging for access to data. Some companies will expand into new industries using the information they naturally collect from their traditional business operations as a foundation.
But to optimize your business, you must acknowledge that your information should change what you consider to be adjacent markets — and your business leaders need to make active decisions about which of these “information adjacent” markets to pursue and how.
The Challenge of Building an Ecosystem
In this era of information-based competition, sometimes sharing today is core to profiting tomorrow. And sharing a critical competitive asset is not something we’re used to doing. Developing the systems to help you determine how to build the case for when to share, what to share, and when to stop sharing is vital for managers trying to win in the information economy.
Information is a challenge for your management team because it’s intangible, difficult to quickly value, and can quickly lead you into adjacent markets. And once you have unique data assets that differentiate your business, it’s often tempting to clutch them too tightly, assuming that the value of monetizing those data directly is more than the returns to sharing it and growing your ecosystem.