Information as an Asset

There's Never Enough Time in the Day

If you're a small business owner, you're likely putting in a sixty hour work week to manage your business and, well, sixty hours? Yeah, that's probably a conservative figure. There's customers to appease, employees to manage, vendors to pay, and - somehow - you need to squeeze in more marketing and networking to help it grow. There's never enough time in your day. Managing technology is the last thing on your mind.

And it should be! You've got enough to worry about. Technology is a utility. It's like the lights, an elevator, or the HVAC system, or an appliance. You turn up the thermostat and it gets warmer; you flip on the air conditioner and it gets cooler; you flip on the lights and they illuminate a room; you open up the fridge and it's cold. Always. Always, always, always! This stuff is usually so rock-solid that we barely consciously think about them.

Good Data is the Byproduct of Automation

Predictability is the promise of technology and the benefit of automation to your business. You invested in computers to automate your business processes and make things faster, more accurate, and more reliable (you guys remember my blog post about that earlier this week, right?). Everything should always be humming along, providing the right stuff to the right people at the right time, and you shouldn't have to think about it.

Source: chris-kimble.com.

That predictability and automation creates the foundation of the Transaction Processing System (TPS) - the lowest layer of information systems theory. This is where we're trying to reduce the influence of manual labor and produce the most accurate forms of data we can. It's the first place I start when coaching small business owners on managing their information as an asset: Their data is an invaluable byproduct of their operations.

Data is invaluable because of its influence on the Management Information System (MIS), the second tier of information system theory. This is the reporting and tactical analysis layer. It sits above the TPS and completely relies upon it. A great example of the MIS layer is a bank statement that summarizes the thousands of transactions that occurred in an account over the period of a month. The bank statement gives you a quick picture of deposits, withdrawals, and balances - without having to add and subtract the thousands of those little niggly transactions that took place over time - and allows you to make a decision.

Garbage In, Garbage Out - The GIGO Effect

How dependent is the MIS layer on the TPS layer? Watch the causality here:

• If I run a report on bad data ...
• I'm going to get bad or inaccurate information ...
• Which leads me to make incorrect decisions ...
• That eventually costs the firm in real waste, lost efficiency, or lost opportunity.

Garbage In, Garbage Out, right? Now, imagine doing that, over and over and over again. Automation's great, but if we don't treat information as an asset - that it's important to get the data right and accurate every single time - our business will chronically be making bad decisions and wasting money, except repetitively faster! Over and over again, we'll make the same dumb decisions based on the conclusions of errant data.

The Big Picture

Now, you are a business owner and likely don't have a lot of time to think about really abstract information theory stuff like TPS and MIS layers. I get it. That's my job. But here's the big take-away that I'd like to give you as a manager:

• How is your organization treating information as an asset? How much time and attention are you paying to make the TPS layer the most accurate it can be to get the greatest value out of the MIS layer?
   
• What is your organization doing to verify and challenge the results in the MIS layer? Not all data can be accurate; not all MIS layer conclusions should be relied upon. Do you challenge the assumption of TPS accuracy?
   
• Is the reporting found in the MIS layer the right report? For the right people? Is it providing the right information to the right people to help them do their job most effectively? Are there more reports, better reports, that could be used to solve an ongoing problem?

Now You're Thinking Strategically!

If you can start thinking about your IT spend in this way, you're just broaching the problem of strategically managing your information system. You're thinking proactively about the effect of automation, the data byproduct, and the expectations of efficiency. Kudos, dude: you're managing the problem. You're treating your information system as an asset.

Next time: core competencies and intellectual property.

R

Automated vs Manual Information Systems

Manual Labor and the Impact upon an Information System

Last week, I got to writing about data and what an information system was. Today, I'm going to build upon those discussions and talk about automated versus manual information systems.

Okay, here's an exercise that's happy fun time. Let's get those hands dirty.

First, I want you to open Facebook and write down - by hand - all of the names of your friends on paper.

Next, I'd like you to re-enter those names into a spreadsheet because we're going to use that spreadsheet to conduct an email marketing campaign. Ready?

I know you're excited about doing this ... ready?!

Yah, not so thrilling, but let's examine this information system for a minute.

Duplicative, Non-Reproducible Efforts

There's a heavy labor component required in name acquisition, that is, you have to manually write down the names of your friends to a piece of paper. That activity is very time consuming for a human being. It takes a relatively long time to do that work in comparison to a computer which can do it in a matter of milliseconds.

In this process, there are two media at play:

• The information is first electronic;
• There's a manual transcription to paper that must take place;
• There's a manual transcription from paper to electronic media that must take place.

Within this one process, it's like we've purposefully created a vinyl record from an MP3, then played our vinyl record to listen to and record the sample again, and then, we copied the sound to another MP3.

Different media, same information transformed (three times!), no functional difference.

Further, once copied to electronic form the second time, the data is stale: we'd need to go back every day and do the same process by hand again.

Also, the same information has been duplicated in two places. From a security standpoint, this is more difficult to control. The paper copy is inherently without controls and cannot be audited.

Also, there's also risk of error in every transaction. With each recording of a name, the human being is prone to make mistakes, and the error rate will pass through to the email marketing campaign in one of two ways:

1. The data collected was gathered incorrectly;

2. The data transcribed into the next system was erroneous - like, a name was mistyped, for example.

And at the end of the day, the compounded errors, duplication of effort, redundant activity, and relatively slowness has cost the money significant dollars in labor cost.

Shouldn't IT Be Faster?

Okay, now, let's recall my speed, accuracy, and reliability argument from a few weeks ago. Relying on manual labor to conduct our sample business processes is inherently:

• Slow
• Error-prone
• Not reproducible
• Inconsistent
• Insecure
• Costly

As a business manager, you should be aware of how manual your business processes are. Take a good look around your shop. For a single critical business processes:

1. For that one process, how dependent are you upon labor?
2. For that one process, where is labor inserting itself where automation could do a better job?
3. For that one process, how is the impact of manual speed, accuracy, and reliability affecting your competitiveness?

What's Left is Raw Opportunity

This gap - the difference between the current, manual information system and a potentially automated information system - represents an opportunity for you.  It's the sweet spot strategy that I talked about last month (Reducing Expenses) that helps justify technology spend. It also represents a way for you to easily manage the technology problem on your hands: follow the labor.

• Where are people?
• What are they doing?
• What real value are they contributing?
• How is the impact of labor harming or helping the business model?

Next: information as an asset.

R

What is an Information System?

Are You Watching What You Really Need?

The other day, I got to talking about what data was. I explained that data was a discrete fact that, by itself, had no specific relevance. We can't contrive meaning out of things like "red", "287.83", or "Ron" unless we know how they're being used ... that they have context.

Information is data in context. It's the lens by which that we perceive data and attempt to make sense of it. If I told you that, in this case, Ron was interested in purchasing a red suitcase for $287.83, then the data is put in context and makes sense, and subconsciously, our minds are already making judgments and decisions surrounding the information that it's been fed:

• Is "red" really a good color for a suitcase? Your mind is already buzzing with long-held perceptions, images, and opinions concerning red suitcases.
  
  
• Is $287.83 really too expensive, given your judgment and past history purchasing suitcases?
  
  
• Is there a reason why Ron wants to travel?

Watch What the Mind Does!

The mind is an interesting thing. See the last one there? My mind wanted to jump to the next logical conclusion - it made this assumption that Ron would be travelling based off of known variables. Ahh assumptions! But did I make the right assumption?

Think About Your Small Business Information System

Should we look at this example as a lesson for understanding your small businesses' information system, I think we should make three points:

1. Facts. Are the facts (datum) recorded in your company's information system accurate? This goes back to my last conversation with you. If the data is bad, the information we'll get from it is bad, and the decisions we'll end up making will be wrong. If the data's bad, why is it bad? That's going to need to be fixed before anything else.
   
   
2. Information. Is the information derived from the information system relevant to your job, or, the job of your employees? Example: if this was a suitcase retailer, it'd be relevant - we see who bought what and for what price. Instead, if you're in the business of, say, carpet cleaning, how does this information help you? Is the information you're getting from your information system relevant to the decisions that need to be made? If it ain't relevant to you or your employees, what's the point? What's the value in being handed irrelevant information? 
   
   
3. Assumption. Finally, how did the information system work to dispel assumption? In this case, there were few data points and my mind was able to wander (as minds do!) and make a broad assumption about what I was seeing. That assumption - that Ron was travelling - may be entirely wrong! And you guys know what happens when people ... assume ... in your business, right? The next thing to look at: how is the information system providing relevant, factual, accurate information, that dispels assumption, and leads the user to the correct decision/answer every time? If the information system provides information that's left up to interpretation (or assumption), we'd see increased guesswork in outcomes, leading to more errors, more malfunctions, more loss.

If we were talking, I'd want to look at the reports being spit out by your information system. How do the contents of this report benefit its user? I'd ask, "What do we absolutely need to know to do THIS job?", and then look at how the information system is providing the right information to the right person at the right time make the best decision, and in a way that dispels assumption, because the more assumptions that'll be made will contribute to higher error rates and loss down the road.

Hey ... There's More?

Wow! Cool, okay, today we've covered some great information theory 101! All of this content is related to my discussion on information management strategy for the small business.

Next time we'll talk about automated versus manual information systems, and, the impacts of errors and omissions. Talk to you then.

R