The 500 companies that manage information best
If you receive IT newsletters from the US, you cannot have missed it: last week, CIO Minute / Baseline issued their annual “500 companies that manage information best” ranking (click here to download the Excel file).
I have to say I was very excited by the perspective of seeing which companies manage information best in a world in which information is the new graal at the center of all paradigmatic shifts. Information today is what oil used to be, half a Century ago: the future.
However, I got disappointed by the fact that I, for instance, don’t know any of the 50 top companies of the ranking. The biggest company in the world, Exxon Mobil, ranks 52 – and it’s the very first name in the list I happen to be familiar with. Again, in a globalized world at the information age, it’s a pity the survey weren’t more international.
To comment on the actual ranking, there’s lot to be learnt from the “Information Value-Added” (a metric rather hard to compute in an objective way) and the “Information Productivity” criteria. I leave it to your own appreciation but to tell you the truth, I believe this is complete bullshit. As a proof, and looking at the industries from which top performers come from, three sectors prevail: Energy, Manufacturing & Banking.
Seriously, how could the energy sector top the banking sector in terms of information management performance? The mission of an energy company is to produce energy, not manage information – which is a skill needed to better business processes and perform trading. Conversely, the mission of a bank is to manage information: datawarehouses in a bank are strategic in our dematerialized world since all the assets are digitally, not physically, stored. Few industries are as tied to information management as banking. There may be the telecom industry (eg a cable or mobile operator) for billing & CRM purposes & the Internet industry (eg Google) for load management. Retail (RFID challenges) and manufacturing (business process optimization) are next. So, could someone help me understand why is that that energy companies top their counterparts in this ranking? I really can’t tell.
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Working in the Energy sector myself, I can see how that list comes to be. Most of the companies are Oil/Gas companeis which do exploration, so I’m guessing this has nothing to do with IT, but it’s becuse of their cost structure which is heavily capital-intensive.
First of all, this model assumes that all excessive profit (profit-(riskfree interest+beta*avg. stock risk premium)*equity) as calculate using CAP model is generated by IT!
Next they divide this excessive profit by “transaction costs” or sales&general expenses. So, somehow we measure the excessive profits supposedly generated by IT with expenses caused by Business? Somehow this doesn’t make any sense.
Energy sector is booming thanks to high oil prices and therefore they generate more return than average stock and on the other side, their annual expenses are small compared to investments (which are excluded in this model).
As you said, Jeremy, this is total bullshit.
I knew you would react on this one Kari. Your explanation makes things all the more clearer: the study doesn’t take into account the profits generated by selling price inflation – which is both lame &..stupid from a scientific viewpoint.
Of course I would, it’s classic case of numerology, aka bad math. They’re just looking for companies with highest ROC and attributing all that to IT.
Maybe five years ago this list would’ve been full of IT companies, but then again, it was when IT companies’ stock prices were inflated. Funny that.
They also list only companies that have only once made loss during the last 5-year period, which of course left me wondering that does it mean that if a company’s profits are less than CAP model would suggest, does that mean negative “Information Value-Added”? The whole methodology is totally flawed.
The overrepresentation of the energy sector should have tipped the authors that there’s something wrong with their formulas.