NEW CONCEPTS FOR THE MANAGEMENT OF INFORMATION RESOURCES Walter R. Kendall University of North Colorado Greeley, Colorado C. Richard Scott Radford University Radford, Virginia Charles J. Capps III Sam Houston State University Huntsville, Texas Successful mangers of the future are likely to be well~informed opportunists who use information strategically and have the flexibility to respond to opportunities. The success of these managers will be determined by their ability to combine the right information with the right opportunities. Information strategy is increasing in importance and will assist firms in building a competitive edge. Information has always been at the heart of organizations. While always vital, the increasing availability of various types of information has led to its growing organiza- tional importance. Only within the last few years has the availability of information become such that managers have been able to obtain it at the time and place when they need it. Although much information has to be sifted to identify key informa- tion which is timely and complete, those managers that have it and know how to use it achieve a form of leverage over competing firms which do not possess similar information. Utilizing that latest and best information for aggressive management is prudent, if not imperative, in view of today's realities. Given the importance of information, it is critical for an organization not to lag behind competitors in the development and utilization of information resources. Of- ten, it takes years of lead time to develop an efficient information resource. For a lagging competitor, the race is likely over about the time this critical distinction sets in. The importance of organizational information is not going to lessen over time. As more firms think competitively, their attitudes toward information must change. They must come to think of information as a strategic asset - an asset that becomes the enabler of their business plans. The economic gap between those which do and do not possess and employ infor- mation resources effectively will likely widen appreciably in the 1990s and beyond. Only those managers who best understand this impact and direct their organizational resources in such a way as to best utilize information as a productive asset are likely to survive in an increasingly competitive global environment. Journal of Business Strategies, Volume 7, Number 1 (Spring 1990) 25 26 Journal of Business Strategies Vol. 7, No.1 The trust of this article is twofold. First, it is advocated that information should be added to the list of the traditionally accepted factors of production. Second, an information protection decision model coupled with a classification scheme based on the economic value of differing types of information to the firm is presented. Information as a Factor of Production Incorporating information as a strategic corporate resource means managing a dy- namic balance between the conceptual thinking of economists and managers. Econo- mists have generally grouped productive factors into three broad categories: land, labor and capital. These factors have been viewed as the necessary inputs to any productive process. Land had been used to represent the input of raw materials which are derived as "gifts of nature;" labor the efforts of man; and, capital the input of man-made resources, such as machinery. Usually, money is added to the process as a means of facilitating trade, thereby providing some common denominator for valuation between the inputs and the output of the firm. These inputs, or factors of production, have generally been viewed as substitutes for one another, tradiitionally assumed to be substitutable for one another at some diminishing rate of return. Thus, the use of labor could be increased and substituted for inputs of capital or land. Due to the scarcity of these inputs, however, a continual increase in the amount of labor applied to a productive process (while land and capital remain fixed) result in less and less output per unit of labor added. Even if labor were extremely cheap, diminishing returns will eventually be reached where further increases in output can only be obtained by increasing the input quantities of land or capital. A primary concern of theoretical economists and practicing managers is the optimal allocation of resources under their control. They are concerned with producing the highest possible level of output (utility) given the productive resources available. This translates into using the firm's factor endowments in the most efficient way possible - finding the best fit of input combinations to accomplish the productive task. Information inputs which enhanced the productive process are a key organizational resource, and as such should be viewed as a factor of production. Management theorists have extended the list of factors of production that was originated by economists. Many management scholars subscribe to the ideas of Fred- erick W. Taylor [4J. That is, they accept the proposition that management makes a unique contribution to the productive process. As a result, they contemporarily include management talent or entrepreneurial ability as a fourth basic factor of pro- duction, in addition to land, labor, and capital. This additional factor is usually defined in terms of the professional managerial skills and the necessary risk-taking that is involved with innovation and ownership of a successful business enterprise. Thus, managers would list land, labor, capital, and management or entrepreneurial ability as the factors of production which are under their control. The inclusion of information as a productive input should not entail as great a conceptual leap for managers as for economists. As land, labor, and capital are all Spring 1990 Kendall, Scott & Capps: Information 27 tangible inputs, it is easy for both economists and managers to recognize their value to the productive process. Management and entrepreneurial ability are far less tangible and are, therefore, more difficult to evaluate. But, because managers have already accepted management and entrepreneurial ability (relatively intangible factors), they should be more open to the concept of information as a productive input. Information however, possesses special characteristics which makes it unique. It is these special characteristics which should be understood if information is to be utilized and handled properly in the context of a factor of production. The Special Nature of Information Information is unlike any of the other productive inputs in many important aspects. These differences cause the need for decision-makers to re-evaluate the way in which productive factors are combined to produce goods and services. There may also be an impact on those that own the other factors of production, since the way in which the other inputs are allocated may be greatly altered as information use, flows, and values are altered. Some of the salient characteristics of information are outlined in an article by Har- lan Cleveland in the Futurist ([1], pp. 34-39). We have drawn on Cleveland's work, but have expanded and modified his thoughts. These extensions represent an effort to develop a framework to better guide managerial thought with regard to the na- ture, use, abuse, and safeguarding of information within the corporate environment. Within this expanded framework, information is viewed as simultaneously expansible, compressible, substitutional, transportable, shareable, and diffusive. These unique features of information are discussed below. Information is Expansible Most information tends to expand with use. Thus, as information is used, even more is generated. On the surface, this attribute may seem to be of little consequence. However, when the idea is applied to the efficient use of productive inputs, the special nature of information as a factor of production may be seen. All of the other factors· of production are viewed as being scarce - that is, there is a limited supply of these inputs at any point in time. Moreover, few of the traditional resources are self- renewing, much less self-generating. If information expands with use, it must not be viewed as being a scarce input, but rather an input of potential glut. The only limits on the use of information would be the capacity of users to analyze, store, and retrieve it. However, even the limitation of analytical ability may diminish as artificial intelligence is further developed. The non-scarce nature of information must bring about a re-thinking of the dimensions associated with the calculus of util- ity maximization and cost minimization. Information is Compressible It is possible to concentrate, integrate, or summarize vast amounts of informa- tion for easier handling. Through the selection and compression of information into 28 Journal of Business Strategies Vol. 7, No.1 knowledge and wisdom, some of it is necessarily lost. The compression process, while necessary, is also a potential source of error, for the compression process eliminates information which may ultimately be needed. Managers must familiarize themselves as to the value of their information holdings (just as they know the worth of their tangible assets) in order to be able to distinguish the important from the trivial and preserve that which is needed. Further, managers must be able to retrieve previously- discarded information should it become viably important to the firm. Information is Substitutional The evolution of the mental process which allows managers to think of information as a factor of production will also cause them to grasp the idea that information can be substituted for land, labor, capital, entrepreneurial ability and management. In many cases, managers will come to the realization that information can be substituted for those other, often more expensive and less substitutional, factors of production. For instance, when the other resources are used more efficiently (i.e., less of the resource is used due to the input of new information), the net result will be a substitution of information for other factors in the productive process. Information is Transportable Using telecommunications technology, information can be transported at the speed of light! Thus, is provides a lightning response time for decisions. Also, information movement can be a strategic competitive tool in that its ease of movement does well what physical distribution often does poorly. With information, managers are not faced with the problem of physical transportability associated with the other factors of production. While some cost is involved in the "transportation" of information, its speed and lack of physical bulk should keep this cost relatively low. Information is Shareable The premise that information can be easily shared should cause a change in man- agerial thought. With information, managers must not think in terms of traditional exchange transactions, where one party gives up something of value in exchange for something else of value. Information is shareable. That is, I may give information to you without losing it myself. For example, if information is shared, we both have it - my stock is not diminished because yours is increased. In fact, the same information can be sold, bartered, or otherwise exchanged. Information is Diffusive Information tends to leak. It is difficult to contain information as one would think of containing a physical object. Because information lends itself to diffusion, the issues of secrecy, property rights, and confidentiality are potentially called into question. However, since information is easily transported, potential unauthorized, as well as authorized, users can have ready access to it. Therefore, processes must be established to deny or limit the pilferage of information by persons or organizations Spring 1990 Kendall, Scott fj Capps: Information 29 which the owner wishes to restrict from access. That is, ways must be found to seCure stocks of information much in the same manncr as the other factors of production, but these methods must not be overly restrictive in its legitimate transportation. Policies which are aimed at the husbanding of the other factors of production have been given considerable attention by prudent strategic managers. For example: personnel policies exist in an effort to retain and further develop an organization's l