The race to the top- Information Arbitrage
Talked through this concepts with some of my colleagues today. It goes like this:
In today’s economy, folks are looking for ways to save money in business. More and more, social media emerges as a solution. Take, for example, the corporate conference. On average, it costs about $1,000 per head to fly attendees in and put them up for a 2 day conference. Businesses are now uncomfortable with the $250,000 spend and are looking for alternatives. Social media fills the void. Why not host a virtual conference at more modest cost, say $5,000?
This business activity defines the race to the bottom.
Similarly, businesses and its employees are looking for an “edge” in the workplace. Historically valuable conversations like “what is our market share?” are being replaced by a thirst for information. More importantly, to be the first to find hot information and report it throughout the organization. To the prospector come the riches. Today, value comes from the following statements:
- “Did you see?”
- “I found…”
- “Check this out…”
Information is driving a “race to the top” in terms of value. Each newly discovered tweet, story, or theory could be the nugget that wins recognition, fame, or accomplishment. So we mine Twitter and read RSS dumps trying to identify the tidbit that will be most valued by the organization. Through information control, the boss used to be the best informed person in the group. Now, the employees have equal access to information via the web. The equation shifts and the organization flattens.
This activity defines the race to the top.
The spread between top and bottom is information arbitrage. No longer do I need to spend hundreds of dollars on professional groups to network in my industry or thousands of dollars to bring in consultants. The web makes this information more accessible and in most cases free. The challenge for employees is to make the information palatable for the organization to devour.
The role of corporate web editor is born. Take in tons of web based information, edit, re-package, and route within the organization.
I need to think this through a bit more but wanted to get initial thoughts out there. I also realize I’m not the first to think of “Information Arbitrage” as a concept but I like the handle. What do you think?
Perspectives on Connected Innovation and Collaboration 
Hi Don
Interesting points – I had a phone interview with an internal recruiter at a large insurance company about a new Innovation role they are hiring for last week. When I asked about how they would measure my performance in the short term (especially as the team I would be leading would work on developing concepts 3-4 years out) – she talked about how even just having the flow of new information, ideas, and concepts into the organisation would be seen as a successful job being done. Interesting stuff – and quite an alien concept to me as I’m used to companies valuing only what they can see will directly be impacting the bottom line!
Boris Pluskowski
March 23, 2009 at 5:05 pm
Thanks for the data point. Very interesting indeed. Hope good interviews keep rockin your way.
Donald Smith
March 23, 2009 at 7:08 pm
Gets me thinking Don, rather optimistically perhaps – but could this be the sign of a bottomed out market? The point at which companies stop looking at the bottom line and start valuing input other than cash is typically only seen when a company is growing – could the recognition of information flow as a source of value, be seen as a sign of the recession beginning to finish?… optimistic maybe, but possible… 🙂
Boris Pluskowski
March 23, 2009 at 7:35 pm
hmm…that’s some smart stuff. Let’s keep an eye on this theme and see where it goes.
Donald Smith
March 23, 2009 at 8:13 pm
So if organizations approach information arbitrage from the top and the bottom would you consider one over the other? Do you need both for balance and change (I think so). What if you have an even race and it ends up a draw? ;-0
Ward Tongen
March 23, 2009 at 7:39 pm
We have to go for both. There is new low hanging fruit for productivity savings, things we probably haven’t considered yet. Things that might create new market opportunities.
Likewise at the top. Business will explore this arbitrage until the spread narrows to your average grocery margin, or 2%.
What do you think the shelf life looks like for this spread? 10 years? 2? The internet will make it happen at light speed.
Donald Smith
March 23, 2009 at 8:17 pm
[…] friend, Donald Smith on his “Perspectives on Connected Innovation” Blog. The post, entitled “The Race to the Top – Information Arbitrage” – details a new goal in organizations as they embrace social media to both save money at the […]
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