book.chapter The data focused economy

In essence, anything that has been digitized or that can be digitized in the future can be classified as information. The cost structure of information is unusual: it is costly to create and assemble into a package such as a $100 million movie, but exceptionally cheap to reproduce such as copying that movie onto a videotape for a few cents. Information is an "experience good" - a person often can't tell what any piece of information is worth until it has been acquired and applied, only then can its true value be fixed. Brand names and corporate awareness are created by images for information goods. There is now so much information available that often the value created by an information provider comes in filtering out irrelevant material and highlighting or communicating what is useful. The more customized a packet of information is, the greater the value it can have to consumers. The current growth in interest in the information economy is being driven by technological advances in the delivery mechanism and infrastructure rather than by improvement in the quality of the information offered in and of itself. As an information resource, the Internet is not terribly impressive, but as an infrastructure for delivering personalized information, it is without peer. Consumers today are better equipped to do more with the same information than at any previous time in history. In the information economy, complementary products provided by collaborators create significant added value. Therefore, companies competing in the information field place more emphasis on compatibility with others than on trying to outperform direct competitors. Technology lock-in becomes the norm for the information economy - once an information system or technology has been adapted, there will be relatively high costs to change to another system. For many information technologies, a network effect exists, where the greater the number of users, the more value there is in becoming a user, creating a positive feedback loop. Therefore, growth and the achievement of critical mass become far more important than profitability in the early stages. In the information economy, the timing of strategic corporate moves becomes more important than any other factor. As a result of information's rather unique cost structure, the pricing and value of information goods is determined solely by how much consumers are willing to pay. The traditional approach of calculating costs and then adding a margin for profit simply cannot apply to an information good.