Chapter-7: Information, Knowledge, Business Intelligence

• Information Concepts:• The word information is used commonly in our day to day working. The information has a value in decision making while data does not have.• Information brings clarity and creates an intelligent human response in the mind.• Data is like a raw materials while the information is equivalent to the finished goods produced after processing the raw material.

• The characteristics of information are: • Improve representation of an entity.• Updates the level of knowledge.• Has a surprise value• Reduces uncertainty.• Aids in decision-making.

• Here is a sales report which shown in table will highlight the point that the quality of information could be called good or bad depending on the mix of these characteristics.

• Sales Information Table Particulars of sales data

(Rs. Lakhs) Characteristics

Sales 10/day Represents sales/day.

Budgeted sales 15/day Represents budget/day.

Cumulative sales 510/60 days Updates the knowledge about sales as on date.

Cumulative budget 600/60 days Makes the information meaningful by a comparison with budgets and has a surprise value as it is significantly below the budget.

Sales Information Table

Ratio of sales performance to the budget

85% 15 per cent less than budget. Represents performance of Sales vs. Budget

Sales of new products

80/60 days Reduces the uncertainty of sales of new product as expected sales were only Rs. 70 Lakhs.

• In this example sales data is processed with the budget data and further some results are computed, providing information of an exceptional nature, that is the sale of new product in the total sales.• The sales data progressively becomes an information when processed with other data such as the budget and the new product sales.• Davis and Olson defines “information as a data that has been processed into a form that is meaningful to the recipient and is of real or perceived value in the current or the prospective actions or decisions of the recipient”.

• Whether an entity is a data or an information, it must be transferred through communication from the ‘source’ to the ‘Destination’ without loss of content. • Conceptual model of communication

• Communication model is used in the MIS. The MIS is equivalent to the transmitter which provides information and sends through reports (channel) to the various receivers, which is decoded or interpreted by the receiver at the destination.• The poor quality of an information due to various factors would create confusion and misunderstanding, which is equivalent to a ‘Noise’ and ‘Distortion’ in the communication model.• A good MIS communicates the information without a noise and distortion to the user.

• Information Presentation:• Presentation of the information is an art. • The data may be collected in the best possible manner and processed analytically, bringing lot of value in the information.• If it is not presented properly it may fail to communicate anything of value to the receiver.• The degree of communication is affected by the method of transmission, the manner of information handling and the limitations and constrains of a receiver as the information processor, and the organization as the information user.

• The method used for improving communication are1. summarization 2. Message routing.• The concept of summarization is used to provide

information which is needed in the form and content.

• The information can be summarized in a number of ways which shown in Table.

• Information Summarization

Key for Summarization

Focus of information

Operations

Management position

Responsibility General Manager, Divisional Head Marketing, Materials

Management functions

Performance, Goals, Targets

Production Target

Levels in the organization

Relevance to the level

Middle

Selective on condition

Exceptions Only those products, where sale is below the budget

• The principle behind summarization is that too much information causes noise and distortion. i.e., confusion, misunderstanding and missing the purpose.• The summarization contains the noise and the distortion.• Another method of improving the degree of communication is through message routing. The principle here is to distribute information to all those who are accountable for the subsequent actions or decisions in any manner.

• That is the information is generated with a certain purpose for a primary user, then such information may have secondary purposes to some other users in the organization. • The principle of the message routing achieves the spread of information to the appropriate quarters.• Knowledge is a power and an intelligent person in the organization can misuse this power to achieve personal goals undermining the functional and organizational goals.• In order to control the misuse of information, a control is exercised on the content of information and its distribution. The methods shown in table.

Methods to Avoid Misuse of Information.Method Reason ExampleDelayed delivery of information

A possibility of immediate action or decision is reduced. It will have only a knowledge value.

Sales report to the sales representative or a copy of invoice to the sales representative.

Change in the format and content of the report

Provide only that information which may be needed, hence the misuse is prevented

Sales information to operations management, sales versus target for the middle management sales with a trend analysis to the top management

Suppression and filtering of the information of confidential and sensitive nature

To avoid the risk of exposure and the misuse of information for achieving the undesirable goals

The price, the cost information. Drawing and design information.

Suppress the details and references of data and information

Make it difficult to collect, and process the data at the user end to meet the personal needs of information

Statistical reports with no references

Truncated or Lopsided presentation

Make it difficult to read through the information and avoid its probable misuse.

A focus on high value sales and production and suppress the details.

• Bias in Information :• While choosing the appropriate method of communicating information, a care has to be taken to see that it is not biased.• For example, while using the techniques of classification or filtering the information, it should not happen that certain information is to be avoided. • This bias enters because people try to block a sensitive information which affect them.• To overcome this problem, a formal structure of organization should be adopted and the type of information and its receiver should be decided by the top management.

• Many times the data and the information are suppressed but the inferences are informed, with no or little possibility of verification or rethinking.• In this case one who draws inferences may have a bias in the process of collection, processing and presentation of data and information.• Organizations have departments like corporate planning, Market Research, R and D, HRD and so on, which collect the data and analyze for the company and communicate the inferences.• In all these cases personal bias, organizational bias and management bias may be reflected in the entire process of collection, processing and communication inferencing.

• The presentation of the information will generate a bias and may influence the user. For example, if the information is presented in an alphabetical order and if it is lengthy, the first few information entities will get more attention.• If the information is presented with a criteria of exception, the choice of exception and deviation from the exception creates a bias by design itself.• For a quick grasp, the information is presented in a graphical form. The choice of scale, the graphic size and the colour introduces a bias in the reader’s mind.

• The attributes to increase information's utility which are following:

Attribute Explanation

The accuracy in representation The test of accuracy is how closely it represents a situation or event. The degree of precision will decide the accuracy in representation.

The form of presentation Forms are qualitative or quantitative, numeric or graphic, printed or displayed, summarized or detailed. Appropriate form is important.

The frequency of reporting How often the information is needed? How often it needs to be updated?

The scope of reporting The coverage of information in terms of entities, area and range, and the interest shown by the recipient or the decision maker.

The scope of collection Internal from organization or external to organization.

The time scale It may relate to the past, the current and the future and can cover the entire time span.

The relevance to decision making

The information has a relevance to a situation and also to a decision-making. The irrelevant information is a data.

Complete for the decision considerations

The information which covers all the aspects of the decision situation by way of the scope, transactions and period is complete.

The timeliness of reporting The receipt of information on time or when needed is highly useful. The information arriving late, loses its utility as it is outdated.

• Redundancy is the repetition of the parts or messages in order to avoid the distortions or the transmission errors.• Redundancy is considered as an essential feature to ensure that the information is received and digested.• Information: A Quality Product: