"Knowledge is power". In the context of a business organization
"Knowledge is power". In the context of a business organization, discuss the role of data, information and knowledge. In what way can a computer-based system support a manager in the decision making process?
.0 Introduction
A business organization is an entity formed for the purpose of carrying on commercial enterprise. Such an organization is predicated on systems of law governing contract and exchange, property rights, and incorporation. Information technology is of great importance to business and most are reliant various computerised systems in order to function efficiently and meet their aims and objectives. Computers are used in many ways in businesses from just merely word-processing to actually making decisions for managers to solve problems within a business organization. Data, information and knowledge are what businesses and individuals are based upon. These three elements are important to business organization in many ways, an example of where it these are is in market research whereby data is processed into information when collected and organised and then once this done the information is read by human and becomes knowledge. The importance and use of data is shown in figure 1.1.
Figure 1.1 Acknowledge Ramp
2.0 Data
Data is important is the raw and unprocessed material that arrive from the external world. For example consider the receipt that one receives from a supermarket checkout desk. It simply transfers the price of the objects in the basket into a table of data. There is little sorting, categorising or interpretation.
2.1 The Role of Data
Business organizations need large amounts of data to be processed in order for routine business transactions. However some types of data of data have constraints for example a bank cannot give details to anyone about its customers, this is a legal constraint from the Data Protection Act. Constraints like this occur often in businesses and are known as legal constraints, other constraints are political constraints or company constraints whereby the business is not allowed to disclose information externally, this often happens within law firms. Data is also used within a business organization in market research. In market research there are two types of data these are primary and secondary data. Primary data is raw data, which has been collected by the individual, and secondary data is existing data that has been processed by another person or company. Data such as this must be of relevance to what the company is investigating in its market research.
3.0 Information
Information is data that has been acted on cognitively, codified and transformed into a framework for specific purposes. It might include a variety of transformation processes including sorting, categorising, extraction etc. For example in many supermarkets there is an automatic process of discounting across linked product lines. This is often shown at the bottom of the shopping receipt as the total discount offered to the customer. At this stage the data has become of use to the customer, and some market value can be perceived.
3.1 The Role of Information
In a business information is classed as a resource or asset, as like capital, land, fuel etc. useful information in a business is integrated with the costs of production, distribution, security, storage and retrieval of information. Information is used when data is processed for example a business when performing and analysing market research turns the data into information which is now of relevance to a business. This is also used in databases where a database contains data, however the data is processed, and organised and categorized into field and is then transformed ...
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3.1 The Role of Information
In a business information is classed as a resource or asset, as like capital, land, fuel etc. useful information in a business is integrated with the costs of production, distribution, security, storage and retrieval of information. Information is used when data is processed for example a business when performing and analysing market research turns the data into information which is now of relevance to a business. This is also used in databases where a database contains data, however the data is processed, and organised and categorized into field and is then transformed into information. The use of information is of great use to a business as it is of value, some information can be sold to other individuals or companies, but on the other hand can be used or stored for future reference. Despite information being seen on paper, walls etc. It is not a physical object, this is shown the law case of RvWood (1996) where a student stole and exam paper and it was held that information cannot be stolen.
4.0 Knowledge
A favoured definition of knowledge is that offered by Nonaka and Takeuchi (1995, 58): ' Knowledge might be viewed as the first point in the transition process where the hand of a human action is visible.' This implies that in order for the transition process to be satisfied human action must be present, turning information into knowledge. For example a shopping list would have left a mechanistic process that has limited human intervention to one where deliberate value has been generated for the business and the customer.
4.1 The Role of Knowledge
Knowledge involves a human action, therefore the result of information read by a human is turned into knowledge, therefore the importance of knowledge to a business is of great importance, as the senior staff must have the greatest knowledge within a business organization in relation to that business environment. For example in a bank the information is on computer it not known by an employee until that information has been entered and processed by the human interaction. Knowledge unlike data and information in that it cannot be seen.
5.0 Data, Information and Knowledge Conclusion
Data, Information and knowledge interact, and in order for knowledge to exist the data and information must be present respectively. This process is often used when interacting with computers for example a database where data is inputted and is then sorted, categorized and processed it is then as mentioned previously changed into information by which human interaction become knowledge.
6.0 The Decision-Making Process
In order to understand the decision making process, it is necessary to understand how decisions are made, the most well-known model of decision making is that proposed by Herbert A. Simon. This is shown in figure 2.1.
(Systems Analysis and Design Third Edition James C. Wetherbe p335)
Decision-making is a three phase, continuous process, flowing from intelligence to design to choice but capable of returning to a previous phase when necessary. The need for a decision making process is invoked by the recognition of a problem or an opportunity. The result of a decision making activity is directed at resolving the problem or taking advantage of the opportunity. All decision making processes follow this process.
7.0 Decision Support System (DSS)
A Decision Support System (DSS) serves to directly support the intelligence and design phases of decision making, also having an indirect influence on the choice phase.
7.1 Intelligence Phase
The intelligence phase of the decision making process involve identifying the problem. Once a problem is identified, it needs to be defined, this is where the DSS can help a decision maker determine the scope of the problem to minimize the complexity of the decision. This phase usually requires delving deeper into the problem or identifying and examining the variables and their relationships. For example a symptom of a problem may be a decrease in sales, but the actual cause of the problem could be a change in consumer behaviour, a new product introduced by competitors, a morale problem in the sales force etc.
7.2 Design Phase
The design phase of decision-making involves developing and analysing decision
alternatives, some of which may not have occurred with the decision maker. Once this is done the alternatives need to be quantified or described. There are two ways in which this can be done by the decision maker. The first involves:
'...Retrieving data from a database, collecting new data, and manipulating data' (Systems Analysis and Design Fourth Edition Kendall &Kendall p396).
The second involves a more extra-organisational approach:
'...building analogies, seeking opinions or considering various scenarios'
(Systems Analysis and Design Fourth Edition Kendall &Kendall p396).
Once these alternatives have been generated and organized, performance criteria needs to be established, this involves assigning values, risks, weights, and/or a rank to each alternative. The reasons assigning these values is for the choice phase, which is later discussed. By implementing this to the problem with the decrease of sales the possible causes of the problem can be looked at and new alternatives that may not have been overlooked by the decision maker thus the DSS enhances the design phase by expanding the number of possible actions that can be considered.
7.3 Choice Phase
The choice phase of decision-making involve selecting a particular course of action to resolve a problem or to capitalize on an opportunity. DSS support of decision choice results from the output of models during decision design. The difficulty of the choice phase is a function of the degree of certainty associated with outcomes. If a decision is uncertain the use of the assigned values, risks, weights etc in the decision phase are brought into use to find the optimum solution.
7.4 Management Information Systems
Management information systems are computerized information systems that work because of purposeful interaction between people and computers. By requiring people, software (computer programmes), and hardware (computers, printers etc.) to function, MIS support a greater range of organizational tasks than transaction processing systems including decision analysis and decision-making. In order to access information, users of the MIS share a common database. The database stores both data and models that help the user interpret and apply that data. MIS output information that is used in decision-making. An example of an MIS report is an annual report for a stockholder, which is a scheduled report.
7.5 Group Decision Support Systems (GDSS)
Group Decision Support System (GDSS) are computer based information system that enhances group decision making by facilitating the exchange and use of information by group members, and interactions between the group and the computer, to formulate and solve unstructured problems. The decision making process for GDSS is same as DSS the only difference is the interaction of groups as oppose to one person. The intention of a GDSS is to bring a group together to solve a problem with the help of various supports such as polling, questionnaires, brainstorming, and scenario creation. GDSS software can be designed to minimize typical negative group behaviours such as lack of participation due to fear of reprisal for expressing an unpopular or contested viewpoint. The advantages of GDSS are that there is a parallel entry and more ideas, independent of time and place, good for subsequent editing, evaluation and action planning, and large groups can be effective. The disadvantages are loss of social interaction, loss of power for senior people cost of facilities and software.
7.6 Expert Systems
Expert systems are a special class of information system that have been made practicable for use by business as a result of widespread availability of hardware and software such as microcomputers and expert system shells. An expert system effectively captures and uses the knowledge of an expert for solving a particular problem experienced in an organization. The basic components of an expert system are the knowledge base, an inference engine connecting the user to the system by processing queries via languages such as SQL (structured Query Language), and the user interface. Knowledge engineers capture the expertise of experts, build a computer system, which includes this expert knowledge, and then implement it. However unlike the DSS, which leaves the ultimate judgement to the decision maker, an expert system selects the best solution to a problem or a specific class of problem.
8.0 Conclusion
All of the computer-based systems support in a decision making process, however the difference in output from these systems differ. MIS and GDSS are inferior decision-making systems, although GDSS is similar to DSS the requirement of a group is needed which have to be assigned upon by a manager and MIS has limited support for management decision making unlike the DSS and expert systems. DSS differs from these systems by its ability to simulate, via models, the outcomes of different of different courses of action being considered by a decision maker. However an expert system is superior, besides supporting a decision maker, an expert system can do one or more of the following:
* Make the decision (or perform)
* Explain the results and reasons for the actions taken
* Learn from its mistakes
The development of the DSS is also different to that of the expert system, therefore justifying its superiority to other information systems.
'A DSS designer tries to support the expert, whereas the knowledge engineer when developing an expert system is attempting to simulate the experts behaviour.'
Expert systems is still an emerging technology and will go beyond DSS in popularity to assist in productivity of organizations and help with management decisions, and is the most superior and effective computer based support system.
