Chapter 2
Information Systems
and Knowledge Management
AT-A-GLANCE
I. Information, Data, and Intelligence
II. The Characteristics of Valuable Information
A. Relevance
B. Quality
C. Timeliness
D. Completeness
III. Knowledge Management
IV. Global Information Systems
V. Decision Support Systems
A. Databases and data warehousing
B. Input management
Internal records
Proprietary business research
Salesperson input
Behavioral tracking
Outside vendors and external distributors
C. Computerized data archives
Statistical databases
Financial databases
Video databases
D. Networks and electronic data interchange
VI. The Internet and Research
A. What exactly is the Internet?
B. How is the Internet useful in research?
Accessing available data
Collecting data
C. Navigating the Internet
D. Interactive media and environmental scanning
E. Information technology
F. Intranets
G . Internet2
LEARNING OUTCOMES
1. Know and distinguish the concepts of data, information and intelligence
2. Understand the four characteristics that describe data
3. Know the purpose of research in assisting business operations
4. Know what a decision support system is and does
5. Recognize the major categories of databases
CHAPTER VIGNETTE: Delivery, Data, and UPS
United Parcel Service (UPS) is the largest package delivery company in the world. How does it
do it? Data management and integration. UPS invests over one billion dollars a year on
technology, making it the only company with an integrated data colletion and management
system that incorporates all levels of services, both global and domestic, in one pickup and
delivery system. UPS leverages its data intelligence to create real-world, real-time information
throughout its global delivery network. Key to this success is the use of telematics, which
incorporates global positioning systems with package information. Information systems are a
core component of UPS’s business success.
SURVEY THIS!
Students are asked to review the questionnaire they responded to last chapter and to consider which
sections provide the most value to a head-hunting firm that matches employers to potential employees and
the kinds of information this section of the survey yield and how it might help the head-hunting firm.
RESEARCH SNAPSHOTS
RFID Technology Gets Cheaper – Business Knowledge Grows
Radio frequency identification (RFID) tags have been used by large organizations and the U.S.
military for several years to track equipment and supplies. Recently, though, Walmart is pushing
suppliers to adopt the technology. Not only can it be used in logistical operations, it can be used
to “go into” consumers’ homes and track how much and the way consumers actually consume
products, potentially tying ordering to customer consumption. Prices continue to drop (i.e., as
low as 12.9¢ each, but passive RFID tags range from 9¢ to 25¢ ), opening up the possibility of
new applications.
Are Businesses Clairvoyant?
Businesses using a system called active data warehousing to integrate data with research results
that allow them to predict consumer preferences and even cyclical usage patterns quite accurately
have an advantage in the marketplace. The latest technologies even provide ways for customers
to voluntarily enter data or block certain data from being transmitted to companies he or she does
business with.
Staying Home at Home Depot
The DSS of any organization is no better then the quality of the data input to its data warehouse.
For this reason, Home Depot has people who decide what should go into the data warehouse and
how the DSS will use it (i.e., executives) and outside suppliers who may be involved in
information technology design spend a few days in an actual Home Depot store. Outside
directors meet with middle managers and conduct store visits so they can provide more
meaningful advice to senior executives.
OUTLINE
I. INFORMATION, DATA, AND INTELLIGENCE
Data are simply facts or recorded measures of certain phenomena (things or events).
Information is data formatted (structured) to support decision making or define the
relationship between two facts.
Business intelligence is the subset of data and information that actually has some explanatory
power enabling effective decisions to be made.
So, there is more data than information, and more information than intelligence.
II. THE CHARACTERISTICS OF VALUABLE INFORMATION
Data characteristics:
Relevance
Quality
Timeliness
Completeness
Relevance
Relevance reflects how pertinent these particular facts are to the situation at hand.
Irrelevant data and information often creep into decision making.
Relevant data are facts about things that can be changed, and if they are changed, it will
materially change the situation.
So the question is: Will a change in the data coincide with a change in some important
outcome?
Quality
Data quality is the degree to which data represent the true situation.
High quality data are accurate, valid, and reliable, and they represent reality faithfully.
Obtaining the same data from multiple sources is one check on its quality.
Critical issue in business research.
Timeliness
Timeliness means that the data are current enough to still be relevant.
Computer technology has redefined standards for timely information.
Completeness
Information completeness refers to having the right amount of information.
Often incomplete information leads decision makers to conduct business research.
III. KNOWLEDGE MANAGEMENT
Knowledge is a blend of information, experience, insight and data that form organizational
memory – a key resource and a potential competitive advantage.
Knowledge management is the process of creating an inclusive, comprehensive, easily
accessible organizational memory, which can be called the organization’s intellectual capital.
Purpose is to organize the intellectual capital of an organization in a formally structured
way for easy use.
Particularly useful in making data available across the functional areas of the firm.
Salespeople are in a key position to have a lot of knowledge about customers and the firm’s
capabilities, and market-oriented organizations generally provide both formal and informal
methods through which the knowledge gained by salespeople can be entered into a data
warehouse to assist all decision makers.
IV. GLOBAL INFORMATION SYSTEMS
A global information system is an organized collection of computer hardware, software,
data, and personnel designed to capture, store, update, manipulate, analyze, and immediately
display information about worldwide business activities.
Uses satellite communications, high-speed microcomputers, electronic data interchange, fiber
optics, data storage devices, and other technological advances in interactive media.
V. DECISION SUPPORT SYSTEMS
Business research can be categorized on the four possible functions it serves in business:
1. Foundational – answers basic questions (e.g., What business should we be in?).
2. Testing – addresses things like new product concepts or promotional ideas (e.g.,
How effective will they be?).
3. Issues – examines how specific issues impact the firm (e.g., How does
organizational structure impact employee job satisfaction and turnover?).
4. Performance – monitors specific metrics including financial statistics like
profitability and delivery times; this category is of most interest to decision support
systems.
A decision support system (DSS) is a system that helps decision makers confront problems
through direct interaction with computerized databases and analytical software programs.
Purpose is to store data and transform them into organized information that is easily
accessible to managers, enabling decisions to be made in minutes rather than days or weeks.
Modern decision support systems greatly facilitate customer relationship management
(CRM).
A CRM system brings together information about customers including sales data, market
trends, marketing promotions and the way consumers respond to them, customer
preferences and more.
Database and Data Warehousing
A database is a collection of raw data arranged logically and organized in a form that can
be stored and processed by a computer.
Data warehousing is the process allowing important day-to-day operational data to be
stored and organized for simplified access.
Data warehouse is the multitiered computer storehouse of current and historical data.
Data warehouse management requires that the detailed data from operational systems be
extracted, transformed, placed into logical partitions, and stored in a consistent manner.
Input Management
Input includes all the numerical, text, voice, and image data that enter the decision
support system.
Many functions within an organization provide input data.
Input data can also come from external sources.
Major sources of data input:
1. Internal Records – accounting reports of sales and inventory figures.
2. Proprietary Business Research – emphasizes the company’s gathering of new
data.
May involve either or both of the testing and issues types of research.
3. Salesperson Input – can alert managers to changes in competitors’ prices and
new-product offerings as well as customer complaints.
4. Behavioral Tracking – modern technology provides new ways of tracking
human behavior.
Global positioning satellite (GPS) systems allow management to track
the whereabouts of delivery personnel at all times.
Can track actual customer behavior on the Internet.
Scanner data refers to the accumulated records resulting from point of
sale data recordings. The term single-source data refers to the ability of
these systems to gather several types of interrelated data (i.e., purchase
and promotional activity at the time).
5. Outside Vendors and External Distributors – market information as their
products (e.g., Nielsen Company). Companies called data specialists record and
store certain business information.
Computerized Data Archives
Historically, collections of organized and readily retrievable data were available in
printed form at libraries but are now available electronically (e.g., the Statistical Abstract
of the United States).
Numerous computerized search and retrieval systems and electronic databases are
available as subscription services or in libraries (e.g., Dow-Jones News Retrieval and
Bloomberg Financial Markets).
Data wholesalers put together consortia of data sources into packages that are offered to
municipal, corporate, and university libraries for a fee.
Statistical Databases
Contain numerical data for market analysis and forecasting.
Geographic information systems use geographical databases and powerful
software to prepare computer maps of relevant variables (e.g., Claritas, Urban
Decision Systems, and CACI).
One source for these huge data warehouses is scanner data, but not all points of
sale have scanner technology (e.g., convenience stores and vending machines).
The Universal Product Code, or UPC, contains information on the category of
goods, the manufacturer, and product identification based on size, flavor, color,
and so on.
Financial Databases
Competitors’ and customers’ financial data (i.e., income statements and balance
sheets) may interest managers.
Compustat is an example.
Video Databases
Video databases and streaming media are having a major impact on many goods
and services (e.g., clips of upcoming films, television commercials on the
Internet).
Networks and Electronic Data Interchange
Electronic data interchange (EDI) systems integrate one company’s computer system
directly with another company’s system.
VI. THE INTERNET AND RESEARCH
What Exactly is the Internet?
The Internet is a worldwide network of computers that allows users to access to data,
information, and feedback from distant sources.
There is no central computer; instead, each message sent bears an address code that lets a
sender forward a message to a desired destination form any computer linked to the Net.
A host is where the content for a particular Web site physically resides and is accessed.
How is the Internet Useful in Research?
Accessing Available Data
Allows instantaneous and effortless access to a great deal of information.
Since it can be electronically downloaded or copied, it isn’t necessary for a person to
transcribe the data, making it available in a more error-free form.
Collecting Data
Questionnaires can be posted on a Web site and respondents can be invited to go to
the particular URL and participate in the survey, which cuts down on costs (i.e.,
mailing costs) and errors since data can be automatically recorded.
When a consumer uses the World Wide Web, their usage leaves a record that can be
traced and observed.
Navigating the Internet
The World Wide Web (WWW) refers specifically to that portion of the Internet
made up of servers that support a retrieval system that organizes information into
documents called Web pages.
Content providers – parties that furnish information on the WWW; maintain Web
sites.
A Web site consists of one or more Web pages with related information about a
particular topic.
Introductory page or opening screen is called the home page because it
provides basic information about the purpose of the document along with a
menu of selections or links that lead to other screens with more specific
information.
Connections between pages anywhere on the Internet are called hyperlinks.
Uniform Resource Locator (URL) – a Web site address that Web browsers
recognize.
Search engine – a computerized directory that allows anyone to search the WWW
for information based on a key word search (e.g., Yahoo!, Goggle, Hotbot,
WebCrawler, etc.).
Key word search – search engine searches through millions of Web pages for
documents containing the key words.
Google revolutionized search engines by basing searches on a mathematical
theory known as graph theory, which greatly improved the accuracy and
usefulness of results.
Interactive Media and Environmental Scanning
Interactive medium – a medium (i.e., Internet) that a person can use to communicate
with and interact with other users.
Environmental scanning entails all information gathering that is designed to detect
changes in the external operating environment of the firm.
Information Technology
Pull technology – consumers request information from a Web page and the browser
determines a response.
Push technology – sends data to a user’s computer without a request being made.
Software is used to guess what information might be interesting to consumers based on
the pattern of previous responses.
Smart agent software – capable of learning an Internet user’s preferences and
automatically searching out information and distributing the information to a user’s
computer.
Cookies – small computer files that record a user’s Web usage history.
Intranets
An Intranet is a company’s private data network that uses Internet standards and
technology.
Information is available only inside the organization or to those whom the organization
deems as appropriate participants.
Key difference between Internet and an Intranet is that security software programs, or
“firewalls,” are installed to limit access.
Serve as knowledge portals that contain substantial amounts of organizational memory
and can integrate it with information from outside sources.
Can be extended to include key consumers as a source of valuable research (e.g., new
product development).
Internet2
A collaborative effort involving about 250 universities, government entities, and
corporate organizations in the U.S., and access is limited to those organizations.
Goal is to create a faster more powerful Internet by providing multimodal access,
employing more wireless technologies, and building in global trading mechanisms.