Data
⎯ As observed above, a vast amount of data has been accumulated within the information systems of public and
private organizations.
These data originate partly from internal transactions of an administrative, logistical and
commercial nature and partly from external sources.
⎯ However, even if they have been gathered and stored in a systematic and structured way, these data cannot be
used directly for decision-making purposes.
They need to be processed by means of appropriate extraction
tools and analytical methods capable of transforming them into information and knowledge that can be
subsequently used by decision-makers.
⎯ The difference between data, information, and knowledge can be better understood through the following
remarks.
⎯ Data. Generally, data represent a structured codification of single primary entities, as well as of transactions
involving two or more primary entities.
For example, for a retailer data refer to primary entities such as
customers, points of sale, and sale items, while sales receipts represent the commercial transactions.
Information
⎯ Information is the outcome of extraction and processing activities carried out on data, and it appears
meaningful for those who receive it in a specific domain.
⎯ For example, to the sales manager of a retail company, the proportion of sales receipts in the amount of over
¤100 per week, or the number of customers holding a loyalty card who have reduced by more than 50% the
monthly amount spent in the last three months, represent meaningful pieces of information that can be
extracted from raw stored data.
⎯ (monthly sales, bonus declared)
Knowledge
⎯ Information is transformed into knowledge when it is used to make decisions and develop the corresponding
actions.
Therefore, we can think of knowledge as consisting of information put to work into a specific domain,
enhanced by the experience and competence of decision-makers in tackling and solving complex problems.
For a retail company, a sales analysis may detect that a group of customers, living in an area where a
competitor has recently opened a new point of sale, have reduced their usual amount of business.
⎯ The knowledge extracted in this way will eventually lead to actions aimed at solving the problem detected, for
example by introducing a new free home delivery service for the customers residing in that specific area.
⎯ We wish to point out that knowledge can be extracted from data both in a passive way, through the analysis
criteria suggested by the decision-makers, or through the active application of mathematical models, in the form
of inductive learning or optimization, as described in the following chapters. (sales analysis)
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