Data is all around. It is generated in practically every action of each business process within an organization’s business units. In general terms, data is raw facts. Data is converted into information, which businesses then use in reports or other meaningful forms. A company takes this information and analyzes it either manually or using complex information systems. Such analysis creates new information which is called knowledge. The foundational part of knowledge is data as it is the point of origin, and this is important not only for decision-making but also for the development of competitive advantages.
To create knowledge, companies must understand a few principles. Among these principles is connectedness and relationship among data. Some of these are visible, and others require advanced information systems to determine if relationships exist. By finding associations, businesses learn new information and generate actionable knowledge. For example, retail companies may sell two distinct items in different parts of a store. These two items may appear in sales receipt multiple times as customers continuously purchase the items together. This association may not be apparent to the store. When the connection is made, actionable knowledge is developed. Meaning, the store can take actions, such as creating promotions with both items or displaying the items together to increase the probability of a sale. Knowledge workers can also seek information by researching and establish connections with other pieces of data.
Compiling, storing, and analyzing data is not the only way that businesses create knowledge. Learning by experience is another way. Such experience is developed by common business practices and general business activities. However, it is harder for businesses to store and use this type of knowledge. This is because an organization’s human assets generally experience the creation of the knowledge. For example, project managers may gain experience and learn valuable lessons while working on projects. Such experience generates new best practices. The problem is that this knowledge is not institutionalized. It is in the heads of employees. Therefore, organizations need to debrief employees, compile the knowledge gained, and store the information so that everyone needing access can use it.
Businesses that fail to institutionalize knowledge will end up losing this vital asset. The reason is that, at some point, employees may change jobs and move on, taking the experience and best practices established with them. To avoid the loss, organizations can develop a repository that stores information, which includes debriefing sessions, lessons learned, best practices, vital known and used resources, and other documentation needed for decision-making or executing mission-critical tasks.
Furthermore, handling knowledge is not just about accumulating and disseminating. The rate of change forces businesses to have to continuously review and update information stored in databases as best practices can improve or change or new technologies can render certain information obsolete. Additionally, those in charge of the information need to know how to validate and update records for consistency and accuracy. To handle corporate knowledge, organizations should designate a department responsible for the handling of the knowledge base and create policies and procedures for continuous review and subsequent update when warranted. Such practices should include training new employees on how to handle the processes.
Businesses use data, information, and knowledge daily to make important decisions or to generate competitive advantages. Some of this information is internal and is created by a businesses’ functional units or by the experience gained by employees at performing a task, such as best practices or knowledge bases, while other information is external, such as stock market information or data retrieved by activities exterior to the business. Regardless of the type of data, businesses should understand how to evaluate, store, manage, update, and use knowledge for better decision-making.