Case Study: Automated Waste Disposal, Inc.

This is an interesting short case about using IT to monitor employees. In this case it’s a GPS system used to monitor the location of trucks and company cars. Ultimately, however, it plays out as a system to monitor drivers and salesmen. Management must walk a fine line as they build a process to implement such a system in an organization. As an extension to this discussion, the instructor might ask “would it be easier for management to implement a GPS system in an existing company (who previously didn’t have one) or in a new company (where all employees are just learning the processes and systems)?

Sample Answers to Discussion Questions:

1. The positive and negative aspects of Viento’s use of the GPS-based system to monitor his drivers and salesmen:

Positive aspects might include the ability of Viento to know where his trucks are at any given time. If someone has to go into an ‘unsafe’ area and/or is not where they are supposed to be at a given time, Viento can help them by knowing where they are. The case also mentions the money savings that accrued due to the reduction in overtime, presumably because the drivers knew they were not only ‘on the clock’ but being watched. The negative aspects might include the cultural impacts… his drivers feel big brother is watching, which may make them resent the system or at worst case, sabotage it. It might drive unintended consequences such as drivers speeding or taking unsafe risks because they know their management is watching and they have certain time restrictions and milestones to make.

2. Advice for Viento about the use of the system for supervising, evaluating and compensating his drivers and salesmen:

It’s one thing to use the system to monitor behavior and correct it. It’s another entirely to use it as part of the evaluation and compensation system. Viento must be very careful how he introduces that to the workers. IF they are unionized, he must make sure to have buy in from the union. But in any case, he should start by letting the drivers get used to the system without fear of it impacting their compensation. After they are used to it and have changed their behavior, he can slowly introduce a plan to use the information for evaluation and compensation. Should he not do it slowly, he can expect some employees to not only complain, but possibly sabotage the systems, break them (and claim it was an accident or something they know nothing about). Astute students will use the TAM model to structure their response to this question.

3. As more and more companies turn to IS to help them monitor their employees, what do you anticipate the impact will be on employee privacy? Can anything be done to ensure employee privacy?

This is an opinion question. The impact on employee privacy is clearly an issue when IT is introduced to monitor behavior and activities. We’ve seen lots of legal action regarding monitoring of e-mail, but usually the courts come down on the side that company email systems are the property of the company, and therefore monitoring the emails is not an invasion of individual privacy. On the other hand, monitoring individuals such as the drivers in this case study, can uncover some information that may be deemed private (like visiting their girl friends, their local bar, or other private activity). What the company does with that information is the key here. To ensure employee privacy, companies need very clear guidelines on what information they plan to collect, what they will do with that information, and what consequences result if the guidelines are not followed. These guidelines must be clearly communicated to both management and monitored employees, so that all is out in the open and the monitoring is not seen as a spying operation or subversive management activity.

* Source: Pearlson & Saunders (2006)

Case Study: Virtually There?

This case study allows the students to explore issues related to the management of virtual teams.

1. Why this case offers an example of a virtual team, and in what ways are the members on this team dispersed (i.e., location, organization, culture, etc.):

Consistent with the definition of virtual teams on page 73, this team consists of “geographically and/or organizationally dispersed coworkers that are assembled using a combination of telecommunications and information technologies to accomplish an organizational task.” The physicians work for different organizations and are in different locations. Point out to the students that virtual teams may also consist of team members who are in different countries or who work for the same company in the same location, but on a different time shift.

2. The advantages of the virtual team described in this case:

This virtual teams to provide input to the patient on treatment options (Though not clear from the case, it may also allow a better diagnostic to be made.) Thus, the patients can draw on the knowledge of many doctors. These doctors located in other locations may know about innovative treatments or may have a fresh look on the treatment options.

3. The technological support that is needed for the virtual team to meet its goals:

The case mentions a real-time shared data network. Other technology support may include electronic collaboration systems, electronic repositories, and video teleconferencing.

4. Possible suggestions that can be offered to Dr. Esserman for managing this virtual team:

This question is an excellent tool for exploring the issues in managing virtual teams. Below are some of the issues that may emerge

• Compensation:
  – How will the team members be compensated for their participation? For the team to work over a long term, some system will need to be devised to compensate the physicians for their time. Since the quality of their input will continue to be important for these virtual teams, there needs to be some motivation for the physicians’ participation.
• Liability:
  – Considering the widespread concern for medical malpractice, who will assume the responsibility for problem cases? The students may respond the physician who serves as the initial point of contact, but it may not be possible to so neatly restrict liability.
• Rotating leadership:
  – Who will lead the teams? How will the differences of opinion be handled? Though little research has been conducted on virtual team leadership, the popular press describes a phenomenon that appears to be somewhat unique: rotating leadership. In the virtual team described here, the initial physician who was contacted may serve as the leader on a particular case. Leadership rotates with each case. The leader of the team for each case can be responsible for uncovering and handling differences of opinion.
• Communication:
  – How will the information be communicated to the patient? Who will be responsible for maintaining the communication technology? Students may be concerned that the sensitive information has to be communicated via face-to-face communications, the richest communication tool. However, other students will probably point out the cost and other difficulties in getting all physicians on the team together to discuss treatment options with the patient. This discussion can be very useful to highlight the advantages and disadvantages of virtual teams. Other forms of communication (i.e., video conferences) or approaches (having the physician who is the initial point of contact summarize the discussion) can be discussed.
• Technology support:
  – Who will provide the technology support? These teams will only be able to work if the hospitals provide adequate support of compatible technologies. However, in addition to the technology support for each organization, someone will need to actively coordinate with the appropriate support personnel in each organization to ensure that the technologies of each organization can continue to interface with one another. Technological support raises a non-trivial cost issue.
• Privacy/security:
  – How will the confidentiality of patient records be maintained? In a world increasingly concerned about privacy, the confidentiality of patient records must be addressed.

* Source: Pearlson & Saunders (2006)

Case Study: Roche’s New Scientific Method

“So what is the right way to reconfigure a company when breakthrough technology shows up on its doorstep? Step inside Roche’s U.S. pharmaceuticals headquarters, and you’ll see how that adjustment is taking place. It begins with something as basic – and hard – as embracing the excitement of having way too much data, too fast. It goes on to include new thinking about the best ways to build teams, hire people, and create a culture where failure is all right, as long as you fail first. The only way to embrace a technological revolution, Roche has discovered, is to unleash an organizational revolution” (Anders, 2007)

* Extracted from: Online article on FastCompany.com, available at http://www.fastcompany.com/magazine/54/roche.html

The areas of information strategy and organizational strategy that Roche had to deal with are as follows:

Information strategy to deal with:
- A new way to handle too much data too fast

Organizational strategy to deal with:
- The way to build teams
- The way to hire new people
- The way to create culture

The reason why those changes necessary:

The reason behind the change in strategies is the emergent of new technology in pharmaceutical, which requires a change in thinking among management and workers of Roche.
(Further acceptable elaboration on this is required.)

A good answer would link the elaboration with the IS Strategy Triangle, the business diamond (Hammer & Champy, 1994), the managerial levers (Cash, Eccles, Nohria & Nolan, 1994) and/or the value chain (Porter, 1985). It should mention how the changes in these strategies eventually change the business process, where the bottleneck issues are confronted by having new methods in handling tasks.

A good additional discussion on how Roche eventually applied the D’Aveni’s 7Ss of hypercompetition model in their strategies.

7-S: Application

• Superior stakeholder satisfaction:
  - Maximizing customer satisfaction by adding value through the discovery of breakthrough drugs to cure cancer, stroke, or other disabling diseases
• Strategic soothsaying:
  - Seeking new knowledge in a variety of ways: applying new technologies
  - Advertising for new employees in a wide range of sources, including online magazine
  - Leveraging on the knowledge of it employees through more collaboration and teamwork
• Positioning for speed:
  - Using IS to process large volumes of data more efficiently
  - Applying ‘Fail Fast’ philosophy to identify winners more speedily
• Positioning for surprise:
  - Altering its organizational and IS strategies to speed the discovery of new breakthrough drugs
• Shifting the rules of competition:
  - Using breakthrough discoveries of revolutionary drugs to treat major diseases can result in new ways to serve customers that transforms the industry
  - Trying to take advantage of discoveries in the genomics projects

* Source: Pearlson & Saunder (2006)

Mini-minicase: Coca-Cola Amatil, Ltd.

The business strategy of Coca-Cola Amitil, Ltd. when they made the decision to install this new technology, and what would have been the major components of the cost/benefit analysis that justified this project:

The business strategy might have been to lower the cost of maintenance and/or to increase the sales made through each machine. Components of the cost/benefit analysis might have included things like the cost per machine to send someone out to fill it up, the estimated sales lost from stock-outs, the maintenance cost for a machine, the cost of a maintenance person going to a machine only to find out that they don't have the parts needed to repair it.

How the process of managing sales of sodas through vending machines changes with the introduction of this system:

Since the system sends information daily to company headquarters, we would expect an entirely new way to manage sales information (I assume the old way was that sales info was only available after someone when out to restock the machine. And then, they may not have had information by machine, but only by truck restocking the machine. First, we might see corporate people, rather than local people, doing the sales management processes (analyzing the numbers, predicting sales, managing profit numbers, setting prices etc). Perhaps they would have instituted "machine controllers" at the headquarters site. So the place where the work is done, and the person who does the work, might be different. Second, with daily information, rather than less frequent information, we might expect to see processes that respond to that information, such as new ordering/delivery processes. And third, since the information would be by machine, we might expect forecasting processes to change. The machine "controllers" would be able to identify high traffic machines and order new machines installed there, for example.

How this system might change the process of maintenance and repair of the machines:

With knowledge of faulty machines coming back to the maintenance organization, a repairperson can go fix it with the required parts in hand. Otherwise, the repairperson might have to make two trips, one to diagnose the problem and another to fix it. Usage data gives the maintenance group information for forecasting needed maintenance. For example, they can analyze statistics of usage/failures and anticipate when a problem will occur. That might change the maintenance processes significantly, since they may not have had specific maintenance processes in the past. They might build a set of processes based on usage statistics that the maintenance person can do to keep the machine from failing in the first place.

* Source: Pearlson & Saunders (2006)

IT and Changing Business Processes

1. Off-the-shelf enterprise IS often forces an organization to redesign their business processes. The critical success factors to make sure the implementation of an enterprise system is successful are as follows:

The critical success factors would include things like a well-thought-out design of the business process when the EIS is used, a comprehensive communications plan to insure everyone affected is informed, and a well-tested technology to insure that no technology problems get in the way of operations.

2. The reason why radical design of business processes is embraced so quickly and so deeply by senior manager of so many companies, and the benefit for businesses:

This idea was embraced so quickly because managers realized they needed to change the way they did business and reengineering offered them a roadmap to do that. Reengineering was written up as the method to use to achieve very significant (75% or more) increases in productivity, decreases in costs, and increases in efficiency.

It was a benefit for businesses in part because even if they didn't achieve the radical objectives they set for themselves, they did realize that changing their operations was not only possible, but also critical if they want to operate at a reasonable cost level. Other managers realized that business processes were the critical unit of business, not function or geographical region. Still other businesses achieved real savings and real productivity gains from the process of reengineering.

It was not necessarily a benefit to business because the process of reengineering was very disruptive to daily operations. Many people were pulled out of the daily business and put on reengineering teams. Those left in the operations were overloaded, and in many cases, the business was forced to abandon reengineering efforts. This was costly.

* Source: Pearlson & Saunders (2006)

Virtual Teams

1. Virtual teams and why there are differences in management control activities in virtual teams compared to traditional teams:

Virtual teams are defined as geographically and/or organizationally dispersed coworkers that are assembled using a combination of telecommunications and information technologies to accomplish an organizational task.

They are an increasingly common organizational phenomenon and must be managed differently from more traditional teams, especially when team members are from different organizations, cultures, or countries.

2. Comparison between the challenges facing virtual teams and traditional teams:

Leaders of virtual teams cannot easily observer the behaviour of virtual team members. Thus, monitoring of behaviour is likely to be more limited than in traditional teams. Performance is more likely to be evaluated in terms of output than on displays of behaviour, because the team members are dispersed, providing feedback is especially important – not just at the end of a team’s project, but throughout the team’s life.

In order to encourage the accomplishment of the team’s goal, compensation should be based heavily on the team’s performance, rather than just on individual performance. Compensating team members for individual performance may result in “hot-rodding” or lack of cooperation among team members. Organisational reward systems must be aligned with the accomplishment of desired team goals. This alignment is especially difficult when virtual team members belong to different organizations, each with their own unique reward and compensation systems. Each compensation system may affect individual performance in a different way. Managers need to be aware of differences and attempt to discover ways to provide motivating rewards to all team members.

Communication:

• Virtual Teams:
  - Multiple time zones can lead to greater efficiencies when leveraged, but can also create communication difficulties in terms of scheduling meetings and interactions.
  - Communication dynamics such as facial expressions, vocal inflections, verbal cues, and gestures are altered.
• Traditional Teams:
  - Teams are allocated in same time zone. Scheduling is less difficult.
  - Teams may use richer communication media, including face-to-face discussions.

Technology:

• Virtual Teams:
  - Team members must have proficiency across a wide range of technologies; VT membership may be biased toward individuals skilled at learning new technologies.
  - Technology offers an electronic repository that may facilitate building an organizational memory.
  - Work group effectiveness may be more dependent on the ability to align group structure and technology with the task environment.
• Traditional Teams:
  - Technology is not critical for group processes. Technological collaboration tools, while possibly used, are not essential for communications. Team members may not need to possess these skills.
  - Electronic repositories are not typically used.
  - Task technology fit may not be as critical.

Team Diversity:

• Virtual Teams:
  - Members typically come from different organizations and/or cultures. This makes it:
  -> Harder to establish a group identity
  -> Necessary to have better communication skills
  -> More difficult to build tryst, norms, and shared meanings about roles, because team members have fewer cues about their teammates’ performance
  -> More likely that they have different perceptions about time and deadlines
• Traditional Teams:
  - Because members are more homogenous, group identity is easier to form.
  - Because of commonalities, communications are easier to complete successfully.

Answers could include examples to better explain the discussed points.

Mini-minicase: Mary Kay, Inc.

This mini-minicase is written to highlight how a seemingly low-tech company, a cosmetics company, would be affected by the use of information systems.

The way organizational strategy need to change to respond to Mary Kay’s new business strategy:

Organizational changes would need to be consistent with a revised organizational strategy. If no organizational changes were made, we’d expect the systems to be rejected by many of the workers. Managers would expect IBCs to use the systems, but IBCs are independent agents, so they would most likely delay in using the systems unless motivated to do otherwise. Thus the reward and compensation systems would need to be adjusted to accommodate the new system. And unless business processes were also changed to accommodate the new systems, we would expect problems to occur that make it difficult for the new systems to be used (information entered into the system might be just printed out, if the processes are expecting paper-based forms rather than screen shots).

You might also want to explore business process that would have to change to accommodate the new systems. The paper-based ordering system would have to be removed, if managers wanted IBCs to only use the new system, since running the older system discourages IBCs from using the new system. Fulfillment and reconciliation processes would be different with the use of mymk.com, since the order information was entered earlier into the system. If customers of IBCs place orders automatically, IBCs lose control over what is ordered, and will have to build new ways to keep track of their sales. If fulfillment processes are done using paper pick lists, then the process either needs to be redesigned to use electronic lists (shown on the screen or such) or to print out paper lists.

Changes that would be suggested for Mary Kay, Inc. managers to make in their management systems in order to realize the intended benefits of the new systems. Specifically, types of changes would be expected to make in the evaluation systems, the reward systems, and the feedback systems:

Evaluation systems would include a component of how well the systems were used by the IBCs. There would need to be an evaluation of the frequency and effectiveness of the use of the systems. That may translate into the reward systems, where IBCs are compensated for their use of the systems (direct bonuses, etc) or where they find that using the systems gives them advantages they didn’t get otherwise (faster orders, better book keeping, etc). IBCs might need incentive packages to encourage them to buy computers if they don’t have one already (such as discounts from a preferred vendor ). Support processes would be needed to help IBCs learn how to use the systems effectively, and to help them identify new ways to do their business better. The results of the evaluation process would have to be used to provide feedback to the employees. Possibly, in discussing an employees performance, it may be helpful to share with them average performance levels of other employees.

* Source: Pearlson & Saunders (2006)

Organisational Impacts of Information Systems Use

1. How IT might change a manager's job:

Managers traditionally are information managers. They get information from those working for them, they massage it, format it, add interpretations, etc, and pass it upwards in an organization. Likewise they take information from the top managers and pass it downwards. All of this can change with IT. The information system itself will handle the information sharing. Interpretation is still needed, and managers might do some of that. But information directly from the source where it is created, will always be more valuable than some passed through several layers of people who might distort, change or even lose some of it. Other managerial tasks will change, too. Managing people who you don't see every day is different than managing people sitting at desks near you.

2. Is monitoring an employee's work on a computer a desirable or undesirable activity: i) from a manager's perspective; ii) from the employees' perspective:

From the managers point of view, computer monitoring is a mixed blessing. It is desirable because it is easy. Work done on the computer is accessible, and if it involves repetitive tasks (such as filling in forms) then it is easily measurable. An example is the traditional call center, where agents answer calls from customers. The duration of the call, the number of screens the agent had to use, the number of handoffs of the customer to other agents, etc are all easily measurable. However the numbers don't tell the whole story (not surprising). The quality of the interaction, as measured by how nice the agent was to the customer, how professional, how satisfied the customer was, etc are not easily measurable. So management can easily fall into the trap of measuring those things that are easily measurable, at the expense of measuring things that are important.

Regarding the employees, monitoring work done on a computer is not much different than monitoring any output. Should that monitoring take place covertly, that is without informing employees, then it becomes a different issue from an ethical perspective and in terms of increasing employee stress. Workers tend to work in a way that maximizes what they are monitored and rewarded for. If managers are monitoring them for how quickly they get work done on the computer, managers can expect workers to do things as quickly as possible, even if it means sacrificing quality.

3. E-mail has made communications between individuals much easier. Examples of communication that would be: i) inappropriate, and ii) appropriate, if they only took place over e-mail:

Inappropriate types of communication over e-mail are typically either emotional or lengthy, such as firing someone (emotional) or providing an accounting of details (lengthy). Of course, appropriate e-mails are those that are short, brief answers to questions or continuing dialogue, or those that are done as documentation (in which case lengthy may be required). Also, appropriate e-mails tend to be those that accompany documents transferred to someone else, or that notify parties who have a right and need to know of action that is being considered or that has been taken.

4. It is sometimes argued that team members must meet face-to-face in order to accomplish more complex, meaningful tasks. The following explains the agreement/disagreement to this:

The jury is still out on this question. Answering it should help the students think through some of the issues related to virtual teams. On one hand, an advantage of virtual teams is the cost savings from being able to tap the knowledge and expertise of team members in different locations, possibly at locations around the globe. These members can use advanced information and communication technologies to complete the team’s business. For example, video teleconferencing, with advances that allow costs to spiral downward, can be used instead of face-to-face to convey facial expressions in addition to graphical and textual materials.

On the other hand, it could be argued that at least one or a few face-to face sessions are needed, especially at a project’s initiation to allow team members to get to know one another better and to build the trust to cement team relationships. Sensitive issues can best be addressed face-to-face.

5. Considering the brief description of the zero time organization, the following explains an example of a control system that would be critical to manage for success in the zero time organization:

Briefly describe the zero time organization:
The zero time organization describes the concept of instant “customerization”, or the ability to respond to customers immediately. Common to all of the mentioned designs is the idea of agile, responsive organizations that can configure their resources and people quickly and are flexible enough to sense and respond to changing demands.

An example of a control system that would be critical to manage for success in the zero time organization, with reason why it is considered critical:
It would be critical to manage just about all the control systems to insure success of a zero time organization, so any example is probably good if it is supported well. For example, it would be important to monitor the people, processes and technology to insure that they are all able to respond instantly. It would be important to create evaluation criteria and feedback mechanisms to insure the success of the people when they respond instantly.

Answers can be elaborated from the model of management control activities:

• Monitoring
• Evaluating
• Providing feedback
• Compensating
• Rewarding

Answers can be related to the five disciplines a zero time organization must master:

• Instant value alignment
• Instant learning
• Instant involvement
• Instant adaptation
• Instant execution

IT and the Design of Work

Implementation of IT system helps in changing the way work is done, but there seems to be resistance from the human workers when the technology replaces the routine and mechanical works.

Reasons behind a worker's resistance to the implementation of a new technology, with examples:

• Resistance might come because the worker is afraid his/her job will significantly change and he/she will be unprepared for the new requirements.
• Resistance might come because the change is distasteful (like having to do more repetitive work, rather than the thinking work).
• Resistance may come because new skills are needed but compensation is not altered to reward the use of new skills.
• Possible consequences of using a computer are numerous.
• (Other reasonable answers and examples are acceptable.)

The possible consequences of asking a worker to use a computer or similar device in his or her job:

Examples from cases can be used to support the answer. For example, how IT created confusion and distanced workers form the work process itself. In effect, the workers were just watching numbers and data, whereas before the computers they were actually doing the "art" of the work itself. The newer job required more interpretation of the numbers and different skills in judging and decision making.

Another example can be given when an individual’s work also described a paper mill, where workers used to mix paper by hand, using smell and feel as key aids in making just the right mix. When automation was introduced, these same workers were put in a control room and asked to use their computers to monitor the process and make the paper. Needless to say, using the information on the computer was significantly different to the workers than mixing a vat of paper.

Many such examples exist. To overcome resistance to change (by applying the Technology Acceptance Model), managers need to combat negative perceptions about the systems usefulness and systems developers need to design systems that are easy to use.

Accompanying points that may be cited in discussions:

• What tasks will be performed?
• How will the work be performed?
• Who will do the work?
• Where will the work be performed?
• How can IS increase performance, satisfaction, and effectiveness of the workers doing the work?

Others not explicitly mentioned here may also be considered, if pertinent in delivering a valid point.

How can IT alter an individual’s work and how can a manager insure that the impact is positive rather than negative:

IT can alter an individual's work by changing the work itself, changing where the work is done, changing communication and collaboration patterns, changing the ways that organizational decisions are made, or by changing how work is managed (these are topics from the chapter).

A manager can help insure a positive impact through traditional management processes (as discussed in Chapter 3 of Pearlson & Saunders, 2006) such as the way individuals are rewarded, evaluated, compensated, etc. Training is an important factor in insuring success. And communication is important. Managers cannot communicate enough about changes that will take place in an individual's job.

The Information Systems Strategy Triangle

The importance for business strategy to drive organisational strategy and IS strategy, and what might happen if business strategy was not the driver:

The primary point in this chapter is that in any well-run organization, the business strategy drives the rest of the operational strategy, and information systems is no different. However, typically, managers seem to think that changing or upgrading an information system (or even a component of an information system) will only positively impact a business. Quite the opposite, in fact, is true. By making changes in organizational strategy or IT strategy first, the triangle is "out of balance" and there will be consequences in the affected areas.

For example, building a virtual organization, but not changing the business strategy to something like "insuring our people are productive and have the widest possible work place opportunities" can lead to significant disconnects between workers, their managers, and their customers. And, worse, without supplying the virtual worker with the appropriate information system (a computer at home, a laptop, etc) will lead to a decrease in productivity by the virtual worker, and a major disruption of business operations.

Considering a traditional manufacturing company that wanted to take advantage of the Internet and the Web, the reasonable business strategy is as follows, followed with the way organisational and IS strategy need to change:

A reasonable business strategy might be to provide what the customer wants when the customer wants it. The idea is to use the web as a mechanism to connect to customers, to take their orders, to provide services when the customer wants them and to link with suppliers and partners. To do that the organization would have to be organized around responsiveness, and would have to include elements of empowerment and authority. It would not work to have a centralized decision making authority if the organization wants to be responsive because it would take to long to get information up and decisions back to the field.

The manufacturing process might be organized around build-to-order rather than on market analysis and product histories, but then there would need to be a series of organizational processes and people that would be in place to make sure the manufacturing company is able to actually build the products when they are ordered. The IT strategy to support this business strategy would be one of rethinking the use of the web as a tool for delivering information to customers, suppliers and employees.

The meaning of this tip from Fast Company, “The job of the CIO is to provide organisational and strategic flexibility”:

The job of the CIO does not just narrow in on information systems (IS) or solely focus on developing IS strategy. Rather the CIO must work with top level executives and functional executives to insure that the IS strategy is aligned with the business and organizational strategy. A particular challenge for the CIO is to ensure that the IS architecture and infrastructure can support the business and organizational strategy. In making long-term decisions about IS architecture, the CIO must attempt to promote flexibility in the future with scalable architecture that meets the organization’s present and future needs.

* Source: Pearlson & Saunders (2006)

Davenport's Information Hierarchy (1997)

According to Thomas Davenport’s Information Hierarchy (1997), data, information and knowledge have their own meaning and characteristics.

Define the meaning of the terms data, information and knowledge:

• Data is a simple observation of the state of the world.
• Information is data endowed with relevance and purpose.
• Knowledge is information from the human mind, which includes reflection, synthesis and context.

Characteristics of data:

• Easily structured
• Easily captured on machines
• Often quantified
• Easily transfered
• Mere facts

Characteristics of information:

• Requires unit of analysis
• Data that have been processed
• Human mediation necessary

Characteristics of knowledge:

• Hard to structure
• Difficult to capture on machines
• Often tacit
• Hard to transfer

Examples of...

• Data: Daily inventory report of all inventory items sent to the CEO of a large manufacturing company
• Information: Daily inventory report of items that are below economic order quantity levels sent to inventory manager
• Knowledge: Inventory manager knowing which items need to be reordered in light of daily inventory report, anticipated labour strikes, and a flood in Brazil that affects the supply of a major component

Possibility of a fourth level of Information Hierarchy:
Some people think there is a fourth level in the information hierarchy, wisdom. In this context, wisdom is knowledge, fused with intuition and judgement that facilitiates the ability to make decisions. Wisdom is that level of the information hierarchy used by subject matter experts, gurus, and individuals with a high level of experience who seem to "just know" what to do and how to apply the knowledge they gain. (Pearlson & Saunders, 2006)