The Distinction Between Data, Information and Communication
Data, information and communication are three common terms widely used in business intelligence which easily interrelate with each another. Bill Gates, the founder of Microsoft, stated, ‘How you manage information determines whether you win or lose’. As such, when trying to improve the effectiveness of business operations and decision making processes, it is vital to understand the difference between data, information and communication.
In essence, the term ‘data’ refers to information in its unorganised form. It has not been shaped or interpreted and comes in many forms, including numbers, words and symbols. Processing data turns it into information, at which point it takes on context and structure. Communication is the way in which this information is passed among the different sectors of the business. This allows managers to discuss the information generated from the data and take appropriate actions to increase the organisation’s effectiveness. In this way data and information become useful and form the basis of progress.
Defining Data, Information and Communication in the Context of a Business/Company
Beynon-Davies et al. define data as ‘raw material.’ This is due to the fact that it requires processing before it can be turned into something meaningful — on its own, data are not very useful. Take the example of data created when products are purchased from the supermarket Sainsbury’s, which includes:
- the time and date of transaction (e.g. 10:13 Monday 3rd December 2014);
- the transaction value (e.g. £48.95);
- items bought (e.g. honey, apple, milk, shampoo, etc.);
- the quantity of each item;
- the payment type/method;
- the name of the employee who recorded the sale; and
- whether any promotional discount was applied.
These data need processing at the point of sale in order to become information, which the customer receives in the form of a valid and meaningful receipt.
The same data would also be useful to the managers of the retail store. For example, a report showing the best-selling products for a specific month/season could be useful in determining growth opportunities and expansion of certain product lines. This highlights the importance of keeping a record of the data concerning all transactions, and then processing them into management, financial and sales/revenue reports to generate useful information. These reports can then be analysed further and discussed by the managers and directors to plan strategic actions aimed at increasing productivity and improving the effectiveness of their operations.
There are numerous ways in which a company can use data in order to increase effectiveness, including:
- collecting and analysing reports to optimise marketing strategies;
- determining whether or not the existing marketing campaigns are effective;
- identifying opportunities for growth, expansion and product/service innovation;
- measuring product demands and demand planning; and
- devising strategic solutions to optimise sales/profit.
These can all help eliminate reliance on intuition during decision making processes so that well-informed decisions can be made with a structured approach through data-driven insights.
Sainsbury’s have produced strategic company reports from a vast collection of data, such as its Annual Report and Financial Statements 2015 and its Sainsbury’s Closer to Customers Report 2015. Mike Coupe, Sainsbury’s Chief Executive, stated: ‘We have seen Tu clothing sales grow to over £800m this financial year [2014/15]’. This is an example of how raw data was useful in providing Sainsbury’s with information and the ability to recognise an opportunity for growth. The response from Sainsbury’s sales and marketing team was to release Tu collections every 6 weeks and focus on being a destination for ‘high street style at supermarket prices’. Also, via effective communication, Sainsbury’s managed to establish successful partnership with the fashion designer and television personality Gok Wan, which has helped increase market share and drive double-digit sales growth. This illustrates strategic analysis of reports containing valuable information as well as how communication within the organisation and external sources could increase market share and productivity.
Ways in Which a Company Can Best Utilise Data to Increase Effectiveness
The effective use of data is becoming the basis of competition. There are several ways a company can best utilise data to increase effectiveness. One of these is by analysing the data to eliminate the reliance on intuition when making business decisions. This means that decisions can be made with a structured approach through data-driven insight. To illustrate this, consider movie rental companies and content delivery services as examples. These companies can utilise a vast array of data to generate accurate and personalised recommendations. Analysing what was viewed, when, on what device and even whether the content was fast-forwarded, rewound or paused, coupled with other user activities, such as Internet searches, allows recommendations to be tailored for millions of customers in real time.
Another way managers could make the most out of the data contained in company reports is to utilise these data to identify valuable opportunities as well as any areas for improvement or expansion. An example of this is the abovementioned action taken by Sainsbury’s. Successful discovery of opportunities for growth requires building a data advantage by pulling in relevant data sets from both within and outside the company, as well as looking at the collected data in a new perspective. This will help the company to identify opportunities for innovation and perhaps a gap in the market where there is a potential to sell new products and services in areas that are not currently covered.
Examining the data carefully and meticulously can also help managers determine which of the marketing campaigns works best. For instance, data could provide information about whether advertisements appeal to the target market or even to a completely different market. The data may also point to completely new areas of customer interest. Hence data can be used by companies to optimise their marketing strategies.
Finally, when data is aggregated by demographics, locations and subcultures, it helps the business distributor deliver pinpoint advertising and forecast product demand with a high confidence level. This concept is applicable to other retailers who can also aggregate feeds from social networks to build an understanding of how new products will be received by new or existing markets, or even how their products and company reputation are perceived among the public.
Example From Author's Own Work Experience
The author fully understood the distinction and appreciated the importance of data, information and communication to a business when he was appointed as Assistant Sales Manager of an online store. The database he uses updates itself daily with data such as the time and date of a purchase, the geographic location of the clients, their age, the total amount of orders, sales/revenue per day, etc. These data are raw numbers, columns and rows in an excel sheet, or strings in a database. Business intelligence is the next step, when raw data become actual information that the company can use to formulate decisions.
Once all the data have been transformed into information, it becomes a useful tool for the managers to take appropriate actions to improve productivity. They now have all the information in their hands to make the most suitable decisions for improving business operations, which is achieved via effective communication between the different departments. For example, knowing that most of their customers are in the 18 to 24 age bracket, companies can decide to offer more products that are more likely appeal to this particular target audience/age range, hence optimising sales. At the same time, they could also utilise the information about the location (e.g. the specific country) most of their customers are based in, and could reduce the cost of shipping by either organising a special deal with a carrier, or even installing a warehouse and a distribution centre in that particular country. These are strategic decisions will give the business the edge over the competition.
This particular example from my own work experience clearly demonstrates how a company can best utilise data collected from all transactions to optimise sales and reduce costs. Also, this demonstrates how the organisation could cleverly use data to direct their products correctly to the largest group of consumers within their target market.
In summary, data, information and communication are all integral to a successful organisation. Data is raw and objective, but is in itself meaningless; however, information depends on data and a logical meaning and a rational interpretation of it.This information then becomes an important ingredient in decision making, which occurs via effective communication between different departments within the organisation.
Key Note would like to thank Chi Maher, a Business Management lecturer, and all of her wonderful students at St Mary’s University Twickenham, London, for taking part in our research article writing competition. It was tough to choose a winner from all the fantastic entries but we felt Steven Ibizugbe should win the prize. His interesting piece was very well-measured and concise. There is a clear structure which also highlighted that he understood the question. What impressed us so much is how he answered the question with such confidence from the first paragraph to the last.
We’d like to thank all of the other entrants to our competition. Their articles were insightful, and they showed that they understood how to do scholarly research using www.keynote.co.uk.
Find some of the company information Steven used in this report on the Key Note website, listed as J Sainsbury PLC.