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Turning information into knowledge.

Faced with a bombardment of diverse data on a daily basis, how does someone determine which items to accept and retain, and which to ignore or reject? Not only are we being overwhelmed with information, we are frequently confronted with conflicting information. There are widely varying estimates on the number of Americans presently living in poverty. There are also conflicting statistics about the failure rate of businesses. Such disparities become crucial when that information is the basis for a major social, political or business decision. Thus, each decision maker or manager must decide which of the many pieces of information encountered are valuable.

Prior to describing those guidelines it is necessary to distinguish between general information and knowledge. General information includes all the information a person comes in contact with as a social being. It comes from such sources as personal conversations with others, the general media (newspapers, TV, magazines) and instructional environments such as schools, churches and seminars. It can occur in a variety of forms such as statements, statistics, diagrams or charts.

Information becomes personal knowledge when it is accepted and retained by an individual, and it becomes general knowledge when it is accepted by a consensus of people. But why are some pieces of information accepted and retained as knowledge, whereas other information is rejected or ignored?

Filtering systems

Each person uses a filtering process that determines which pieces of information to retain. The basic elements of such a process are depicted in Figure 1. In that model, the term "receiver" describes the person who must decide which pieces of information to add to the reservoir of knowledge.

The initial factor determining which pieces of general information will be assessed is the relevancy of that information to the receiver. People are more attentive to information related to their areas of interest.

Thus, the marketing manager of a facsimile (FAX) equipment firm may be interested in a wide variety of business information, but is especially alert to information pertaining to the facsimile industry.

This does not mean receivers completely ignore nonrelevant information; they just do not make a major effort to assess or retain it. The more varied a person's interests, the more varied the types of information that is perceived as being relevant. An advantage of a liberal arts education is that it supposedly broadens a person's areas of interest, thus expanding the types of information the person considers to be relevant.

Relevant information is then assessed by the receiver to determine which pieces to retain. The following factors comprise that filtering process:

Authority/creditability of source of information -- The receiver is more willing to adopt information that comes from an acceptable source. We view certain people or media as highly credible and readily accept their information, whereas we are skeptical of similar information coming from less credible sources. We accept information on medical breakthroughs described in the New England Journal of Medicine, but will be hesitant about accepting similar medical information if it were introduced in The National Enquirer.

Receiver's biases -- The term bias implies a closed-mindedness or a prejudicial outlook that prevents someone from being totally objective. We accept information that is in agreement with our personal beliefs, and tend to question opposing information. Someone who feels strongly that there should be mandatory retirement for workers by age 65 will readily accept information showing that the performance of workers begins to decline significantly after age 60. Conversely, that same person may tend to ignore or downplay information that indicates age is not really a factor in workers' performance. Ideally, everyone will be objective in data gathering and data assessment, but it is human nature to have strong beliefs on certain topics and to seek information that reinforces those beliefs.

Receiver's personal experiences -- We accept information that reinforces our personal experiences and tend to reject opposing information, regardless of the source. Although a certain brand of tires receives a high rating from an authority such as Consumer Reports, the receiver will question that finding if he had a bad experience with that same brand.

Receiver's savvy -- Background in a variety of areas such as sociology, psychology or history enables a person to draw on a broader base when evaluating information. For example, a claim that the recent decline in a city's crime rate is the result of stricter law enforcement would be questioned by people knowledgeable about demographic changes occurring in that city. They realize that the age group most prone to commit crimes (18 to 26 years old) has diminished in size relative to other age segments, which helps explain the recent improvement in some crime statistics. The savvy factor also relates to the receiver's skills in assessing information. A person who understands proper research procedures, is better able to assess information obtained by surveys. Was an appropriate sample used? Was the questionnaire designed properly? Was the appropriate analytic method applied?

Desperation factor -- There is a saying: "Something beats nothing all to Hell!" A person becomes desperate when some crucial information cannot be found and under these circumstances will accept almost anything that seems pertinent. For example, after a long fruitless search for information about the market share of various producers of facsimile equipment, a decision maker finally comes across an article mentioning that Acme Inc. has 25 percent of that market. That figure is accepted, not necessarily because it is accurate, but because it is the only information available.

Roles of components vary

The importance of each of these previous filtering components varies, not only between receivers, but even at different times for the same receiver. With emotional topics such as religion and politics, the receiver's biases will usually dominate; whereas in business related topics, the source's authority usually prevails.

Another factor affecting the filtering process is its importance to the receiver. Although the initial screen is the general relevancy of the information to the receiver, the actual importance of the information determines how much effort the receiver will expend to assess its quality. A sports fan might add information about a rumored trade of a particular outfielder to his reservoir of knowledge without spending a great deal of time assessing the rumor's accuracy or tracking down its source. However, that same person, when making a decision about whether his firm should enter into the production of facsimile equipment will carefully review and assess information about that industry. So, relevance is really multi-tiered, and the importance of the information to the receiver determines how much effort is put forth in assessing its quality.

Assessment procedures

Figure 1 illustrates how general information is transformed, via a rather informal process, into personal knowledge. However, when the information is expected to play a major role in an important decision, a more formal assessment procedure is needed to determine the quality of the information.

The quality of information is determined by its accuracy and appropriateness. Information is accurate when it describes the actual situation. It is appropriate when it fits the receiver's needs. Of the two, appropriateness is usually easier to assess.

The following pieces of information about the facsimile industry are used to illustrate the various decisions a receiver has to make when evaluating the quality of information:

* The first fax transmission was made by AT&T between London and New York in 1924;

* Facsimile machines are virtually a Japanese product, since eight Japanese firms produce over 90 percent of all machines;

* There were around 400,000 facsimile machines in operation in 1985;

* It is predicted that sales of facsimile equipment will increase 30 percent annually through 1992 and the primary market will be people working at home;

* A survey of firms presently using facsimile equipment disclosed that most (65 percent) intend to purchase at least one more fax machine in the next six months; and

* Increased emphasis on saving time will be a major force in the 1990s, and the facsimile industry will benefit greatly from this force.

Note that some of the above statements contain fairly precise findings, whereas others are more imprecise because they deal with attitudes or are projections of future events.

Following are three questions receivers should raise when determining whether the information is appropriate:

Does it pertain to the proper period of time? Information needs are often tied to some specific period of time, and the value of information depends on how well it fits that time frame. For example, the 1985 sales figure in statement 3 is too dated to be of much value to someone seeking current sales estimates of the facsimile industry.

Is the information compatible with our needs? Does this information match our interpretations of terms? We seek information about telecommuters. Is this the same group of people identified in statement 4 as working at home?

Does it fill our information gap? Assume we are seeking information about recent sales of facsimile equipment as well as projections of sales for the next five years. Although all six of the above statements pertain to the facsimile industry, only statements 4 and 5 really fit our needs.

Ideally all information would be accompanied by an audit or "seal of approval" attesting to its accuracy. Realistically, this seldom occurs, so the receiver either has to assume the information is accurate or try to validate it.

Surprisingly, a large amount of the information used by higher level decision makers is accepted at face value. Executives generally accept the accuracy of information contained in the reports they receive, because they assume the preparers of those reports have already checked it out. Executives are usually more concerned about the soundness of the strategies proposed in a report, than they are about the accuracy of the information on which those strategies are based. Therefore, the responsibility for assessing accuracy of information usually rests with the preparers of the report.

An initial factor to consider is how important is it that the information be accurate. For example, the accuracy of information about the original development and use of facsimile equipment (statement 1) would not be as important to a decision maker as information about the number of firms presently providing facsimile equipment and their market shares (statement 2), or projected demand for 1992 (statement 4).

If it is important that the information be accurate, a series of questions can be raised that will aid in assessing its accuracy:

Is the information hard or soft? Hard information is derived from someone actually observing or recording the activities/demographics of an entire population or a representative sample. Examples would be information from the Census Bureau, statistics associated with athletic events, sales data derived from sales receipts, inventory records and so forth. Soft information, however, is derived from people recalling what they did in the past, predicting their future activities or expressing attitudes towards a product or issue.

When available, hard information should be used because observing and recording actual events generally provides more accurate information. Thus, information on church attendance derived from actual counts made by church ushers on random Sundays would be preferred to figures based on results from a major survey in which adults estimate their church attendance over the past three months.

Is the information compatible with what is already known? Some information, especially projections of lifestyles or other aspects of human behavior, may be so out of line with present conditions that its accuracy should be questioned. For example, a recent article dealing with the restaurant industry stated that by 1995, 80 to 85 percent of all dollars spent on food would be spent in away-from-home eating facilities. While there certainly has been a major increase in eating away from home due to such factors as the number of single person households, smaller families and working wives, it is unlikely that such expenditures will account for 80 to 85 percent of all expenditures on food by 1995.

Who developed the information and what are their qualifications? Assessing a source's qualifications involves such things as their potential biases (Tobacco Industry vs. the American Cancer Society) or their capabilities or reputation as a collector of information (Data from research firms such as Nielson or Dataquest vs. data from a small survey used for a Master's thesis). Footnotes aid in assessing sources of information. Many articles appearing in academic journals are laden with footnotes; but most business reports suffer from the opposite condition, they do not supply enough. If the original sources can not be identified, the user may be forced to accept questionable information. For example, the statement, "The vast majority of all new products fail," is widely quoted, but its source is never identified. Similarly, statements are frequently made about the great loyalty of Japanese workers, but no specific references or pieces of supporting information are provided.

Was the proper methodology used? Many reports provide little or no explanation about the methodology used to develop the information; thus the receiver must base the information's accuracy on the reputation of the source. However, when the methodology is described, the following questions should be raised:

* Was the right data gathering instrument used? Does it provide the type of information you need and does it really depict the situation? Surveys are widely used to obtain information about attitudes or intentions to buy, but they often provide misleading information because they require only a verbal commitment from respondents, i.e. soft information. It is relatively easy for a bank's customers to answer "yes" when asked if they would use the bank's facilities if it were open on Saturdays. In a similar vein, a large number of a firm's employees will probably indicate they will ride to work on a company sponsored bus at least once a week to help fight pollution. In both examples, actual participation will be significantly less than what the surveys indicated because the surveys only require verbal commitments. Some type of test market or survey process in which participants are forced to make monetary or personal commitments will usually provide more accurate results.

* Was that instrument used properly? This is a tough question to answer because it assumes the user not only has access to a description of the procedures used, but is also knowledgeable enough to evaluate those procedures. Two examples of such a dilemma are projections of GNP derived from econometric models and recent projections of the rate of depletion of the Earth's ozone layer. Since both of these are based on computer simulations, most people are not privy to the models used to make such predictions, nor would they even understand such models if they were described to them. Thus we can only assume the models were used correctly.

Quite often, the user's common sense will cause him to be skeptical of certain research procedures. It is unlikely that a firm's employees will disclose their true feelings toward management and their work environment in focus group sessions attended by their managers. Or how accurate will sales projections from a sales force be if they know those estimates will be used to develop quotas?

* If a sample was involved, does it represent the population? The user of any data obtained from a sample should feel comfortable that such data provide a representative picture of the population the sample is intended to represent. Representatives includes both the size and makeup of the sample. Can information from 25 banks provide an accurate picture of the usage of facsimile equipment among all U.S. banks? Will input from only Colorado banks provide a good estimate of facsimile usage among all U.S. banks? Are purchasing agents the appropriate people to contact about intentions to buy, or should data processing managers or office managers be used?

* Were the proper analytic techniques used? This is an important question, but a tough one for most users. It may require some understanding of such statistical techniques as chi-square, analysis of variance, regression, factor analysis and an awareness of cross tabulation procedures. Are the techniques described in simple, direct language, and does the use of such techniques make sense? Unless there are some glaring errors, most users can only assume the researcher used the appropriate analytic technique.

Are the conclusions drawn logically and objectively from the data? The final area of assessment relates to the conclusions or projections made from the data. Are they logical extensions of that data? Could different conclusions have been drawn? Are the conclusions based on all the data, or just selected bits and pieces the researcher may have chosen subjectively to make a point.

Many decision makers read only the executive summary of a report and thus are not in a position to determine whether the key findings or conclusions are logical extensions of all the information in that report. This reliance on executive summaries reinforces a statement made years ago by John Galbraith about the decision-making process. "There must always be questions as to how much the individual is deciding and how much is being decided for him by the group which has provided the relevant information; the danger of confusing ratification with decisions must be emphasized."


Managers in all disciplines are expected to continually make sound decisions based either on their personal knowledge or on information provided by others. Whereas in the past, a key problem facing decision makers was how and where to obtain information; with today's "information explosion," the key problem is determining which of the vast amounts of information available are appropriate and accurate.

The filtering process that people use to assess general information is usually not intense enough for those situations where decision makers need to be very confident about the information. Thus a more formal assessment process should be used in which key questions are asked that determine the information's appropriateness and accuracy. These questions will not guarantee the right decision will always be made, but they will enhance the decision maker's chances of using quality information.

For further reading

Galbraith, John K., The New Industrial State, Boston: Houghton Mifflin, 1967.



* Is it in the proper time frame?

* Does it match definitions?

* Does it fill an information gap?


* Is it hard or soft?

* Is it compatible with what is known?

* What is the source?

* Was proper methodology used? Proper instrument? Properly used? Sampling aspects? Analytic aspects?

* Are the conclusions logical and objective?

George Kress is a professor of marketing at Colorado State University where he teaches courses in business research methods and sales forecasting. He has written three texts on these topics and is currently completing Forecasting and Market Analysis Techniques to be published by Quorum Books.
COPYRIGHT 1993 Institute of Industrial Engineers, Inc. (IIE)
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Author:Kress, George
Publication:Industrial Management
Date:Mar 1, 1993
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