Costs and benefits of the optimisation of data flow in theory and practice of information management

Diploma Thesis, 2006

72 Pages, Grade: 1,0



List of tables

List of appendices

List of abbreviations

1 Aim of this work

2 Background and key terms
2.1 Data – Information - Knowledge
2.2 Management
2.3 Costs and benefits
2.3.1 Costs
2.3.2 Benefits

3 Fundamental principles of information management
3.1 The information paradox
3.2 Definition of information management
3.3 Tasks of information management

4 Information Economies and Data Flow
4.1 The Management of Information Economies
4.2 Data flow management
4.2.1 Overview
4.2.2 Information requirement analysis Key term, objectives and background Procedures Background Subjective procedures Objective procedures Mixed procedures
4.2.3 Communication requirement analysis Key term and background Methodology
4.3 Concerns
4.3.1 Information quality General criteria Criteria of information for management Systemisation of information quality
4.3.2 Information security Background and aim Measures to protect information
4.3.3 Storage of information
4.4 Evaluation of the optimisation
4.5 Management Information systems (MIS)
4.5.1 Definition and background
4.5.2 Tasks
4.5.3 Operating on different levels The need for different levels The levels of a MIS The personal information system (PIS) The work group information system (WIS) The organisational information system (OIS)
4.5.4 Further parts of a MIS Decision Support Systems (DSS) Knowledge Systems (KS)

5 A optimisation of data flow for art decor®
5.1 History and business of the organisation
5.2 Data Flow analysis
5.2.1 Preface concerning methodology
5.2.2 Analysis and recommendations Organisation and communication structure The main office Chain stores Stock and inventory Sales at mall events
5.2.3 Implementing a MIS?

6 Conclusion

7 Appendices

8 Literature

9 Acknowledgement

10 Statutory Declaration

List of figures

Figure 1: Forms of information

Figure 2: Knowledge pyramid

Figure 3: relationship of information demand, supply and requirement

Figure 4: balanced scorecard

Figure 5: communication process

Figure 6: Relationship among components of MIS

Figure 7: Categories of OIS

Figure 8: Communication structure

Figure 9: Example new calendar

Figure 10: a stock related MIS

List of tables

Table 1: Comparison of Tasks

Table 2: tasks of IM

Table 3: procedures of information requirement determination

Table 4: examples of communication media

Table 5: systemisation of information quality

Table 6: benefit matrix

List of appendices

Appendix 1: Users manual questionnaire

Appendix 2: Questionnaire

List of abbreviations

illustration not visible in this excerpt

1 Aim of this work

Some things are as they are and they have worked well all the time. People are used to them. Sometimes they know, that things could work better, sometimes they don’t.

One important thing in small and medium sized enterprises is communication and the flow of information. This sometimes can be crucial to the surviving of such firms.

Although, some organisations know that they have a deficit in the communication or information process, they are not able to initiate any change.

This diploma has the aim to point out this critical issue and to show how practices of communication and data flow can be improved.

Firstly, the author gives an overview about theoretical approaches and than she will analyse the dataflow for a commercial organisation of the middle class.

Here, it is important to say, that the measurement of the effects of such an optimisation is hard to realise, as effects can’t be measured on numerical or monetary scale.

The main concern of this diploma is not the theoretical explanation of types of data banks or the programming of such a data bank, which common literature describes. It is rather the establishing of more efficient methods to deal with the daily business and at least not to loose the basis of business, namely, the delivering of value to customers.

Therefore, this diploma will present a probably total different perspective of this theme in practice, because of the individual tailoring, adaptation and transformation of theory to a practical solution.

2 Background and key terms

2.1 Data – Information - Knowledge

First of all, it is very important to mention that the three terms listed above are not equal, although, in common language they seem as they were.

But by looking deeper into this subject matter and comparing leading literature it is obviously that data becomes through a process of transformation firstly to information and, as main aim, finally to knowledge.

By that it is important to examine these terms in an explicit way to show differences.


Schwarze (1998, p.24) states that data is just information which can be transformed and displayed with the help of technology.

In comparison with other authors this statement seems to be insufficient and superficial. Krcmar (2005, pp.14-15) therefore, identifies data as a combination of single signs or characters or numbers that are part of any alphabet. These single signs have qualitative or quantitative character and are not connected to any coherent statement. They have no context (Eppler 2003, pp. 19-20). A simple example for data is the number 1.43 or the word “dollar”.


The information itself has its origin in the Italian language. “informare” means there “educate” (, 14.04.06).

If data is connected to any coherent statement, the resulting entity builds a piece of information. In other words, several pieces of data form the message, which is called information (Eppler 2003, pp.19-20).

Furthermore, information can be an inquiry or a clearing up (Heinrich 2005, p.7).

By that, if 1.43 and dollar is connected in relation to 1 Euro, the data makes sense.

Königer et al.(1998, pp.65-66) defines information in two different ways. Firstly, information is structured. This means that it can be processed in the meaning of business management science, e.g. accounting information. Secondly, those which can be not processed in this way are, therefore, unstructured.

As Krcmar (2005, pp.18-19) identifies the following characteristics of information:

- Information is an intangible asset
- Information provides advantage
- Information is not free and may create costs
- Value of information depends upon its quality, time related use and context
- Information can be shared

A schematisation of forms information gives the following plot:

illustration not visible in this excerpt

Figure 1: Forms of information

(Schwarze 1998, p.92)

Respecting the diplomas object, the author takes up Königers (2003) view that information can be treated as an object, which has content but also meta-information, which can be seen as information about information, e.g. a cover of a CD or a headline of a table, which provides information about the music stored in the CD. By that it is easier to describe the processing of data flow.


The last stage of transformation of signs to data to information is knowledge.

By that, knowledge is not only the totality of information as Schwarze (1998, p.24) states. Rather, it is the connection of information in a coherent way. It is integrated and interpreted in the prior knowledge (Eppler 2003, p.20).

Davenport et al. (1998, p.5) enlarge the term of knowledge “as framed experience, values, contextual information and expert insight that provides a frame work for evaluating and incorporating of new experiences and information”.

Another interesting view is the differentiation of knowledge by Nonaka et al. (1995, p.59). They divide it into tacit and explicit knowledge.

Tactic knowledge is strong related to a person’s commitment. Therefore, it can be hardly formulated and communicated. It is said, that it is absolutely subjective. It contains the worlds past, current and future view. Skills and capabilities are included there, too. Tacit knowledge becomes visible through acting.

Explicit knowledge can be formulated and systemised. It can be stored, processed and transferred in different media.

Königer et al. (1998, p.68) classify information and explicit knowledge at equal level.

To visualise the relationship between sign, data, information and knowledge the model of a pyramid is most appropriate:

illustration not visible in this excerpt

Figure 2: Knowledge pyramid

(own development)

2.2 Management

This word has its routes in the Latin term “manum agere” (, 14.05.2006) which can be translated as “leaded by hand”.

This leads directly to the problem which this term includes. It is correct to state that management is subject to administration to generate best output (Heinrich 2005, p.7). But in some literature management is equal to leading only, which is superficial. Krcmar (2005, p.23) divides the term into two different directions.

Firstly, management is considered in a functional context. It describes tasks and processes which further can be divided into personnel function and line function. Personnel function copes with the administration of human resources, integration of staff or the arrangement of the work place. Line function deals with the fulfilment of tasks which contribute to the achievement of organisational objectives. Planning, organising, implementation and controlling are focused. These processes are executed on all levels of the organisation, on a low level e.g. a secretary plans (sometimes unconscious) in which order she fulfils her tasks of the day, than she organises issues to facilitate the implementation (e.g. to file the post by importance). Then, she implements her tasks and at the end, she controls that she didn’t forget something.

Secondly, management is seen as institution. This institution consists of people, who are policy-makers, concerning line and personnel tasks. Such institutions can be boards and leadership on corporate, business and enterprise level. Most important, regarding to management as institution, are rather the tasks and the competences managers have than their hierarchical position.

2.3 Costs and benefits

2.3.1 Costs

The subordinate concept of costs is the term of expenses. If expenses are not related to the ordinary operating procedures they are not treated as costs and named as non operating costs. Expenses always reduce the amount of equity (Schmolke et al. 2006, p.354).

In economics, operating costs are the quantitative usage (kg, but also time) or legally obligated pays. Costs need to be valued with a certain amount of money (Schmolke et al. 2006, p.354).

If the amount of costs is dependent on the output, science speaks of variable costs. Costs which occur independently from the produced output and are stable in there amount are called fixed costs (Detsch 2006, cited in Microsoft Encarta 2006).

Economic science distinguishes also historical and opportunity costs. Former are recognised in accounting, latter describe the amount of difference of values of two opportunities, where not the best opportunity was chosen ( E.g. if the entrepreneur invests 100.000 € in ordinary shares of the XXX AG and sells them one day later for 102.000 €, he has earned 2.000 €. If he had chosen the opportunity to buy shares of ABC AG he would have earned 3.000 € by selling them one day later. Therefore, the opportunity costs of buying shares of XXX AG were 1.000 €.

2.3.2 Benefits

Benefits or profits describe the evaluation of the success of the company (Kraus 2006, cited in Microsoft Encarta 2006).

Subordinated benefits are always measured in the amount of money in which they increase the equity. Science also distinguishes between operating and non operating benefits. Further are e.g. turnover or capitalised services. Latter are e.g. tax abatements (Schmolke et al. 2006, pp.355).

Sometimes it may be difficult to evaluate success with a certain amount of money. If this is the case, effects should be evaluated by the usefulness they add to a process or circumstance.

3 Fundamental principles of information management

3.1 The information paradox

The paradox

A paradox often is characterised as a simple contradiction. But the difference between a paradox and a contradiction is that one of two assumptions must be wrong if it is a contradiction, and if it is not, both assumptions can be true, although it seems they can’t.

The development of society in industrialised nations generated such a paradox, namely, though there is so much information that there is not enough of it.

To much information and the issue of reasoning

Information is all over there. Regarding to the definition of information above, it must be.

Information transport messages, but what aim do they have? In daily life this could be to entertain people, to educate them, to inform them e.g. about the weather or news, to avoid growing of a traffic jam or to stimulate their buying behaviour. In business life this could be to cause an order because coffee run out, to fill a human resource gap because a secretary is ill or to react quickly because a rival made a better offer to a high potential prospect.

The problem of too much information, therefore, can be identified through external and internal constraints.

The external influences are not only defined trough the mass of information which flows towards the individual, it is also the fact that the same or nearly equal information is provided by too many emitters and this information is repeated. Furthermore, which is most worth, information is provided irrespective it was desired or requested. This fact called Shenk (1997) as “datasmog”.

The internal constraints are subject to the human being. De Wit et al. (2004, pp. 52-57) state that reasoning is influenced by three issues: cognitive abilities, cognitive maps and cognitive activities. As cognitive

maps are characterised through tacit knowledge or can be compared with a computers running system it is more interesting to examine cognitive abilities and activities.

Cognitive abilities can be compared with a computer’s hardware. This means firstly that a human being sensing abilities are limited. While the senses of touch, smell, taste, hearing and seeing are bombarded with information or stimuli, much of it remains unrecognised. The human being is not able to realize everything. Secondly, its information processing capacity is limited, too. By that, not everything what a person realize can be interpreted. To avoid an overload, the human being has to weed useful information out. Finally, not everything what has been processed can be stored. Nearly everything may stay in short term memory, but not everything may stay in mid term memory and just a little bit of the whole will stay in long term memory.

Cognitive activities, therefore, can be compared with a computer’s software. Before conceiving and realizing a problems solution, the problem must be identified and diagnosed. To do this in an efficient way the software must be provided with correct and relevant information.

To relate it more to business, it is to say, that management has to be provided with the information which is not only relevant rather presented in an easy interpretable form. By that management may work more efficiently and effective.

Too few information

As there is on the one hand too much information as stated above there is on the other hand often not enough of it.

This means that some information has not been acquired or is not available when needed. This is illustrated by comments like: ”This you should have known!”, “If I had known that…!” or by daily time kidnapping recherché work, where colleagues are asked, data banks or filings are searched. But also structured research needs time and, therefore, money. Sometimes missing information is used to excuse failing.

As these examples show, not only the missing of the information itself leads to insufficient supply of it, but also its availability. What value does information have, if it can not be used, because it wasn’t available at the right time?

Viability of any organisation is dependent on the availability and supply of information, which is necessary to manage processes and human resources.

The paradox explained above, leads to the constraint of establishing information management to use information as production factor and to create competitive advantage by using it in an effective and efficient way.

3.2 Definition of information management

To come to an appropriate definition of information management (IM) in context to the diplomas aim, it is necessary to compare several views of it, firstly.

Schwarze (1998, pp. 41), therefore, collected the following different meanings:

- IM as a synonym for commercial information systems
- IM as the management of documents, books and journals, which is near to library science
- IM as the management of information resources, which has a strong connection to computer science management and the using of soft- and hardware
- IM as the management of data, which means the development of data banks and to ensure data security by the use of special information processing systems
- IM as a special management task containing all activities of acquisition, processing, storing and offering of information. Therefore this meaning includes strategic and operational tasks.

With those meanings he came to his personal definition of IM:

“Information management contains all management tasks (leading, planning, co-ordination and controlling) of the acquisition, processing, transferring, storing and offering of information to support the achievement of the organisations objectives.”

Krcmar (2005, p.49) defines IM as follows:

“IM is the management of economies of information, information systems, information and communication technology as well as holistic leading tasks.

…IM is a discipline of management as well as a technique and is an elementary part of leading an organisation.”

Concerning the diplomas theme, the author agrees with booth definitions, but stresses the data flow management as support function of management’s decision making process.

3.3 Tasks of information management

Firstly, it is important to mention how varied this topic in literature is. Schwarze (1998, p. 64) compared 13 different authors with 13 different views of tasks of IM:

Table 1: Comparison of Tasks

illustration not visible in this excerpt

(Schwarze 1998, p. 64)

This table could be updated regarding to Kcrmar (2005, p. 34), who distinguish different approaches of IM. One of these approaches is the task orientated approach in the German speaking region and is, by that, referring to Heinrich (2005, pp.73-314), who divides the tasks of IM in strategic, administrative and operative tasks.

Schwarze (1998, p.65) amplifies each of those and adds analytic tasks. This scope of tasks, he defines as core tasks of IM. A whole overview of these tasks could be plotted on a grid as follows:

Table 2: tasks of IM

illustration not visible in this excerpt

To evaluate this table in a critical way, the author mentions, that IM rather is the base to fulfil these tasks efficiently and effective than IM has the task to match all these fields of business.

Schwarze (1998, p.68) rebuild this table by the outsourcing some tasks as cross sectional area tasks. These tasks bother the core tasks and can be seen as support to them, which contain the following parts:

- Data management
- Personnel management
- Security and catastrophe management
- Juristic issues
- Quality management

Regarding to the diplomas theme, the author will concentrate in the continuing text regarding to Schwarze (1998, pp.87) on some parts of the analytical tasks or regarding to Krcmar(2005, pp.51) to Management of information economies.


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Costs and benefits of the optimisation of data flow in theory and practice of information management
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Costs, information management, information, management, data flow
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Anne Wolkodaw (Author), 2006, Costs and benefits of the optimisation of data flow in theory and practice of information management, Munich, GRIN Verlag,


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