The Value of Data and KnowledgeBy Francisco Ruiz | Thu, 06/02/2022 - 11:00
Now that everyone takes for granted, sometimes without questioning, the value of data, who could dare to question the value of knowledge? And yet it happens.
In the 1980s, the American architect Russell Ackoff developed what we know today as the “knowledge pyramid” and which is the basis of almost any explanation of what knowledge management is, both from a theoretical approach and in terms of its application to organizations.
The knowledge pyramid establishes a hierarchy of value between data, information, knowledge and wisdom. At the base of the pyramid is data as the minimum unit of decontextualized information. At the top of the pyramid is wisdom as internalization of knowledge and its relationship with goals and values.
Advances in information technologies, especially in the last two decades, have developed data storage and processing capacities that were unthinkable until now, and at prices that were also unthinkable. Organizations have made these capabilities their own by applying them to the development of their businesses. This has occurred at different speeds and with varying degrees of success. But, in any case, there is no manager today who does not recognize the importance of data in the design of their business strategies.
Companies have created specific equipment for data processing and analysis, and have invested significant amounts in equipment and data acquisition and storage systems. Business schools have developed programs exclusively focused on this subject, with specialized courses and case studies. Congresses, events, symposiums, meetings and roundtables are held.
Everyone today is a data-driven company.
And this is all good. When we have data, organize it, contextualize it and give it a purpose, we get information. When information is put at the service of objectives and applied in decision-making and problem=solving, we provide knowledge. When knowledge helps us to know what is appropriate at any given moment, wisdom appears.
But let's go back to the pyramid. At first glance, the less data, the less information, the less knowledge, and possibly no wisdom at all.
Consequently, specific teams, investments in equipment and technological systems and all training and dissemination initiatives on the importance of data for organizations are fully justified.
Indeed, it is essential to obtain and structure data. It is essential to manage in real time all the information that data analysis provides us with. It is essential to apply this information to decision-making and problem-solving. And the need to put all this at the service of socially accepted values and goals that transcend the essential contribution of value to shareholders is becoming increasingly evident.
But what happens when data becomes an end in itself? Accumulating and processing data without having a clear purpose of what to do with it, how to use it and what value it will bring us is a mistake of the same magnitude as not doing it.
The only way for data to add value and have an impact on our income statement is if we know what to do with it and what we are going to use it for. This can only be achieved if we move through the knowledge pyramid in the opposite direction. That is, from top to bottom.
Analyzing the knowledge that our company needs to put to work in order to achieve its goals and in accordance with its values is the first step. Knowing what we know as an organization and what gives us a differential value in the market. Knowing what we do not know and what we need, in order to make the decisions that will lead us to incorporate it. This is the task that really consolidates us in the present and projects us into the future.
And yet, paradoxically, this is much more contested.
All managers with whom I have the opportunity to talk about the importance of knowledge in their organizations do not hesitate to state this fact as unquestionable. They are all aware that without the knowledge provided by their employees it would be impossible for them to maintain the business they are in. None of them doubts the value of the knowledge thanks to which their organization operates. The value. But what about the price?
Taking care of knowledge, thanks to which your organization operates, grows and competes, costs money. If you sell knowledge, you have to manage it. And managing it requires effort and therefore investment.
Raising awareness and engaging the entire organization, especially management levels, in the importance of knowledge requires effort.
Identifying the key knowledge to be competitive in the market requires effort.
Acquiring or, as the case may be, preserving the knowledge that gives me a differential value over my competitors requires effort.
Providing technology that facilitates real-time sharing of this knowledge requires effort.
Transferring knowledge from one generation to another requires effort.
All these efforts are necessary. All these efforts are essential. It is urgent to apply ourselves to the task of putting some knowledge at the base of the pyramid. The reflection (wisdom?) on the value of data has already been done but we still have to reflect on the value of knowledge. Dedicating resources to it and designing and creating specialized teams of people dedicated to the knowledge that our organization treasures is an investment that cannot be delayed any longer. Later will come the strategy regarding the use of data but then it will have a purpose, a purpose and therefore a return, both to our income statement and to the more transcendent purpose of our organization.