From Data to Wisdom

I had a discussion recently with a client about what measures would be important for his factory. New ERP systems are now very good at creating ‘dashboards’ of current measures and can often overwhelm the manager with data but is it information – or knowledge? During this discussion I was reminded of the DIKW pyramid.

DIKW pyramid

The idea of this hierarchy is that it takes an awful lot of Data from which to get Information. You can interpret Information to get Knowledge and from Knowledge we get (over time?) a tiny bit of Wisdom!

Because we have such powerful data capture systems we should never ever be short of data although it is surprising how many companies still rely on gut feel and monthly accounts as their “data” source.

But lets presume that your business has an ERP and access to a reporting capability. Using this hierarchy then we can say in a business:

Data is:
Business systems records as data. Stock levels, yields, costs per meter, hours per works order, material cost per part, sales per part, attended hours of workers.

These days you can get most of this stuff out of your system very easily – but it doesn’t tell you much.

Information is:
I think this could be thought of as data over time. Think of stock levels over a 6 month period, sales per part per month, attended hours vs sales per month. Material costs vs sales per month. – that is information.

These reports and even graphs are also easy to do these days and you can wallpaper your office with lots of exciting charts, which of course means you must know what is going on – don’t you?

We can also get stuck at this level – measure lots of stuff but don’t do anything with it. In this case we are not so much managers as librarians.

Knowledge is:
It is only when you understand why something is happening can you claim it is knowledge. In a business context this also requires a root cause to understand how fix it. So knowledge is information with a root cause that explains it.

Wisdom is:
To have the satisfaction of knowing exactly why you are losing money has some value but I suspect it is short lived. The wisdom bit is to know what you are going to do about it. So wisdom is about the future. Data, Information and Knowledge are really all in the past – it is only through acting – applying wisdom  – does all this have a useful business purpose.

For example:

Data:                material costs and sales revenue of Product groups A & B

Information:    material cost as a % of sales is increasing in product groups A & B

Knowledge :    reason 1) prices are going down in group A

reason 2) material prices have increased in group B

Wisdom:          Action 1)           Investigate why prices are going down in group A

Action 2)          Start a retender of sources for material for group B