Author: Jim Riley Last updated: Sunday 23 September, 2012
We talk often about Information - the "I" in ICT. But what is
information? How does it differ from "data"? And what kind of information
does a business require?
The difference between Data and Information?
It is important that you understand the difference between "data" and "information"
Think of data as a "raw material" - it needs to be processed
before it can be turned into something useful. Hence the need for "data processing".
Data comes in many forms - numbers, words, symbols. Data relates to transactions,
events and facts. On its own - it is not very useful.
Think of the data that is created when you buy a product from a retailer.
- Time and date of transaction (e.g. 10:05 Tuesday 23 December 20X3)
- Transaction value (e.g. £55.00)
- Facts about what was bought (e.g. hairdryer, cosmetics pack, shaving foam) and
how much was bought (quantities)
- How payment was made (e.g. credit card, credit card number and code)
- Which employee recorded the sale
- Whether any promotional discount applied
At its simplest, this data needs processing at the point of sale in
order for the customer to receive a valid receipt. So the data about the
transaction is processed to create "information" - in this case a receipt.
You can imagine that the same data would also be useful to the manager of
the retail store. For example, a report showing total sales in the day, or
which are the best-selling products. So the data concerning all shop transactions
in the day needs to be captured, and then processed into a management report.
The above example demonstrates what information is.
Information is data
that has been processed in such a way as to be meaningful to the person
who receives it.
Note the two words highlighted in red - "processed" and "meaningful". It
is not enough for data simply to be processed. it has to be of use to someone
- otherwise why bother?!
Uses of Information in a Business
Businesses and other organisations need information for many purposes: we
have summarised the five main uses in the table below.
To plan properly, a business needs to know what resources
it has (e.g. cash, people, machinery and equipment, property, customers).
It also needs information about the markets in which it operates and
the actions of competitors. At the planning stage, information is important
as a key ingredient in decision-making.
Information about each transaction or event is needed.
Much of this is required to be collected by law - e.g. details of financial
transactions. Just as importantly, information needs to be recorded
so that the business can be properly managed.
Once a business has produced its plan it needs to monitor
progress against the plan - and control resources to do so. So information
is needed to help identify whether things are going better or worse
than expected, and to spot ways in which corrective action can be taken
Performance must be measured for a business to be successful.
Information is used as the main way of measuring performance. For example,
this can be done by collecting and analysing information on sales,
costs and profits
Information used for decision-making is often categorised
into three types:
(1) Strategic information: used to
help plan the objectives of the business as a whole and to measure
well those objectives
are being achieved. Examples of stategic information include:
- Profitability of each part of the business
- Size, growth and competitive structure of the markets in which a
- Investments made by the business and the returns (e.g. profits, cash
inflows) from those investments
(2) Tactical Information: this is
used to decide how the resources of the business should be employed.
- Information about business productivity (e.g. units
produced per employee; staff turnover)
- Profit and cash flow forecasts in the short term
- Pricing information from the market
(3) Operational Information: this
information is used to make sure that specific operational tasks
are carried out as planned/intended (i.e. things are done properly).
For example, a production manager will want information about the
extent and results of quality control checks that are being carried
out in the manufacturing process.
This revision note has outlined the main kinds of information. It is important
that you understand the difference between data and information, explain
the role that information plays in a business, and distinguish between the
main kinds of information.