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UNIT 8 INFORMATION AND ADVANTAGE

The two prime characteristics of information are relevance and reliability. The management accountant is involved in each. Relevant information assists the decision-making process the management accountant decides what is relevant. Reliable information is as accurate as needed the management accountant decides again and establishes control systems to ensure that accuracy is achieved.

Sources of information
Internal sources considered to be more reliable as it is known: Who provided the information When Why What assumptions were used

Questions exist over relevance as there is likely to be Narrow focus; Cultural distortion of issues.

Examples Accounting systems Marketing and customer databases

External sources considered to be more relevant as a wider range of issues with less cultural distortion. However the who, why, when and what is questionable this time as these are not known with any degree of certainty.

Examples Internet Media Industry periodicals

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DATA WAREHOUSING
A data warehouse is a subject-oriented, integrated, time-variant, non-volatile collection of data in support of managements decision-making process.

A data warehouse provides a platform of integrated, historical data from which analysis can be done. It is: A database A data capture system A data classification system

It will have: Data extraction facilities Reporting facilities to act as a decision support system;

The conventional data warehousing model is a system in which a large centralised store of consolidated business data is maintained by constant updates from the operational systems at the branches/stores or operating sites.

Examples Warehouses that capture data about customers and buyer behaviour Loyalty cards usage data Oyster cards

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DATA MINING
Data mining is the analysis of data to detect unsuspected or unknown relationships, patterns and associations. This involves using advanced analytical techniques and involves researching the warehouse to turn data into information Data warehouses are for storing data, not turning it into information, whereas data mining turns data into information. The process uses statistical techniques and technologies to discover relationships and then builds models based on them. Data mining results include: Associations when one event can be correlated to another event, e.g. beer purchasers buy peanuts a certain percentage of the time; Sequences one event leading to another later event, e.g. a rug purchase followed by a purchase of curtains; Classification the recognition of patterns and a resulting new organisation of data, e.g. profiles of customers who make purchases; Clustering finding and visualising groups of facts not previously known; Forecasting simply discovering patterns in the data that can lead to predictions about the future and make forecasting easier

Summary
Warehouses capture data Mining converts data into information

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Benefits of data warehousing and data mining


Faster transaction and query execution can provide competitive advantage. Information can be linked to experience to create advantage Accuracy from using IT capability Processes and captures substantial volumes of data and information results more reflective Cost effective capturing IT allows database to be continually updated Primary research undertaken objectively Can use access for customers as a basis for differentiation

Disadvantages
The data will need to be analysed and 'cleansed' before it can be integrated into a warehouse. This will not be easy, quick or cheap to achieve; Hardware and software costs can be significant and increasingly sophisticated users will be expecting more of their systems possible development into foresight/forecasting which will attract higher development costs Staff will need training users and operators As the new system proves its worth, more and more demands will be made of it, so ongoing maintenance, adequate network bandwidth, sufficient storage space, and highly flexible upgrade capability are all essential; With all data in a single main source, it is vital to ensure that effective back-up arrangements are made and strictly adhered to. Control of access needs regularly monitoring and may be the target of attack Legal considerations constantly changing with regard to the capture and storage of data

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KNOWLEDGE MANAGEMENT
The management of the information, knowledge and experience available to an organisation its creation, capture, storage, availability and utilisation in order that organisational activities build on what is already known and extend it further. Knowledge management is an approach in which an organisation proactively gathers, organises, shares and analyses its knowledge to further its aims.

Data raw fact Information combination of data to give meaning Knowledge combines information with experience to create a basis for advantage

The intellectual capital can be divided between:

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Human capital which comprises of human resources The knowledge, skills and experience possessed by employees Structural capital, which is in turn divided into: innovation intellectual property; customer address lists and client records; organisational control and operating systems.

Intranet systems
This is a private network that is contained within an organisation for access by staff. The main objective of an Intranet is to make information flow more freely by sharing company data, information and knowledge amongst employees. The aim is to make knowledge accessible to as many staff as need be in a speedy cost effective manner that ensures a consistency of provision. E.g. Solicitors / accountants / university professors Advantage from consistency, speed and cost

Extranet systems
An Extranet is a private, secure extension of the enterprise via the corporate Intranet. It creates a server that outside users can access (e.g. customers) and so we can create advantage by allowing access to our knowledge by our customers / consumers It also allows the organisation to share part of its business information or operations with suppliers and other business partners using the Internet and so can create an element of customer lock in

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Problems in implementing a knowledge-sharing system


1. Inappropriate organisation structure divisionalised structures with empowered management teams will not be encouraged to share experience unless there is some for of reward 2. There may be some technological barriers to overcome, such as the need to roll out a suitable modern network across an organisation, if one is not in place already. 3. There will be situations in which problems arise because of incompatible systems and working methods in different parts of the organisation. 4. It is inevitable that some data will have to be transferred into a new common format and this can lead to errors, omissions and inconsistencies if not done with great care. 5. In certain systems it is possible that older information will not be held in digital form at all, or not in a format that can easily be converted into a suitable modern equivalent. Examples include architect's drawings, medical notes written by hand and so on. 6. A decision is needed about how to archive this material. Will individual older systems be maintained and thoroughly indexed, or will it be accepted that such material has to be recreated from paper records on an ad hoc basis, if it is ever needed? Will archives be held locally or centrally? 7. There are social barriers to information sharing. For some staff the notion of making their information available to other staff in other offices may be difficult. They will have their own established and familiar methods of organising their information and may even refuse to change their current practices to fall in line with a centrally-imposed system. 8. There is likely to be some demotivation amongst staff. Some may resent having to give up a system that they know and like and learn a new one, especially if they are not given adequate training and adequate time to adapt. 9. There may be political issues and inter-office rivalries: information is power and some staff may fear that their own status within the organisation will be impaired if they have to share the source of their power with others.

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