Data mining and Knowledge management application to enhance business

operations: An exploratory Study

1
SYED ARFAT ALI

Email: 1arfat_iu88@hotmail.com

Abstract:
The modern business organizations are adopting technological advancement to achieve competitive edge and satisfy their
consumer. The development in the field of Information technology systems has changed the way of conducting business today.
Business operations today rely more on the data they obtained and this data is continuously increasing in volume. The data stored
in different locations is difficult to find and use without the effective implementation of Data mining and Knowledge
management techniques. Organizations who smartly identify, obtain and then convert data in useful formats for their decision
making and operational improvements create additional value for their customers and enhance their operational capabilities.
Marketers and Customer relationship departments of firm uses Data mining techniques to make relevant decisions, this paper
emphasize on the identification of different data mining and Knowledge management techniques that are applied to different
business industries. The challenges and issues of execution of these techniques are also discussed and critically analyzed in this
paper.

Keywords
Knowledge, information, Data Mining, Knowledge Management, Knowledge Discovery in Databases, Business, operational
improvement

money to customers [3]. The matter of concern today

1. INTRODUCTION
Today, the business is not only conducted throughout
the globe but also developing their capabilities, skills,
knowledge and their financial profitability. It is the will
of business managers and owners to keep their business
growing and developing from different aspects so that
they can be ahead of competitors. Getting more
developed and advanced in technology than rival is part
of modern business strategies of organizations, in which
advancement in information technology; knowledge
management and usage of data effectively have higher
significance. It is the need of business era that managers
and owners must be able to appraise and recognize the
affecting factors to their organization [1].
The knowledge produced from data in an organization
captures the attraction of managers but it is also the
truth that these managers are not much interested in
technology that produce it actually [2]. Unlike the past
business concept the modern business is not only to
earn higher profits but the advantage is created by
satisfying customers, continuous business growth,
Innovation, opportunities of growth, and value for
for managers is to understand the changes in customer
need and business environment because today
customers now have several alternative products and
services to choose from which makes them competitor
as well and competitors are providing goods and
services that are improved in terms quality and
performance that leads to emerging changes in business
environment [4]. Some significant concerns for modern
businesses of 21st century includes the identification of
customer needs timely, understand the value customer
wants, and the use of advanced information technology
(I.T) tools to improve design, R&D, manufacturing
productivity, marketing efforts and post sales service
standards. The understanding of clients behavior also
has significance and impact the business strategy and
appraising the new business opportunities [5].
Information technology today not only advancing the
capabilities of organizations but also removing the
restrictions of time a location due to globally
accessibility the differences of large and small size
organizations are narrowing down [3]. Smaller firms
are giving intense competition to larger firms because
 Data mining and Knowledge management application to enhance business operations: An exploratory Study
due to information technology they can make the
consortium with other smaller firms and can access the
clientele that were previously not in access. According
to [6] with the increment of Information technology
applications inside organizations and with boast of
businesses the data of customers also increased that are
unused and remain hidden. The modern managers and
decision makers are finding the significance of this
hidden and untapped data for decision making and
business growth. Due to the competition and options for
customers there is need in business world to create
CRM (customer relationship management) to obtain the
useful customer knowledge which can further be
transformed to a smart business strategy. On one side
the data mining technique helps in divulge the unused
and hidden data related to customer to understand them
well. On other hand knowledge management is now
become the essential part of an organizational strategy
in order to improve business operations. This research
paper explores the affect of data mining (DM) and
Knowledge management (KM) applications on business
organization performance. The reason of studying Data
mining and Knowledge management is that [7,8]
confirms that DM and KM applications are becoming
significant for decision making process. This study
further elaborates the benefits and problems
organizations face while executing Knowledge
management and Data mining applications.
The structure of the paper is designed to understand the
significance of knowledge management and data
mining applications on business performance. The next
section of this paper describes the concept of
knowledge management, its process and discovery of
knowledge from databases. The third part of this paper
emphasizes on data mining, and the business scenarios
related to data mining. Part 4 of this paper focuses on
the application of Knowledge management and Data
mining in business organizations with special
consideration of decision making process and different
fields of business. The part five identifies the
challenges, limitations and problems KM and DM
implementation resulted. In final part the paper is
concluded.
2. KNOWLEDGE AND KNOWLEDGE
MANAGEMENT
2.1. Knowledge
Knowledge is the concept differs from data and
information in the field of information technology. In
2
the I.T related literature the data can be described as
raw facts and figures in numerical form. When data is
arrange in a pattern it becomes the information. When
the information is possessed in persons observance in
form of modified information that may be unique,
valuable and accurate it becomes knowledge. The
knowledge is related to concepts, ideas, judgments,
observations and facts [9].Two major types of
knowledge include Tacit Knowledge and Explicit
knowledge. Explicit knowledge obtained from books
and documents whereas the tacit knowledge is obtained
from personal experience.
2.2. Concept of Knowledge management
The concept of knowledge management in a business
environment is to obtain the data and modified it in
form of useful knowledge. As a multidisciplinary
concept there are several definitions of Knowledge
management. [10] Argued that knowledge management
is diversified concept and taking a single definition out
of it is difficult task because of the three factors. This
nature includes that knowledge is considered as
immaterial in nature and when it comes to its definition
it is complex. In the management field of business the
knowledge management becomes further complex
because each field has its subjective and eclectic nature.
Third factor is that KM concept is in stage of
emergence which is not yet established. [10] Included
the Knowledge management definition from other
authors as well whereas [14] observed a common
feature in all the definitions which is that it helps an
organization creating the competitive edge in market by
sharing knowledge effectively in organization.
According to [14] the security and protection of
knowledge is also an important factor along with
getting the ability to generate and incarcerate the
knowledge, the whole process is actually known as
Knowledge management. [15] Defines the
Knowledge management from perspective of HR that it
is a process of obtain, capture, share and use the
knowledge for the purpose of improve performance and
learning in company. [16] has given a changed
definition of Knowledge management which is that
identify, capture, arrange and distributing the
intellectual information that is crucial for strategic
performance of a firm.[1] elaborate the Knowledge
management as an integration process of different fields
of organization with strategic importance with the
objective to improve performance and capital. The core
 Data mining and Knowledge management application to enhance business operations: An exploratory Study
of above mentioned definitions of KM describes it as
process to achieve knowledge, proficiency and
experience which enables them to have superior know
how, boasted performance, birth innovation and give
consumer the value they needed. [12] Explained that
organizations are achieving their goals by generating
motivation in workers to develop, improve and utilize
their skill of interpreting the data and information.
Employees must be able to give meaning the
information they have to use it for decision making and
improve efficiency. [17] Investigated and found that
modern businesses have agreed that share and
application of knowledge in their operations and
businesses improve their performance. As an intangible
asset the knowledge leads to create competitive
advantage by increasing employees capability and by
providing base to make accurate decisions.
2.3. The Process of Knowledge management (KM)
The knowledge management purpose in an organization
is to utilize the available information optimally and
make it a culture to make decisions and work based on
available knowledge. Process of knowledge
management starts with gathering the data, categorizing
different information in it, evaluate the information
critically and share it with relevant layers within
organization for use. The major objective of Knowledge
management is to make knowledge available right
place, right time and in right format so that timely and
effective decisions could be taken throughout
organization [1]. Process of Knowledge management
revolves around flow of knowledge which starts from
gathering and then creation of knowledge which then
further share and distribute to relevant person. In
modern business world the whole process of knowledge
management is supported and implement via KM
technologies. Modern technology based applications of
Knowledge management are creating significant role
and these are key tools to utilize knowledge
management [18]. In order to enable the KM
communication, cooperation, and content sharing the
technologies have been playing key role to ensure
knowledge management flows. Knowledge
management technologies like Applications are now
integrated with the process cycle of KM. Below is the
figure
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Figure 1: KM Technology and process integration
The Figure 1 demonstrates that knowledge management
is a cyclical process by efficiently using which the
organization can achieve its strategic and business
goals. Organizations needs to make the tacit and
explicit knowledge learning as their habit along with
more emphasize on planning and implementation on the
basis of available knowledge. [19] highlighted a group
of six technologies which supports the implementation
of KM and help improving firm performance includes
the data mining, database discovery, ICT, knowledge
management framework, and Knowledge based system.
2.4. Knowledge Discovery from Databases (KDD)
[1] Investigated the integration of Knowledge discovery
from database from different organizational domains
like production, finance, and production control, and
audit, detection of fraud, internet and marketing
functions. Due to this integration, discovering the
functional knowledge becomes more convenient. [19]
Describes the KDD in words the significant process of
identifying and obtain the useful, novel and
understandable data from huge database. [20] Further
elaborates that KDD is based on steps that uses Data
mining technique to pick the data from database in
useful, novel and patterned form. The figure 2
demonstrates the steps of KDD and identified five
stages of this process [21].
In first stage the data is cleaning and integrated
with different domains. This stage is to remove the
missing data, multiple sourced data and noise from
database.
To retrieve the data from database the second stage
of Data selection and transformation is
conducted which then further transfigure so that
data mining can become easy. Aggregation and
summary operations are performed by the I.T of
firm.
 Data mining and Knowledge management application to enhance business operations: An exploratory Study
In order to excerpt the pattern of data, data mining
adopt an intelligent technique to ensure retrieval of
data needed.
Fourth stage is pattern evaluation in which
different interesting patterns are tried and evaluate
so that when knowledge is needed the right pattern
can be obtained.
The fifth stage is knowledge presentation where the
mined knowledge is present and visualize to user
for decision making purpose.
Figure 2: Data Mining and KDD Process
3. Process of Data Mining
The data mining has emerged as one of most significant
data analysis and detection tool used in business
organizations. The data mining is defined in diversified
ways, It is a process of obtaining and finding the useful,
unknown, understandable and valid pattern from huge
data in database [22]. But it is also the truths that
emphasize of all definitions is to finding data and
discover data to be used in decision and managerial
level discussions. Data mining has its increasing
significance in business organizations because it
becomes critical for management to make successful
decision. What management have in hand is the data of
their financial, marketing, sales, production, and other
business measures. The data is saved in database and
management needs data in arranged and useful form.
Data mining technique is job of I.T to find the data
needed, arrange it in useful form and make sure to
provide it to relevant authorities. Data mining tools
further provides the results of data and help
management interpret it religiously. The process of data
mining is based on four major steps starts from
selection of data, transformation of data, mining of data
and prepares results to be used for interpretation.
4
Figure 3:Scheme of data mining
In past the business queries and information that took
much time to get answer are now resolved and
answered by Data mining tool. DM have capability to
search the huge data base for particular data and
patterns and generate the information that predicts the
business future need and management then makes
decision comparing this information with expectations
[21].The DM tools finds innovative patterns that is
obtained with shuffling of data sub sets [22].
The data mining tools are majorly predictive or it would
be descriptive, different researchers to describe the DM
deeply emphasize on deep analysis, tasks data mining
does and in terms of the pattern they want to mined.
Researchers [6, 20, 21] have identified the tasks of data
mining by using diversified terms. According to [6] the
detection of deviation, description of class, Class
identification, Dependency investigation, visualization
of data and concept explanation are data mining tasks
identified. The tasks identified by [20] includes
summarization, dependency modeling, link
investigation, classification, and sequence investigation
whereas the author [21] find the tasks like predictive
investigation via regression, relationship classification,
concept description, and cluster analysis as useful data
mining tools. Since the different researchers uses
different terms for data mining tasks but the concept
they described were almost same. The concept of data
visualization is different from others which is only
identified by researcher [6]. The data mining tasks are
discussed below with relevance to business
organizations and business environment.
The visualization of data
In this tasks the information is displayed in graph, table
and map formats which helps the users of information
 Data mining and Knowledge management application to enhance business operations: An exploratory Study
to interpret it conveniently along with understand the
patterns of data. The management and owners can use
this graphical and tabular information to understand the
trends and buying behaviors of consumers. The sales
manager can understand the most selling item in
product range and can make the demand of that product
on immediate basis. With the help of tables and graphs
management takes strategic decisions for future
business growth.
Dependency Analysis
The dependency analysis identified the relationship
between the items so that promotional and discount
campaigns could be design accordingly. Dependency
analysis finds the connection between the products
which have pattern to be bought frequently. The
information and knowledge by this data mining tasks is
used to design promotional, discount and marketing
strategies. Products like bread and butter or food with
soft drink are bought together which shows dependency
of one product over other. So the shop owner/ retailer
can design promotional and discount strategy
accordingly for example they can give discount if
consumer buy milk with butter and soft drink with food.
Bread then milk and food then soft drink is the pattern
of purchase.
The description of Concept
The entries of data like data of consumers are grouped
in terms of concept, classes and knowledge domain.
This technique leads to the characterization,
comparison and discrimination in a class of data. The
summary of the whole data is obtained in the data
summarization whereas the in discrimination of data the
selected class is compared with other classes. The
examples of summarization is that the management can
obtain the data of consumers whose purchase has
declined up to 20% in a particular period of time or a
during a month with the help of query SQL. The
example of data discrimination is that management can
discriminate consumers on the basis of their
consumption like they can find the data of consumers
with 10% higher purchases then the worst spending
consumers in April 2014. Similar technique can be
used to extract the information regarding consumers but
the outcome in form of charts and graphs will
demonstrates the different picture due to discrimination
[21]. By using this task the marketing management can
understand whether consumer is declining its loyalty
with company or his taste is changed via the data
profiling process.
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Clustering
It is another important task of data mining in which
management segment different items to a cluster with
similar features and usability. The information and
knowledge obtain through data mining decides the
similar features to cluster the data in same sub group.
The use of clustering in business organization is that the
marketing department can use it to create market
segments for example if a meat selling brand to
understand the consumer preference of meat buying
after discount, so instead of thinking over it they can
group the consumers on religious basis to understand
their preference based on cultural values and norms.
The promotional campaigns could be designed with the
help of data mining technique.
Classification and Prediction
This task discovers the patterns that are predictive in
nature based on the categories and nominal attribute.
The attribute which they predict in this task is known as
Class. In this model the training data is analyzed so
that it can be represented in form of decision trees,
formula of mathematics, rules of classification and
neural network etc [10]. In business organization the
marketing management can classify products in form of
cheap, high priced, most popular and normal etc.
Deviation Detection task
This task of data mining ensures to identify the set of
data from whole data which do not match the features
of whole data. The data which deviate in this task is
known as outliers. In businesses this technique is used
to identify any fraud for example a bank can detect the
deviation in credit card withdrawal of their consumers
and any deviation is then flagged as anomaly to safe
from fraud.
4. DATA MINING(DM) AND KNOWLEDGE
MANAGEMENT (KM) APPLICATION
4.1. Application in Business Decision Making
In the process of business decision making the
application of knowledge management and Data mining
plays crucial role in creating the business intelligence.
The figure 4 demonstrates the interaction of DM and
KM to create the Business intelligence. The term
business intelligence can be described as the capacity of
business to effectively use knowledge and information
that leads to development of business and its growth.
Transformation and effective utilization of these two
techniques is critical in implementation [25].
 Data mining and Knowledge management application to enhance business operations: An exploratory Study

customer footfall, large number of unit sales,

involvement of barcodes, consumer buying history and
sales records. Big retailers like Wal-Mart, Amazon and
Tesco etc. have their data in TBs within few minutes
[1]. The huge data size increases the need of application
of KM and DM because the size of data retailers further
expanding due to global popularity of electronic
commerce/ online buying activities. It is the fact that
retail industry is the largest user of data mining for the
purpose of knowledge building; understand behavior of
Figure 4: Data Mining and Knowledge
consumer buying, sales trends, enhance ratio of
Management Interaction
consumption, retain loyal clientele and to enhance
distribution structure so that the operational efficiency
The figure 4 demonstrates that with implementation of
could improve and cost of operations could be
data mining in organization the management can obtain
controlled [21]. The DM technique of Association helps
information previously hidden and unknown for the
getting the information of buying pattern of consumers
purpose of getting knowledge. The effective knowledge
like customer who ordered food bought soft drink.
and information leads to the creation of business
Deviation investigation leads management in retailers
intelligence. The business intelligence authorizes the
to detect the fraudulent act and persons involved in
managers to know and answer the questions about the
fraud whereas the consumer profiling guides them in
purchase frequency of a product by consumer. The
making promotional campaign.
knowledge of consumers and their profiles enables the
2. Banking Sector
marketers of firm to decide the customer types and the
The banking sector as one of strongest economic player
promotional messages for each type of clientele.
also gets advantage of KM and DM adoption. Banks
record and keep the data in large databases regarding
4.2 Application of KM and DM in different business
their financial values and consumer related data. The
fields
issues in banking operations have resolved with the use
This section of paper demonstrates the different
of association, information deviation, patterns in
domains and business areas where the Application of
consumer investment and finding the market price due
KM and DM does play role to enhance their
to huge data which is not possible to be processed by
performance. Knowledge management and Data
human. Knowledge management and Data mining
Mining are used in banking sector, telecommunication
application in banking industry guides them to identify
industry, manufacturing organizations, retail businesses
the risks involved in investments and returns they will
and in insurance firms. These industries are getting
earn [26]. The knowledge management and mining of
benefited from DM and KM in terms of their
data technique used to minimize business risks and
operational improvement, effective decisions, improved
increase the outcome of trading, because previous
marketing and increased financial profits. The data
patterns alarm the management about risks involved
mining tools are used in organizations in form of
whereas the forecast of previous data help making trade
statistics, pattern identification and applications that
strategies. KM along with DM further enhances CRM,
recognize those patterns and relationships of the
business portfolio and strategies of firm. Data mining
knowledge and information that would not be possible
provides information of past credit rating of customer
to detect without these tools. Failure to get these
which enables Banker to decide approval or rejection of
connections and patterns leads to business operational
loan. Fraud is top most concern of banking institutions
failure which Data mining actually improves. The way
and their management so the uses of deviation analysis
different industries utilize the KM and DM in their
and anomaly identification of transactions take the
business discussed below,
abnormal transactions out of general characteristics that
1. Retail industry
may be due to fraudulent activity.
Retailing is one of most suitable industry to adopt the
3. Airline industry
Knowledge management and Data mining due to large

6
 Data mining and Knowledge management application to enhance business operations: An exploratory Study
The clustering and Association rule procedures help
obtaining the knowledge of consumers which is used by
airline to provide discount and sent promotional
campaigns based on detection of their frequency of
travelling.
4. Manufacturing organizations
The manufacturing firms need to be specially informed
for the customer needs and wants so that they can
modify their manufacturing operations and product
developments accordingly. Knowledge management
mechanism should be used to identify the most
demanded features and ingredients to fulfill customer
need. Data mining techniques facilitates the managers
in manufacturing firm to identify and understand the
patterns of customers claiming warranties and claim
refund due to bad performance of product. So that they
would be ready to deal with it and ensure to retain
consumers with them.
5. E-commerce businesses
The e-commerce websites and online portals like
Amazon and Jumia.com also benefitted from Data
mining and Knowledge management tools. These firms
send recommendations as per customer previous
patterns of buying and their queries. Personalized
product offerings and promotions of products that is of
customer interest is delivered via data mining technique
[24].
6. Health care sector
Doctors in hospitals can also use the data mining
techniques like clustering which guides them to
understand the demographics of infected patients from
HIV, Cancer or other deadly viruses. With the help of
this knowledge doctors can make better treatment plan,
effective diagnostic mechanism and helps researching
on these diseases [4].
7. Telecom industry
As one of fastest grown global industries the Telecom
industry also uses Data mining and Knowledge
management techniques. Managers uses data of
consumers to understand the pattern of their calling,
sending text messages and usage of internet data based
on point of time. By using mined data and knowledge
management design the combo bundles, calling rates ,
internet packages and promote these using profiling
technique. Sequential pattern analysis, data
visualization and detection of illegal activities through
telecommunication are few significant techniques used
in industry.
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5. CHALLENGES OF KM AND DM
APPLICATION
5.1. Implementation Challenges of KM in Business
The significance of data mining and Knowledge
management is not in doubt but application and
implementation of them needs careful considerations.
Business firms face issues, problems and challenges
while applying the KM with full spirit and benefits [4].
The author [27] detect the following problems and
challenges,
(1)Technology
With the growth of technology and innovation the need
of change arise in business organizations time to time.
Application of KM technique created the need of
change in knowledge and data systems in firm.
Management faces the challenge of resistance from
employees because they are in comfort zone with
previous technology. Knowledge management
implementation needs training sessions of employees to
make them aware with new technology and obtain
knowledge from it [27].
(2)Individuals
The ability to learn new skills and perception of
individual that is major source of creating tacit
knowledge is one of key challenge to make information
sharing a culture. The employees retain Tacit
knowledge and stay silent which restrict the knowledge
flow. Explicit knowledge must be encouraged along
with a culture of sharing problems, issues and
information lacks from many organizations creating
challenge [27].
(3)The Shared leadership
The workers with explicit and tacit knowledge are not
promoted to leadership levels in different organizations
leads the disappointment in employees. Thus even after
many trainings and lectures from management the
employees refrain themselves to share key knowledge
and information they have [27].Without effective
arrangement of shared leadership the application of KM
would be challenged.
(4)Culture and cost of creating culture
The knowledge and information in business
organization stay in the human mind and technologies
only capture, save, arrange and process the information
using KM technique [27]. Creating the culture of
human resource development and knowledge sharing
with skills development of employees are needed to
 Data mining and Knowledge management application to enhance business operations: An exploratory Study
fully implement KM. The cost of these supporting
activities sometimes outperforms the benefits.
5.2. Limitations of Data Mining Application
The major limitations in the implementation of Data
Mining technique is use of huge data and privacy of
consumer. There is need of protecting the rights of
stakeholders involved like consumers, employees, and
investors. Without fulfilling the ethical considerations
and imposed the protection laws in applying Data
mining the information obtained and process remain
illegal without consent of consumers. Further the
representation of data in database increased the
limitations because data if not properly managed and
save in homogeneous formats it would be failed to
process it for decision making need. Data mining
technique may not be succeed until assuring the
reliability of data because data obtained from reliable
sources is integrated with outcome of analysis and
evaluation. The cost of buying networking and
computing hardware is declining but the price of
applications like Data mining has been increasing
which must be controlled because due to high cost
small to medium size firms failed to get benefit of
advancement in information technology. The data
mining challenges includes dimensionality, iterative
mining need, scalability, and techniques integration
during mining data like Association and clustering are
still challenges for Data mining application in business
environment.
CONCLUSIONS
Emphasize of this paper is to understand the
significance of data mining and knowledge
management applications in operational improvement
of business organizations. Data mining helps
managements to create database, extract useful
information, understand the patterns from data and
discover the data. Knowledge management on other
hand has similar significance which enables
management to produce knowledge from previous data
and information and utilize it optimally to create edge
in market. Customers as central focus of all businesses
remain key focus of KM and DM applications because
the data related to customers is mined, arrange and
process to get useful information for strategic decision
making. Using Data mining helps businesses to
improve business operations, create customer
relationships, and improve marketing efforts and
8
promotional campaigns targeting which leads to
increased financial profitability.
Advancement of technology has taken the data
usage and data capturing to skies which creates the
challenges for the implementation of Knowledge
management. Adoption of Knowledge management
systems in organizations will be a must for those want
to compete and survive in competitive markets.
Challenges of KM and DM application can be
identified and resolved with a team work of I.T
department and employees at each layer systematically.
Since the data mining involved in knowledge
generation and creation of data this could lead to clash
of these two techniques during operations that increase
the need of integration of both these applications along
with operations. In future the need of advanced data
mining tools will arise because of revolution in data
creation and accumulation. Businesses today know how
the Data mining works but there needs get skills of
using Data mining and knowledge management tools so
that continuous improvement in operations, marketing
and customer relationships could be ensured.
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