Unit 

3
Knowledge Management and Decision Making
Topics
• Types of Knowledge 
• Knowledge Management Value Chain 
• Types of Decisions
• Decision Making Process 
• Business Intelligence 
• Business Analytics
Data – Information – Knowledge ‐ Wisdom
• Data – Raw facts 
• Information – Organized to give meaning 
• Knowledge – Discover patterns, rules and context / Actionable
• Wisdom – collective and individual experience of applying knowledge

Laudon p.461
Define Knowledge
• Data + Information + meaning/interpretation/inference/Experience.

• Information is meaningful data that can be used to improve decisions

and problem solving.
Difference – Information vs Knowledge
Information Knowledge
• Processed data • Actionable information
• Provides facts • Allows predictions
• ‐ summarizing the data, average,  • ‐ How info tied to outcome? Are 
selecting a part of it , graphs,  there any patterns? What info is 
adding context, adding value relevant to the problem? Best 
way to use the info?
Types of Knowledge
• Explicit – Information that is written down or codified/documented.
• Tacit – Information that is stored inside a person’s mind. Not
documented.
Knowledge Management 
• Knowledge management refers to the set of business processes
developed in an organization to create/acquire, store, transfer and
apply knowledge. (Laudon p.462)
• discipline of enabling individuals, teams and entire organizations to
collectively and systematically create, share and apply knowledge
Dimensions of Knowledge
1. Knowledge is a firm asset

Intangible asset
Requires organizational resources
Value increases as more people share it
Dimensions of Knowledge
2. Knowledge has different form

Knowledge can be either tacit or explicit
Knowledge involves knowhow, craft and skill
Knowledge involves knowing how to follow procedures
Knowledge involves understanding the causality
Dimensions of Knowledge
3. Knowledge has a location

Knowledge is a cognitive event involving mental models and maps of 
individuals
There is both a social and individual basis of knowledge
 It is sticky (hard to move), situated (embedded in a firm’s culture) 
and contextual (works only in certain situations)
Dimensions of Knowledge
4. Knowledge is situational

Knowledge is conditional – knowing when to apply a procedure is just 
as important as knowing a procedure
Knowledge is related to context – one must know how to use a 
certain tool and under what circumstances
Knowledge Management Process

THE KNOWLEDGE MANAGEMENT VALUE CHAIN
Knowledge Acquisition
• Organizations acquire knowledge in various ways
 Corporate repositories of documents, reports, 
presentations and best practices
Unstructured documents like e‐mails
Online expert networks
Knowledge discovery through identification of patterns in 
corporate data
Knowledge workstations for discovering new knowledge 
Knowledge Storage
Documents, patterns and expert rules must be stored 
through various means so that they can be retrieved and 
used by employees
Creation of a database
Document management systems (for digitizing, indexing and 
tagging)
Expert systems
Knowledge Dissemination
• Various means through which organization knowledge is 
disseminated are:

 Portals, email, instant messaging, wikis etc
Collaboration tools for sharing calendars, documents, data 
and graphics
Search Engines Technology
Knowledge Application
 In order to add business value and justify ROI, 
organizational knowledge must become a part of 
management decision making into
Decision support systems
Enterprise applications for managing key internal business 
processes and relationships with customers and suppliers
MAJOR TYPES OF KNOWLEDGE MANAGEMENT SYSTEMS
Types of Decision
• Structured Decisions – repetitive and routine
• Semi‐structured Decisions ‐
• Unstructured Decisions – Novel and non‐routine

• Programmed Decision
• Non‐Programmed

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Decision Support System
• Decision support system (DSS) is a computer‐based information
system that combines models and data in an attempt to solve mostly
semi‐structured and unstructured problems with user involvement.
(Laudon, 2017)
Decision Support System
• A computer‐based application or program
• that compiles, combines and analyzes raw data and information
• to identify problems and determine their solutions
• in order to facilitate optimal decision making
Simon’s Model of Decision‐Making
• Herbert Simon (1960) made key contributions to enhance our
understanding of the decision‐making process. In fact, he pioneered
the field of decision support systems.

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Decision Making is the process of choosing the best alternative for reaching objectives.
Conceptual Model of a DSS

MMS ‐ Model management software
Model Driven vs Data Driven DSS
• Model‐Driven DSS • Data‐Driven DSS
• User interacts primarily with a  • User interacts primarily with the 
(Mathematical) model and its  data
results  • Helps to solve mainly 
• What‐if analysis – Helps to solve  unstructured problems
defined problem • Large amount of data is 
• Large amounts of data are not  necessary
necessary
Examples
• Cost‐benefit analysis
• Forecasting
• Finance and Investment
• Inventory control and stock out
• Location, distribution, transportation
• Manpower planning
• Project planning and control
• Queuing and congestion
Data Driven DSS ‐ Netflix
• Netflix Knows what we like?
• Netflix customer will lose interest in 60 to 90 seconds when choosing
something to watch
• In that time they view 10‐20 titles.
• 80% of the content customer watch on Netflix is influenced by their
recommendation system.
Loan Approval Decision
33
Dynamic Pricing
Dynamic Pricing
Business Intelligence
• Business intelligence (BI) has been defined as a broad category of
applications, technologies, and processes for gathering, storing,
accessing, and analyzing data to help business users make better
decisions.
• Business analytics (BA) is the process of developing actionable
decisions or recommendations for actions based on insights
generated from historical data.

Source: Rainer et. al. 
Business Intelligence (BI)
• Business intelligence (BI) is a term used by hardware and software
vendors and information technology consultants to describe the
infrastructure for warehousing, integrating, reporting, and analyzing
data that come from the business environment, including big data.
• Business analytics (BA) is also a vendor‐defined term that focuses
more on tools and techniques for analyzing and understanding data.

Laudon
Business Intelligence (BI)
• Some examples of business intelligence technologies include
database, data warehouses, data mart, Hadoop and analytical
platforms. (p 511)

• A platform provides — charts and other data visualization tools,

dashboard components, customization themes etc
Example of Coca Cola Bottling Company
• Establish one source of truth for 100 different 
systems
• Instituted enterprise data governance strategy
• Field sales teams drive profit with mobile 
dashboards
Example of Coca Cola Bottling Company
• The Coca‐Cola Company is the world’s largest beverage company, 
with over 500 brands and 3,900 products. Coca‐Cola Bottling 
Company Consolidated (CCBCC) is Coca‐Cola’s largest independent 
bottling partner. With Tableau, CCBCC’s IT and business intelligence 
teams replaced a daily, 45‐minute, manual reporting process.
• understand metrics like delivery operations, budget, and profitability 
with a few clicks, consolidating data from hundreds of disparate 
sources. 
Example of Coca Cola Bottling Company
Business Intelligence (Tableau)
• Are we delivering product at the time we say we're going to 
deliver it?
• Are we meeting that budget? 
• And how well are we doing against that forecasted budget?
• Previously, the team spent a majority of their time building reports. 
It could take days to bring together up to 200 million lines of data 
from 100 different systems into a data warehouse to then build a 
portion of one usable dashboard
• https://www.youtube.com/watch?v=jtCsoEw3Ykg&t=81s

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BI and BA Tools and Techniques
• Multidimensional Analysis or Online Analytical Processing
• Reporting and Query tools / Dashboard
• Data Mining
• DSS using models

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DW Framework
OLAP
• OLAP (for online analytical processing) is software for performing
multidimensional analysis at high speeds on large volumes of data
from a data warehouse, data mart, or some other unified, centralized
data store.
• OLAP enables fast, flexible multidimensional data analysis for
business intelligence (BI) and decision support applications.

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Example
• For example, sales figures might have several dimensions related to
location (region, country, state/province, store), time (year, month,
week, day), product (clothing, men/women/children, brand, type),
and more.

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Example
• Suppose your company sells four different products—nuts, bolts,
washers, and screws—in the East, West, and Central regions.
• If you wanted to ask a fairly straightforward question, such as how
many washers were sold during the past quarter, you could easily find
the answer by querying your sales database.
• But what if you wanted to know how many washers sold in each of
your sales regions during each quarter?
What is an OLAP cube?
• OLAP data is also organized hierarchically and stored in cubes instead
of tables. It is a sophisticated technology that uses multidimensional
structures to provide rapid access to data for analysis.
• The source data for OLAP is Online Transactional Processing (OLTP)
databases that are commonly stored in data warehouses. OLAP data
is derived from this historical data, and aggregated into structures
that permit sophisticated analysis.
OLAP Cube

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 OLAP Operations
• Drill down: In drill‐down operation, the less detailed data is converted into 
highly detailed data. It can be done by:
• Moving down in the concept hierarchy
• Adding a new dimension
• Roll up: It is just opposite of the drill‐down operation. It performs 
aggregation on the OLAP cube. It can be done by: 
• Climbing up in the concept hierarchy
• Reducing the dimensions
• Slice & 
• Dice 
• Dice: It selects a sub‐cube from the OLAP cube by selecting two or 
more dimensions. In the cube given in the overview section, a sub‐
cube is selected by selecting following dimensions with criteria:
• Location = “Delhi” or “Kolkata”
• Time = “Q1” or “Q2”
• Item = “Car” or “Bus”

• Slice: It selects a single dimension from the OLAP cube which results 
in a new sub‐cube creation. In the cube given in the overview section, 
Slice is performed on the dimension Time = “Q1”.
Examples
• IBM Cognos
• SAP BusinessObjects Explorer
• MicroStrategy

• Overview of Online Analtical Processing (OLAP)
• https://support.office.com/en‐in/article/Overview‐of‐Online‐Analytical‐Processing‐OLAP‐
15d2cdde‐f70b‐4277‐b009‐ed732b75fdd6
OLTP and OLAP
• An OLTP system is customer‐oriented and is used for transaction and
query processing by clerks, clients, and information technology
professionals. An OLAP system is market‐oriented and is used for data
analysis by knowledge workers, including managers, executives, and
analysts.
Business Analytics Models
• Organizations must analyze huge amounts of raw data in order to
make sense out of them. This overall process is known as data
reduction.
• Descriptive Analytics
• Predictive Analytics
• Prescriptive Analytics

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Business Analytics Models
• Descriptive analytics summarize what has happened in the past and
allow decision makers to learn from past behaviors.
• Predictive analytics utilize a variety of analytics techniques and tools
to examine recent and historical data in order to detect patterns and
predict future outcomes and trends. Predictive analytics provide
estimates about the likelihood of a future outcome.

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Business Analytics Models
• Prescriptive analytics go beyond descriptive and predictive models by
recommending course(s) of action.
• Prescriptive Analytics is a form of advanced analytics which examines
data or content to answer the question “What should be done?” or
“What can we do to make _______ happen?”, and is characterized by
techniques such as graph analysis, simulation, complex event
processing, neural networks, recommendation engines, heuristics,
and machine learning.
• use optimization and simulation algorithms

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• Prescriptive analytics use a combination of techniques and tools such
as business rules, algorithms, machine learning and computational
modelling procedures.

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HR Analytics
• In an interview can we predict whether the candidate, if selected, will 
stay with us for at least 18 months? 
• employee turnover is 13.5% p.a.
• 4% rise on attrition
rate
• Leadership style
 Business Intelligence
• The business environment is constantly changing and is
becoming complex day by day.
• Organizations are now becoming agile to sudden changes
hence now making frequent and quick strategic, tactical,
operational decisions.
• Making such decisions require considerable amount of
relevant data, information and knowledge.
• Decisions needs to be done in real time
 Business Intelligence
• Business Intelligence (BI) is about getting the right information, to the 
right decision makers, at the right time. 
• BI is an enterprise‐wide platform that supports reporting, analysis 
and decision making. 
• BI leads to: 
• fact‐based decision making 
• “single version of the truth
 What is Business Intelligence?
Business Intelligence is an umbrella term for a set of
methods
processes
technologies, and
tools
that help us convert data into information, information into knowledge 
and knowledge into plans that guide the organizations for its get 
competitive advantage
 Business Intelligence
• Making useful, actionable insight from stored data. 
• Allows effective business decisions to be made. 
• The act of using historical data to gain new information. 
• Techniques include: 
• multidimensional analyses 
• mathematical projection 
• modeling 
• 'canned' reporting
• Dashboards
 Questions BI is Designed to Answer
A BI solution, with the right data and features, should be able to take 
operational data and enable users to answer specific questions such as:  
Sales and marketing 
• Which customers should I target? 
• What has caused the change in my pipeline? 
• Which are my most profitable campaigns per region? 
• Did store sales spike when we advertised in the local paper or 
launched an email campaign? 
• What is the most profitable source of sales lead and how has that 
changed over time?
 Questions BI is Designed to Answer
Operational 
• Which vendors are best at delivering on time and on budget?– How many additional 
personnel do we need to add per store during the holidays? 
• Which order processing processes are most inefficient? 
Financial 
• What is the fully loaded cost of new products? 
• What is the expected annual profit/loss based on current marketing and sales forecasts? 
• How are forecasts trending against the annual plan? 
• What are the current trends in cash flow, accounts payable and accounts receivable and 
how do they compare with plan? 
Overall business performance 
• What are the most important risk factors impacting the company’s ability to meet annual 
profit goals? 
• Should we expand internationally, and, if so, which geographic areas should we first 
target?
 Evolution of BI
The search for the perfect "business insight system"
1980s
• Executive Information Systems
• Decision Support Systems
1990s
• Data warehousing
• Business Intelligence
2000s
• Dashboards and scorecards
• Performance Management
2010+
• Analytics
• Big Data
• Data Science
 Why BI?
BI is for answering the following business related questions technically
Past
• What happened?
• Why did it happen?
Present
• What is happening?
Future
• What will happen?
• What do I want to happen?
 Benefits of Business Intelligence
Planning, controlling, measuring and/or changing results in increases 
revenues and reduced costs.
Improve Operational Processes
• Fraud detection, order processing, purchasing
Better Adjustment Settings
• Competitor analysis, adjustment setting to changing trends
Predict the Future
• Predictive analysis, Forecasting
Business Intelligence Life Cycle
 Architecture of BI
A BI system has four major components: –
• a data warehouse, with its source data
• business analytics, a collection of tools for manipulating, mining, and 
analyzing the data in the data warehouse
• business performance management (BPM) for monitoring and 
analyzing performance
• a user interface (e.g., a dashboard)