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In the near future data management and analysis techniques will make expert thinking and individual experience of managers obsolete. Discuss

CEMS Course Managing and Analyzing Data for Business Decisions

Professor: PhillipNell

04/19/2010

Michele Mattotti - 0950446 michelemattotti@gmail.com

In the near future data management and analysis techniques will make expert thinking and individual experience of managers obsolete. Discuss
In this elaborate it is possible to find an academic discussion on the relationship between the data management and analysis techniques and the expert thinking and managerial experience. It is developed through the definition of data management and analysis techniques, followed by their function in the firm and the growing need of the organization for these systems. Afterwards it is analyzed how the human experience and knowledge has and will still play a prominent role in the creation and the use of the information.

Definition of data management and analysis techniques

Data management and analysis can be considered from different points of view. In the literature there are many affiliated concepts, therefore there is a need for defining what is interpreted data management. It is considered that data management and analysis techniques are relevant in the sense that they are the basis for the information system of the firm. For seeing the link between the data management and analysis techniques and information system it is first necessary to define what is data and information, and the process that can bring this concepts to be applied in order to allow the firm to create value. Data will be treated as raw facts, that when are going to be organized will become information (Bath, 2001). The process in which the data are transformed into information can be described as a process of identifying valid, novel, potentially useful, and ultimately understandable patterns in data (Fayyad et ali, 1996). Accordingly to Fayyad et ali, the process is constituted by consequential 9 phases. In each of these require a different operation on the data. It starts from collecting the data and it ends with the interpretation of the information, passing through the selecting, cleaning, and classifying, crunching the data through data mining. They also claim that information are not useful if it is not applied previous knowledge to the interpretation. Previous personal or organizational

knowledge is also the key in order to set the goal and give the information a meaning through the application of a present paradigm. According to Choo (1996) it is fundamental to understand how an organization creates, transforms and use information in order to define the information system, namely The assembly of information processes, information resources and information technologies (Choo, 1996).

Function of the information system within the firm

The creation and use of information is necessary for the success of the firm to grow and adapt to the environment, and how the information system helps the organization to gain competitive advantage can be seen from three different points of view. 1. The organization decision making perspective The organizations search for and evaluate information in order to take important decisions. These choices are supposed to be made rationally based on the organizational goals, feasible alternatives and the possible consequences of these alternatives. However the organization is composed by various actors characterized by bounded rationality first theorized by Simon in , and therefore it tries to develop routines and rules of thumbs in order to simplify the decision process. Moreover the decision process is complicated and untidy by the discrepancy of interests of organizational stakeholders, bargaining and negotiation between powerful groups and individuals, the limitations and idiosyncracies of personal choice making, and so on. Therefore the information can be also seen as a mean to be perceived as a rational actor, in order to maintain the internal trust and outside legitimacy. (Choo, 1996) 2. The sense making perspective This perspective is meant to intend that the information system helps the organizations to sense making of changes and developments in its external environment. The assumption is that the firm is pursuing the fit between his organizational structure and resources and the strategic environment,

which is not fixed but is constantly in evolution. Organizations that are able to sense, understand and act faster than competition can reach a stronger competitive advantage. (Hill&Jones 2000). Management has to cope with these changes, and they have to make sense out of the data in order to enact organizational actions.
3. The knowledge point of view

The organizations create, organize and process information in order to generate new knowledge through organizational learning(Choo,1996). The organizational learning is created through an interaction between the tacit knowledge and explicit knowledge (Nonaka&Takehuchi, 1994). The information is initially personal knowledge, with the characteristic of being tacit and interpreted through the previous knowledge of the individual. Therefore the information system should be able to also individuate the right knowledge that is located within the organization, in order to be able to exploit and apply it. This knowledge is a fundamental resource in order to maintain the competitive edge (Kogut&Zander, 1992). Companies that are not enacting an efficient information systems, and therefore also in data management and analysis, are not efficiently managing knowledge. It is to consider also the concept of absorptive capacity: it states that accumulated prior knowledge increases the ability to accrue more knowledge and learn subsequent concepts more easily (Bhatt, 2001). This fact can be fundamental in an optic of competitive advantage, since knowledge is not easily replicable and therefore would give a competitive edge. Increased importance of information systems It is already clear from these perspectives that the information system has an intrinsic value for the development of the firm. However, it gained also more importance due to a growing complexity and faster change rate of the environment (Bettis, 1995). The main reasons for these features of the environment are: 1. Growing globalization: the firms must be face new challenges in transnational context. Bartlett and Ghoshal (1989) claim that the organizations are pushed in particular through

three different challenges: the integration of the offer and the operations, the responsiveness to the requirements from local markets and the management of knowledge. These three challenges are increasing the level of complexity of the decision making, of the sense making and the knowledge management, since there are more actors involved with tacit knowledge and different stakes, and the data must be considered in a wider spectrum of context specific meanings. Moreover the alternatives that the management has to consider are more in number and nature (Blumberg, 2005). 2. Competition: there is a trend toward a fiercer competition as well (Anderson&Joshi 2007). This is partially due to the open to new global and local actors and trend toward a more specialization within particular activities within the value chain (Rothaermel&Hitt,2006). This fact, increase the time pressure on the decision making, and the requirement of a better knowledge of the customers and the other players within the value chain. In the meanwhile however the information systems are also characterized by an increased technical development: the increased power, easy friendliness and diffusion of the technology have increased drastically. This means that many old human tasks within the information systems can be incorporated into software and applications. On the process of transformation from data to information described previously many passages can be done in automation by the computers, such as data collection, data storage, data cleaning, data mining. Moreover the IT technology is also facilitating the opportunities for sharing the information and data, not only within the company, but also from external source like the Internet (Blumberg, 2005)

Managerial experience and expert thinking

In this section it is argued why the managerial experience is and will be fundamental in order to succeed on the market place, based on the concepts described in the previous sections. The improvement in technology allows the organization to perform more efficiently some operation on the data in order to transform them in information. The managerial experience has a prominent

role in this process, since managers are the actors that hold the personal knowledge that is involved within the process (Fayyad at ali, 1996). Within the process the role of knowledge is prominent in various phases. First of all, the managers have to decide which data to collect and how. Afterwards the process can be conducted with the help of applications that can help to get and process the data in order to be easily understandable from the manager. (Guyenes&Vanecek,1996) However, the process of transformation is the incorporation of a routine and can be useful only if the manager is able to give meaning to the data, and that happens through the interpretation of individual knowledge (Bhatt, 2007). Moreover, it would be the experience that drives the manager to put in place one of the approaches to the data management system (Goodhue, Quillard, & Rockart, 1988). For instance, in the business objective approach is the management that has to express the informational needs to be extracted with help of computer based data analysis techniques could From the decision making point of you, it is important to consider the managerial experience for different reasons. Due to the increased volatility of the environment, the globalization and the increased complexity, the management is always more faced to take decisions in new settings without a sufficient amount of relevant information. It is possible that, for example, there is not enough time to evaluate all the possible alternatives or perhaps that there is not the possibility to collect data without actually entering in the market. One example could be the possibility to launch a new product that needs a critical mass of customer to be functional (Davenport, 2006). Expert thinking and managerial experience could supply the shortage of data, since with the intuition could see patterns not usually recognized (Prietula&Cockely, 2007). Moreover, it is possible that an expert could also influencing other people behavior, and be able to influence the environment by his behavior, and therefore being successful (Collins, 2001). In order to take in consideration the sense making approach, it is important to introduce the concepts of bounded awareness and dominant logic. The bounded awareness is defined by Bazerman and Chugh (2006): when cognitive blinders prevent a person from seeing, seeking, using or sharing highly relevant, easy accessible, readily perceivable information during the

decision making process. In terms of seeing the relevant information, there are problems in particular in two cases: when the firm is focused in pursuing specific tasks and when there is a gradual change in the environment. The dominant logic from Bettis and Prahalad (1995), explains this phenomenon with the current way of interpreting the world of the organization. This believes, allow the firm to have a faster decision making, but at the same time it also acts like a bottleneck on the data that are entering in the analysis. It is argued that experienced management should be able to critically think about the possibility of these facts. By critically thinking management could try to have a different perspective from analysis conducted by an external point of view, people who are not blocked by the dominant logic of the firm. Usually experts in the field can apply their previous knowledge to apply an analysis and individuate the problem more efficiently (Prietula&Cockely, 2007). This could be considered itself a best practice of the information system, but it could be fundamental in order to improve the sensing of the changing of the environment in order to develop possible alternatives. From the knowledge point of view it is easily arguable the importance of the managerial experience and the expert thinking. First of all, the meaning to the information can become knowledge only if the subject is already holding a determinate amount of knowledge. It is possible to further argue that organizational knowledge is coming out from the interaction between tacit and explicit knowledge (Nonaka&Takehuchi, 1994), that is coming through the interaction between people, technologies and techniques (Bhatt, 2007). However, it is important to know that for how much psychology has been evolving it is still difficult to determine the pattern of sharing knowledge. In here emotional intelligence has still a huge role, like it is demonstrated by the example of social networking based on the best sharing of knowledge between competent jerks and lovable fools (Casciaro&Lobo2005). Leadership is also a fundamental issue. For instance, Collins level 5 of leaders are indicated as an individual with extreme humility and professional will that has deliberate practiced leadership skills and, therefore, can be considered as an expert (Prietula&Cockling). Moreover it has the

capacity to impose a long time strategic vision, which usually must rely not only on analysis but as well on intuition. According to Vera and Crossan, leadership has a critical impact on the organizational learning. For instance, leaders must be able to encourage individual and group learning by motivating followers to question assumptions, be inquisitive, take "intelligent" risks, and come up with creative observations. They encourage individuals to break through learning
boundaries and to share their learning experiences both within and across departments. Basically it is the

tasks that are required by overcome the boundaries that were described before and pursue an effective use of the information system, in order to increase the knowledge building, the decision making and the sensing of the firm. As explained before, this will strengthen the organizations competitive advantage.

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