Oromia State University

Course Title: Fundamentals of Information Systems

Chapter 1
Introduction to fundamentals of information systems
 Chapter 1
Fundamentals of Information Systems

Learning Objectives:
After reading this chapter, you will be able to:
1. Understand the parts of an information system;
2. Distinguish between data, information and knowledge;
3. Describe and evaluate information quality in terms of its characteristics;
4. Classify decisions by type and organizational level;
5. Identify the information needed to support decisions made at different
organizational levels;
Introduction
• the quality of provided information is vital for Business
Information System(BIS) to be effective.
• To accomplish a business objective every Information systems
are the combination of:
 people, information technology, and business processes.
• We can represent an information system as a triangle with:
People, processes, and information technology on the three vertices.
often referred to as the information systems triangle.
Introduction …
The three parts of the information
systems triangle must interact in
concert to realize business
objectives.
 The job of the IS professional is
to ensure that a balance is
maintained and enhanced for the
good of all the actors and the
business as a whole.
 Data and Information

• managers working involves using information to make decisions

• technology is used to capture, store and share information
• Many organizations are keenly aware that using information and
information technology
It has impact on every aspect of their operations

‘Information technology and business are becoming inextricably interwoven. I don’t think
anybody can talk meaningfully about one without talking about the other.’ Bill Gates (2001)
Data and Information …
• Russell Ackoff’s ‘DIKW’ model provides a good framework for helping to
understand:
 the relationships between data, information, knowledge and wisdom.

The model provides a hierarchy

which suggests three important
ideas.
1. data becomes information,
information becomes knowledge and
knowledge becomes wisdom.
2. knowledge and wisdom are
somehow more valuable desirable or
important than data and information.
3. data are relatively common while
knowledge and wisdom are less.
What is data?
• Data are raw facts
• have little or no value until they have been processed and transformed
into information
• A single piece of data is called a datum.
•There are several definitions for data that are in common use:
a series of non-random symbols, numbers, values or words;
a series of facts obtained by observation or research and recorded;
a collection of non-random facts.
 Data …
•Examples of data include:
today’s date;
measurements taken on a production line;
records of a business transaction, such as a sale or purchase.
• Data can exist naturally or can be created artificially.
Naturally occurring data need only to be recorded

• Artificial data are often produced as a by-product of a business

process.
E.g. produce the number of sales made in a particular month.
 What is information?
• common definitions of information are:
 data that have been processed so that they are meaningful;
 data that have been processed for a purpose;
 data that have been interpreted and understood by the recipient.
•Three important points can be drawn from these definitions.
1. There is a clear and logical process that is used to produce information.
2. Information involves placing data in some form of meaningful context.
3. Information is produced for a purpose.
information …
• Information acts to reduce uncertainty about a situation or
event.
thereby improving decision behavior.
• Managerial decision making can be improved by using
information to reduce uncertainty.
•Some examples of information include:
 a bank statement;
 a sales forecast;
conversion of data into information.

Data processes are sometimes also known as transformation processes.

 Data processes
• Some examples of data processes are including the following:
 Classification – this involves placing data into categories,

 E.g. categorizing an expense as either a fixed or a variable cost.

 Rearranging/sorting –grouped together or placed into a particular order.

 e.g. Employee data according to surname.

 Aggregating – summarizing data,

 E.g. calculating averages, totals or subtotals.

 Performing calculations – calculations

 E.g. calculating an employee’s gross pay.

 Selection – choosing or discarding items

• In addition, several processes may be used in combination to produce information.
 Value of information
• tangible value: It is often possible to measure the value of information directly.
The value of information is often measured in terms of financial value.
E.g. using inventory information to improve stock control procedures.
 determine the value of a given item or collection of information.
 Value of information – is -- Cost of gathering information

•intangible value: it is not possible to calculate the value of information directly.

 The information is of benefit to the owner, it is difficult or even impossible to quantify its value.
 E.g. attempting to measure the extent to which information can improve decision behavior.

 Improvements in decision behavior – Cost of gathering information

Sources of information
• Information can be gathered through both formal and informal communication
(a) Formal communication:
tend to be presented in:
 consistent,
 structured manner,
 comprehensive view of the situations,
 accurate and relevant
e.g. reports and accounting statements
formal communication also has several disadvantages.
Inflexible
limiting its type, form and content
overlook information obtained by informal means.
ignore group and social mechanisms or staff opinions
 Sources of information …
(b) Informal communication
• Informal communication is always present in an organization, regardless of its
size or nature.
• can be considered as a valuable resource
• Most of the time it takes place by word of mouth.
Known as water-cooler conversation.
• high degree of flexibility and highly detailed
• highly selective – can be able to restrict what information is transmitted and
who is able to receive it.

e.g. conversations and notes

• disadvantages of informal is it cannot deal with large volumes of information.
Inaccuracies and may not be entirely relevant.
 Attributes of Information Quality
• to describe quality information have a number of different characteristics.
• Attributes of information quality are:
time, content and form
the quality of information can be assessed by these attributes
** The following table summarizes information characteristics that can be used to assess quality.
 Attributes of Information Quality …
Time Dimension
• describes the time period that the information deals with and the frequency at which
the information is received.
 Timeliness – the information should be available when needed.
 If the information is supplied too late, it will be of no use.
 Current – the information should reflect current circumstances when provided
 Frequency – information should also be available as often as needed.
 regular intervals
 Time period – the information should cover the correct time period.
 For example sales forecast, - a view of past, present and future circumstances.
 Attributes of Information Quality …
Content Dimension:
• describes the scope and contents of the information.
 Accuracy – information that contains errors has only limited value to an organization.
 Relevance – information should be relevant to a particular situation and should meet the
information needs of the recipient.
 Completeness
 all of the information required to meet the information needs of the recipient should be provided

 Conciseness
 only information relevant to the information needs of the recipient should be supplied.
 Scope
 the scope of the information supplied should be appropriate to the information needs of the
recipient.
 Attributes of Information Quality …
Form Dimension
•describes how the information is presented to the recipient (it should be fit recipient requirement).
 Clarity – to understand the information easily, it should be presented in a form that is
appropriate to the intended recipient.

 Detail – the information should contain the correct level of detail.

 Order – information should be provided in the correct order. E.g, management reports
normally contain a brief summary at the beginning.

 Presentation – the information should be presented in a form that is appropriate to the

intended recipient. E.g. graph or table.

 Media – information should be presented using the correct medium. e.g. printed report,
video projector, …
Attributes of Information Quality …
Additional Characteristics
• Confidence – recipients are more likely to accept and trust the information they
obtain.
 if it is received from a source that has been accurate and reliable in the past.

• Reliability –being available when required and a consistent in terms of accuracy

and conciseness.

• Appropriate – Information provided should be appropriate to the recipient’s

activities
• Information often needs to be formatted correctly, according to its intended use.
 Knowledge
• “Knowledge is the full utilization of information and data, coupled
with the potential of people’s skills, competencies, ideas,
intuitions, commitments and motivations
• Knowledge consists of data and/or information that have been
organized and processed to convey understanding, experience,
accumulated learning, and expertise as they apply to a current
business problem. ”
Rainer and Cegielski’s(2011)

• Is the combination of a person’s experiences and the information

he or she possesses.
 Knowledge …
• Knowledge can be described as explicit knowledge as ‘know-what’
and tacit knowledge as ‘know-how’.
Explicit knowledge is easily captured and stored within documents
and other media.
 highly detailed, formal, structured and systematic.
 stored in the form of manuals, documents, procedures and
database files.
 easy to transmit to others.
 E.g. Minutes of meetings, employee handbooks and user manuals.
 Knowledge …
• Tacit knowledge is ‘the intangible, internal, and
experiential.
 intuitive knowledge that is undocumented and maintained in the
human mind.
It is a personal knowledge contained in human experience’ (Waltz,
2003).
It is characterized by factors such as perceptions, beliefs, values,
intuition and experience.
It may be held unconsciously, it is difficult to elicit, describe or
record.
e.g. riding a bike
 Knowledge Management

• is a deliberate, systematic business optimization strategy that

selects, distils, stores, organizes, packages, and communicates
information essential to the business of a company in a manner
that improves employee performance and corporate
competitiveness.
Knowledge Management …
•CIO’s online magazine suggests that an effective knowledge management
program will bring about one or more of the following benefits (Levinson, 2007):
foster innovation by encouraging the free flow of ideas;

improve customer service by streamlining response time;

boost revenues by getting products and services to market faster;

enhance employee retention rates by recognizing the value of employees’

knowledge and rewarding them for it;
streamline operations and reduce costs by eliminating redundant or unnecessary
processes.

CIO = Chief of Information Office

 Knowledge Management …
• In addition, tangible and intangible benefits associated with effective KM programs are :
 an improved ability to sustain competitive advantage, leading to increased
market share and market leadership;

 increased profit margins leading to increased shareholder satisfaction;

 the ability to identify best practices and better approaches towards problem
solving;

 increased collaboration with customers;

 increased customer satisfaction, loyalty and retention;

 increased organizational stability.

Wisdom
• Wisdom combines the characteristics of knowledge with the ability to
apply such knowledge to new situations and problems.
• Wisdom is deep, rich understanding and insight.
develops through a combination of knowledge (knowing) and experience
(doing) over time.’
• It is approaches and values that can be applied in numerous and varied
situations.
• Is the journey many people take as they move from being beginners to experts.
• For instance, an apprentice spends several years before becoming a craftsman.