Information is Descriptive
A hot issue in business circles in the 1990s has been the advent of the "information society," the "information era," and the "information-intensive" organizations. However, any discussion regarding these issues should, of necessity, focus on the nature of information. What is it? Is it a specific kind of entity? If yes, how can we differentiate information from other similar entities? These are core questions in the continuing debate within a number of disciplines, such as information systems, management science, engineering, and philosophy. A substantial portion of the literature in these disciplines is devoted to defining information, however, as Budd and Raber (1996, p. 217) note in the following:
In the course of doing so [i.e. defining information], many aspects of information (technical, physical, semantic, epistemological) are featured as part of the discussion. Part of what emerges is a multifaceted idea and thing that is, at times, defined in terms of what it is not. For instance, information is not merely data; organization and intended meaning transform the bits of data into something that can inform.
From a process-oriented view, information can be seen as carried by data and as being eminently descriptive. From a linguistic perspective, the typical instance of information is the utterance called assertion. One example of assertion is: "Today is a sunny day." Independently of what this assertion means exactly (the word "sunny" can mean different things to different people, from sparsely clouded to clear-sky weather), it provides a description of the current state of the environment surrounding us. If the environment is seen as an object, the assertion can be seen as defining an attribute of the object, in this case, the weather as sunny.
Information can be qualified in different ways. It can be more or less complete or accurate; and it can refer to the past, present, and future. For example, the assertion, "Today is hot!" conveys less accurate information than the assertion, "Today's average temperature is 85 degrees Fahrenheit." Both assertions describe the present, that is, today. The assertion, "The temperature on this day during the last 3 years has averaged 87 degrees Fahrenheit," provides information about the past. The assertion, "Tomorrow the top temperatures will be in the low 90s," provides a description of the future. Although similar to descriptions of the past and the present, descriptions of the future, by their own nature, always carry a certain degree of uncertainty.
Knowledge, which will be discussed in more detail in the next section, is often used to generate more information based on information at hand. The information thereby generated (or inferred) is usually not obvious and, therefore, possesses some added value in relation to the primary information received as an input by the knowledge holder. One example is the generation of information about the future (e.g., the weather in New York tomorrow) based on information about the present and past (e.g., the weather patterns in New York during the last 2 years) up to now. This type of information about the future is produced by meteorologists, based on their knowledge about the science of weather forecasting. It is then purchased by news services that, in turn, broadcast the information to their audiences and, in the process of doing so, manage to make a profit.
The Value of Information
One interesting aspect of information is that it has value - how
much someone is willing to pay for it and can benefit from it. In general,
this seems to directly correlate some of its attributes. Among these
attributes, it has:
Advanceness, that is, how much time in advance it describes the
future (if it refers to the future rather than to the past or
Accuracy, that is, how accurate the description is;
Completeness, that is, how complete the description
Let us explain the different nature of the attributes above in a
business context. The "corporate war" between Coca-Cola and Pepsi in the 1980s
was largely one of product differentiation (Ramsey, 1987). Both Coca-Cola and
Pepsi tried to increase their shares of the "cola" soft drink market by
launching new differentiated (e.g., diet) products ahead of each other.
Consider the similar situation of two companies, A and B, competing for 2
million customers in the same industry. Each customer consumes a product
supplied by both companies. Analogous to the "cola" war, the product is
essentially the same, the main difference being the brand. Each customer
consumes 70 units of the product, which costs $3 each, every year; this makes
it a $420 million per year market. Company A has 90 percent of the market or
$378 million, while Company B has the other 10 percent or $42 million. Both
companies sell with a pretax profit margin of 17 percent, which yields
approximately $64 million for Company A and $7 million for Company B in
absolute pretax profits.
Now, suppose Company B decides to launch a new product into the
market, whose development time is approximately 9 months. The product has the
potential to bring Company B's market share up to 20 percent, and send Company
A's share down to 80 percent. This would raise Company B's pretax profits up
to about $14 million and make Company A's profits plummet to nearly $57
million. From Company A's perspective (the value of information always depends
on its user and the context), one piece of information - the information that
Company B is going to launch a new product - can make a big difference. This
piece of information can have a high advanceness if it is provided to
Company A well in advance of the product launch, which would enable Company A
to take appropriate countermeasures. The same piece of information can have a
high accuracy, providing accurate details about the product that is
going to be launched (e.g., it might include the precise date of launch). The
information can also have high completeness by providing a rich
description of the new aspects of the product (i.e., the new flavor, amount of
saturated fat, sweetener used, etc.).
If Company A has no access to information about the new product
launch and obtains some imprecise information a few weeks before the new
product is launched, it will have to endure a loss in pretax profits of $7
million - the worst-case scenario. However, if it gets accurate and complete
information early enough, it can take preventive measures whereby it can at
least reduce its losses. For example, if the information is obtained more than
9 months in advance (i.e., has high advanceness) but leaves uncertainty about
the characteristics of the product (i.e., has low accuracy and completeness),
Company A might have to develop a range of new products to dampen the
potential impact of Company B's new product on the market share. Its profits
may still be reduced due to increased product development costs.
Having access to detailed information about Company B's new product
(i.e., highly accurate and complete information) only 4 months before the
launch (i.e., low advanceness information) may lead to a similar end result;
that is, Company A may be able to develop an intermediary product that will
reduce the impact of Company B's new product on market share.
Perhaps the best scenario is that, if Company A has access to
highly detailed information (i.e., highly accurate and complete information)
about Company B's new launch early enough (i.e., the information has high
advanceness), it can develop a similar new product and get it out into the
market before Company B. According to our initial assumptions, this could
potentially bring Company A's market share up to 95 percent and increase
profits by about $4 million.
In the example above, no information or information with low
accuracy, completeness, or advanceness, would be of low value to Company A.
Information with high accuracy and completeness, but low advanceness (or vice
versa) would have a medium value as it could prevent a loss of $7 million in
pretax profits a year. Finally, information with high accuracy, completeness,
and advanceness would have a high value, enabling an increase in profits of $4
million a year. This relationship between information value and its attributes
is illustrated in Figure 3.