2. The Information-Action Value Chain

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Data in itself doesn’t create value for a business. In this lesson, we’ll introduce a model that explains how raw data is processed and converted into something of value to a business.


Lesson Goal

The goal of this lesson is to learn about the information-action value chain, a model which explains how data is used to inform business actions.

The Information-Action Value Chain

The information-action value chain has four steps. Data is obtained from the real world. That data is converted into information. Information is used to inform decisions. Those decisions then prompt actions.


Data is considered to be raw numbers, figures, and facts collected by the company. For example, OneWall collects a list of dates and times representing the times when a customer interacts with their application in some way.


Information refers to data that has been processed and organized into something useful. For example, OneWall can combine their data of times that people used the application with data about what features they used. This creates information about how customers use the app.


Companies want to use the information to inform actions. However, they need to evaluate and select one of several possible actions. This process is called a decision. When making a decision, there should be a method of evaluating the information and the value of each possible action. This helps a company to make effective decisions.


Actions cause the company to modify the outside world in a way that aims to achieve some desired outcome. After taking an action, the company can measure its effectiveness by collecting some information, which restarts the chain over again.


Many people think of data as something that can provide a lot of value to modern organizations. In reality, this is only partially true. Data itself is little more than a series of numbers. It's the actions informed by data that deliver value to a company, not the data itself. In this lesson we'll learn how data can be used to inform business actions by looking at the information-action value chain.

This chain provides the framework for understanding the process by which data is converted into real actions. The chain has four main steps.

We start with data obtained from the real world.

Next, we convert that data into information.

We use that information to inform decisions.

Finally, based on those decisions we take action that will deliver value to the company.

Let's look at each of these steps individually.

We start with data. Data refers to all the raw numbers, figures and facts collected by the company. Data on it's own does not provide any context that we could use to understand or interpret it. For example, consider our social media company One Wall. Each time a customer interacts with their application, whether to log in, to use a feature or for some other purpose, the date and time of this action is recorded.

Therefore, each customer has a list of dates which is a piece of data. In order to obtain value from the data, we turn it into information. To do this, we need to process it, organize it and combine it in a manner that is useful.

Information is therefore the outcome of data analysis. Information provides insights that the raw data alone cannot provide.

So for example, to obtain information on it's customers, One Wall needs to consider not just what dates and times the customers used the application. They should combine this with other pieces of data such as the features they used. They can also consider customer details like location. They can then analyze this data to produce pieces of information such as which features are popular with customers in certain parts of the world. After producing many relevant pieces of information, we can start to consider decisions. At this point, we must decide between a series of possible actions. We should identify a method for comparing the value of different possible actions and then we should use the information we've gathered to make a decision on what action to take. As decision making is a particularly important step, we'll talk about it in more detail and apply it to a case study in a later lesson. Finally, once a decision has been taken. We can take action to achieve the desired outcome. The action should result in some sort of modification to the real world that will deliver value to the business. We can usually identify the value of a particular action by measuring it. By doing this, we're gathering data that can be used to start the whole process all over again. As we can see, there's more to exploiting the power of data and analytics than just gathering lots of data. Making decisions and taking action without analyzing the data will mean a company is not getting the most out of their data. Instead, it's important for companies to build on their data and produce information. In fact, we can further build on information to create knowledge and wisdom. We'll see this in the next lesson where we'll look at The Data Pyramid.