Startup general interest

Deriving wisdom from data

By September 10, 2013 No Comments

Screen Shot 2013-09-09 at 16.01.46

This morning David Gildeh alerted me to the existence of the DIKW pyramid that you see above. It’s been around for some time (long enough for David and to be arguing that we should add a layer called ‘Understanding’ between ‘Knowledge’ and ‘Wisdom’) but judging from the Wikipedia article it has mostly been used in academic circles.

I like it because it is a powerful framework for helping derive wisdom from data, something that many people and companies struggle with. Let me start with some definitions:

  • Data – raw information, e.g. database of 10,000  customers showing which channel they came from and the cost of acquisition (i.e. 30,000 data points)
  • Information – structured information, e.g. the data on those 10,000 customer organised into a table showing average cost of acquisition by channel
  • Knowledge – understanding that is drawn from the data, e.g. Adwords is my cheapest customer acquisition channel
  • Wisdom – deep understanding that increases effectiveness, e.g. CPC based channels are the most effective for my business

Note how with each step the amount of insight increases and with it the broadness of applicability and potential to increase business performance.

As I’ve said many people fail to derive wisdom from their data. The DIKW pyramid can be used as a tool to help people in that situation because its four steps break the process down into manageable chunks. Too often we mystify this process making it seem beyond the reach of all but a fortunate few. That shouldn’t be the case.