Data mining and Knowledge management application to enhance business

operations: An exploratory Study

1
SYED ARFAT ALI

Email: [email protected]

Abstract:
The modern business organizations are adopting technological advancement to achieve competitive edge and satisfy their
consumer. The development in the field of Information technology systems has changed the way of conducting business today.
Business operations today rely more on the data they obtained and this data is continuously increasing in volume. The data stored
in different locations is difficult to find and use without the effective implementation of Data mining and Knowledge
management techniques. Organizations who smartly identify, obtain and then convert data in useful formats for their decision
making and operational improvements create additional value for their customers and enhance their operational capabilities.
Marketers and Customer relationship departments of firm uses Data mining techniques to make relevant decisions, this paper
emphasize on the identification of different data mining and Knowledge management techniques that are applied to different
business industries. The challenges and issues of execution of these techniques are also discussed and critically analyzed in this
paper.

Keywords
Knowledge, information, Data Mining, Knowledge Management, Knowledge Discovery in Databases, Business, operational
improvement

money to customers [3]. The matter of concern today

1. INTRODUCTION for managers is to understand the changes in customer
Today, the business is not only conducted throughout need and business environment because today
the globe but also developing their capabilities, skills, customers now have several alternative products and
knowledge and their financial profitability. It is the will services to choose from which makes them competitor
of business managers and owners to keep their business as well and competitors are providing goods and
growing and developing from different aspects so that services that are improved in terms quality and
they can be ahead of competitors. Getting more performance that leads to emerging changes in business
developed and advanced in technology than rival is part environment [4]. Some significant concerns for modern
of modern business strategies of organizations, in which businesses of 21st century includes the identification of
advancement in information technology; knowledge customer needs timely, understand the value customer
management and usage of data effectively have higher wants, and the use of advanced information technology
significance. It is the need of business era that managers (I.T) tools to improve design, R&D, manufacturing
and owners must be able to appraise and recognize the productivity, marketing efforts and post sales service
affecting factors to their organization [1]. standards. The understanding of clients behavior also
The knowledge produced from data in an organization has significance and impact the business strategy and
captures the attraction of managers but it is also the appraising the new business opportunities [5].
truth that these managers are not much interested in Information technology today not only advancing the
technology that produce it actually [2]. Unlike the past capabilities of organizations but also removing the
business concept the modern business is not only to restrictions of time a location due to globally
earn higher profits but the advantage is created by accessibility the differences of large and small size
satisfying customers, continuous business growth, organizations are narrowing down [3]. Smaller firms
Innovation, opportunities of growth, and value for are giving intense competition to larger firms because
 Data mining and Knowledge management application to enhance business operations: An exploratory Study

due to information technology they can make the the I.T related literature the data can be described as
consortium with other smaller firms and can access the raw facts and figures in numerical form. When data is
clientele that were previously not in access. According arrange in a pattern it becomes the information. When
to [6] with the increment of Information technology the information is possessed in persons observance in
applications inside organizations and with boast of form of modified information that may be unique,
businesses the data of customers also increased that are valuable and accurate it becomes knowledge. The
unused and remain hidden. The modern managers and knowledge is related to concepts, ideas, judgments,
decision makers are finding the significance of this observations and facts [9].Two major types of
hidden and untapped data for decision making and knowledge include Tacit Knowledge and Explicit
business growth. Due to the competition and options for knowledge. Explicit knowledge obtained from books
customers there is need in business world to create and documents whereas the tacit knowledge is obtained
CRM (customer relationship management) to obtain the from personal experience.
useful customer knowledge which can further be
transformed to a smart business strategy. On one side 2.2. Concept of Knowledge management
the data mining technique helps in divulge the unused The concept of knowledge management in a business
and hidden data related to customer to understand them environment is to obtain the data and modified it in
well. On other hand knowledge management is now form of useful knowledge. As a multidisciplinary
become the essential part of an organizational strategy concept there are several definitions of Knowledge
in order to improve business operations. This research management. [10] Argued that knowledge management
paper explores the affect of data mining (DM) and is diversified concept and taking a single definition out
Knowledge management (KM) applications on business of it is difficult task because of the three factors. This
organization performance. The reason of studying Data nature includes that knowledge is considered as
mining and Knowledge management is that [7,8] immaterial in nature and when it comes to its definition
confirms that DM and KM applications are becoming it is complex. In the management field of business the
significant for decision making process. This study knowledge management becomes further complex
further elaborates the benefits and problems because each field has its subjective and eclectic nature.
organizations face while executing Knowledge Third factor is that KM concept is in stage of
management and Data mining applications. emergence which is not yet established. [10] Included
The structure of the paper is designed to understand the the Knowledge management definition from other
significance of knowledge management and data authors as well whereas [14] observed a common
mining applications on business performance. The next feature in all the definitions which is that it helps an
section of this paper describes the concept of organization creating the competitive edge in market by
knowledge management, its process and discovery of sharing knowledge effectively in organization.
knowledge from databases. The third part of this paper According to [14] the security and protection of
emphasizes on data mining, and the business scenarios knowledge is also an important factor along with
related to data mining. Part 4 of this paper focuses on getting the ability to generate and incarcerate the
the application of Knowledge management and Data knowledge, the whole process is actually known as
mining in business organizations with special Knowledge management. [15] Defines the
consideration of decision making process and different Knowledge management from perspective of HR that it
fields of business. The part five identifies the is a process of obtain, capture, share and use the
challenges, limitations and problems KM and DM knowledge for the purpose of improve performance and
implementation resulted. In final part the paper is learning in company. [16] has given a changed
concluded. definition of Knowledge management which is that
identify, capture, arrange and distributing the
2. KNOWLEDGE AND KNOWLEDGE intellectual information that is crucial for strategic
MANAGEMENT performance of a firm.[1] elaborate the Knowledge
2.1. Knowledge management as an integration process of different fields
Knowledge is the concept differs from data and of organization with strategic importance with the
information in the field of information technology. In objective to improve performance and capital. The core

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 Data mining and Knowledge management application to enhance business operations: An exploratory Study

of above mentioned definitions of KM describes it as

process to achieve knowledge, proficiency and
experience which enables them to have superior know
how, boasted performance, birth innovation and give
consumer the value they needed. [12] Explained that
organizations are achieving their goals by generating
motivation in workers to develop, improve and utilize
their skill of interpreting the data and information.
Employees must be able to give meaning the
information they have to use it for decision making and Figure 1: KM Technology and process integration
improve efficiency. [17] Investigated and found that The Figure 1 demonstrates that knowledge management
modern businesses have agreed that share and is a cyclical process by efficiently using which the
application of knowledge in their operations and organization can achieve its strategic and business
businesses improve their performance. As an intangible goals. Organizations needs to make the tacit and
asset the knowledge leads to create competitive explicit knowledge learning as their habit along with
advantage by increasing employees capability and by more emphasize on planning and implementation on the
providing base to make accurate decisions. basis of available knowledge. [19] highlighted a group
of six technologies which supports the implementation
2.3. The Process of Knowledge management (KM) of KM and help improving firm performance includes
The knowledge management purpose in an organization the data mining, database discovery, ICT, knowledge
is to utilize the available information optimally and management framework, and Knowledge based system.
make it a culture to make decisions and work based on
available knowledge. Process of knowledge 2.4. Knowledge Discovery from Databases (KDD)
management starts with gathering the data, categorizing [1] Investigated the integration of Knowledge discovery
different information in it, evaluate the information from database from different organizational domains
critically and share it with relevant layers within like production, finance, and production control, and
organization for use. The major objective of Knowledge audit, detection of fraud, internet and marketing
management is to make knowledge available right functions. Due to this integration, discovering the
place, right time and in right format so that timely and functional knowledge becomes more convenient. [19]
effective decisions could be taken throughout Describes the KDD in words the significant process of
organization [1]. Process of Knowledge management identifying and obtain the useful, novel and
revolves around flow of knowledge which starts from understandable data from huge database. [20] Further
gathering and then creation of knowledge which then elaborates that KDD is based on steps that uses Data
further share and distribute to relevant person. In mining technique to pick the data from database in
modern business world the whole process of knowledge useful, novel and patterned form. The figure 2
management is supported and implement via KM demonstrates the steps of KDD and identified five
technologies. Modern technology based applications of stages of this process [21].
Knowledge management are creating significant role In first stage the data is cleaning and integrated
and these are key tools to utilize knowledge with different domains. This stage is to remove the
management [18]. In order to enable the KM missing data, multiple sourced data and noise from
communication, cooperation, and content sharing the database.
technologies have been playing key role to ensure
To retrieve the data from database the second stage
knowledge management flows. Knowledge
of Data selection and transformation is
management technologies like Applications are now
conducted which then further transfigure so that
integrated with the process cycle of KM. Below is the
data mining can become easy. Aggregation and
figure
summary operations are performed by the I.T of
firm.

3
 Data mining and Knowledge management application to enhance business operations: An exploratory Study

In order to excerpt the pattern of data, data mining

adopt an intelligent technique to ensure retrieval of
data needed.
Fourth stage is pattern evaluation in which
different interesting patterns are tried and evaluate
so that when knowledge is needed the right pattern
can be obtained.
The fifth stage is knowledge presentation where the
mined knowledge is present and visualize to user
for decision making purpose.

Figure 3:Scheme of data mining

In past the business queries and information that took
much time to get answer are now resolved and
answered by Data mining tool. DM have capability to
search the huge data base for particular data and
patterns and generate the information that predicts the
business future need and management then makes
Figure 2: Data Mining and KDD Process decision comparing this information with expectations
3. Process of Data Mining [21].The DM tools finds innovative patterns that is
The data mining has emerged as one of most significant obtained with shuffling of data sub sets [22].
data analysis and detection tool used in business The data mining tools are majorly predictive or it would
organizations. The data mining is defined in diversified be descriptive, different researchers to describe the DM
ways, It is a process of obtaining and finding the useful, deeply emphasize on deep analysis, tasks data mining
unknown, understandable and valid pattern from huge does and in terms of the pattern they want to mined.
data in database [22]. But it is also the truths that Researchers [6, 20, 21] have identified the tasks of data
emphasize of all definitions is to finding data and mining by using diversified terms. According to [6] the
discover data to be used in decision and managerial detection of deviation, description of class, Class
level discussions. Data mining has its increasing identification, Dependency investigation, visualization
significance in business organizations because it of data and concept explanation are data mining tasks
becomes critical for management to make successful identified. The tasks identified by [20] includes
decision. What management have in hand is the data of summarization, dependency modeling, link
their financial, marketing, sales, production, and other investigation, classification, and sequence investigation
business measures. The data is saved in database and whereas the author [21] find the tasks like predictive
management needs data in arranged and useful form. investigation via regression, relationship classification,
Data mining technique is job of I.T to find the data concept description, and cluster analysis as useful data
needed, arrange it in useful form and make sure to mining tools. Since the different researchers uses
provide it to relevant authorities. Data mining tools different terms for data mining tasks but the concept
further provides the results of data and help they described were almost same. The concept of data
management interpret it religiously. The process of data visualization is different from others which is only
mining is based on four major steps starts from identified by researcher [6]. The data mining tasks are
selection of data, transformation of data, mining of data discussed below with relevance to business
and prepares results to be used for interpretation. organizations and business environment.
The visualization of data
In this tasks the information is displayed in graph, table
and map formats which helps the users of information

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 Data mining and Knowledge management application to enhance business operations: An exploratory Study

to interpret it conveniently along with understand the Clustering

patterns of data. The management and owners can use It is another important task of data mining in which
this graphical and tabular information to understand the management segment different items to a cluster with
trends and buying behaviors of consumers. The sales similar features and usability. The information and
manager can understand the most selling item in knowledge obtain through data mining decides the
product range and can make the demand of that product similar features to cluster the data in same sub group.
on immediate basis. With the help of tables and graphs The use of clustering in business organization is that the
management takes strategic decisions for future marketing department can use it to create market
business growth. segments for example if a meat selling brand to
Dependency Analysis understand the consumer preference of meat buying
The dependency analysis identified the relationship after discount, so instead of thinking over it they can
between the items so that promotional and discount group the consumers on religious basis to understand
campaigns could be design accordingly. Dependency their preference based on cultural values and norms.
analysis finds the connection between the products The promotional campaigns could be designed with the
which have pattern to be bought frequently. The help of data mining technique.
information and knowledge by this data mining tasks is
used to design promotional, discount and marketing Classification and Prediction
strategies. Products like bread and butter or food with This task discovers the patterns that are predictive in
soft drink are bought together which shows dependency nature based on the categories and nominal attribute.
of one product over other. So the shop owner/ retailer The attribute which they predict in this task is known as
can design promotional and discount strategy Class. In this model the training data is analyzed so
accordingly for example they can give discount if that it can be represented in form of decision trees,
consumer buy milk with butter and soft drink with food. formula of mathematics, rules of classification and
Bread then milk and food then soft drink is the pattern neural network etc [10]. In business organization the
of purchase. marketing management can classify products in form of
The description of Concept cheap, high priced, most popular and normal etc.
The entries of data like data of consumers are grouped Deviation Detection task
in terms of concept, classes and knowledge domain. This task of data mining ensures to identify the set of
This technique leads to the characterization, data from whole data which do not match the features
comparison and discrimination in a class of data. The of whole data. The data which deviate in this task is
summary of the whole data is obtained in the data known as outliers. In businesses this technique is used
summarization whereas the in discrimination of data the to identify any fraud for example a bank can detect the
selected class is compared with other classes. The deviation in credit card withdrawal of their consumers
examples of summarization is that the management can and any deviation is then flagged as anomaly to safe
obtain the data of consumers whose purchase has from fraud.
declined up to 20% in a particular period of time or a
during a month with the help of query SQL. The 4. DATA MINING(DM) AND KNOWLEDGE
example of data discrimination is that management can MANAGEMENT (KM) APPLICATION
discriminate consumers on the basis of their 4.1. Application in Business Decision Making
consumption like they can find the data of consumers In the process of business decision making the
with 10% higher purchases then the worst spending application of knowledge management and Data mining
consumers in April 2014. Similar technique can be plays crucial role in creating the business intelligence.
used to extract the information regarding consumers but The figure 4 demonstrates the interaction of DM and
the outcome in form of charts and graphs will KM to create the Business intelligence. The term
demonstrates the different picture due to discrimination business intelligence can be described as the capacity of
[21]. By using this task the marketing management can business to effectively use knowledge and information
understand whether consumer is declining its loyalty that leads to development of business and its growth.
with company or his taste is changed via the data Transformation and effective utilization of these two
profiling process. techniques is critical in implementation [25].

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 Data mining and Knowledge management application to enhance business operations: An exploratory Study

customer footfall, large number of unit sales,

involvement of barcodes, consumer buying history and
sales records. Big retailers like Wal-Mart, Amazon and
Tesco etc. have their data in TBs within few minutes
[1]. The huge data size increases the need of application
of KM and DM because the size of data retailers further
expanding due to global popularity of electronic
commerce/ online buying activities. It is the fact that
retail industry is the largest user of data mining for the
purpose of knowledge building; understand behavior of
Figure 4: Data Mining and Knowledge
consumer buying, sales trends, enhance ratio of
Management Interaction
consumption, retain loyal clientele and to enhance
distribution structure so that the operational efficiency
The figure 4 demonstrates that with implementation of
could improve and cost of operations could be
data mining in organization the management can obtain
controlled [21]. The DM technique of Association helps
information previously hidden and unknown for the
getting the information of buying pattern of consumers
purpose of getting knowledge. The effective knowledge
like customer who ordered food bought soft drink.
and information leads to the creation of business
Deviation investigation leads management in retailers
intelligence. The business intelligence authorizes the
to detect the fraudulent act and persons involved in
managers to know and answer the questions about the
fraud whereas the consumer profiling guides them in
purchase frequency of a product by consumer. The
making promotional campaign.
knowledge of consumers and their profiles enables the
2. Banking Sector
marketers of firm to decide the customer types and the
The banking sector as one of strongest economic player
promotional messages for each type of clientele.
also gets advantage of KM and DM adoption. Banks
record and keep the data in large databases regarding
4.2 Application of KM and DM in different business
their financial values and consumer related data. The
fields
issues in banking operations have resolved with the use
This section of paper demonstrates the different
of association, information deviation, patterns in
domains and business areas where the Application of
consumer investment and finding the market price due
KM and DM does play role to enhance their
to huge data which is not possible to be processed by
performance. Knowledge management and Data
human. Knowledge management and Data mining
Mining are used in banking sector, telecommunication
application in banking industry guides them to identify
industry, manufacturing organizations, retail businesses
the risks involved in investments and returns they will
and in insurance firms. These industries are getting
earn [26]. The knowledge management and mining of
benefited from DM and KM in terms of their
data technique used to minimize business risks and
operational improvement, effective decisions, improved
increase the outcome of trading, because previous
marketing and increased financial profits. The data
patterns alarm the management about risks involved
mining tools are used in organizations in form of
whereas the forecast of previous data help making trade
statistics, pattern identification and applications that
strategies. KM along with DM further enhances CRM,
recognize those patterns and relationships of the
business portfolio and strategies of firm. Data mining
knowledge and information that would not be possible
provides information of past credit rating of customer
to detect without these tools. Failure to get these
which enables Banker to decide approval or rejection of
connections and patterns leads to business operational
loan. Fraud is top most concern of banking institutions
failure which Data mining actually improves. The way
and their management so the uses of deviation analysis
different industries utilize the KM and DM in their
and anomaly identification of transactions take the
business discussed below,
abnormal transactions out of general characteristics that
1. Retail industry
may be due to fraudulent activity.
Retailing is one of most suitable industry to adopt the
3. Airline industry
Knowledge management and Data mining due to large

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 Data mining and Knowledge management application to enhance business operations: An exploratory Study

The clustering and Association rule procedures help 5. CHALLENGES OF KM AND DM

obtaining the knowledge of consumers which is used by APPLICATION
airline to provide discount and sent promotional 5.1. Implementation Challenges of KM in Business
campaigns based on detection of their frequency of The significance of data mining and Knowledge
travelling. management is not in doubt but application and
4. Manufacturing organizations implementation of them needs careful considerations.
The manufacturing firms need to be specially informed Business firms face issues, problems and challenges
for the customer needs and wants so that they can while applying the KM with full spirit and benefits [4].
modify their manufacturing operations and product The author [27] detect the following problems and
developments accordingly. Knowledge management challenges,
mechanism should be used to identify the most
demanded features and ingredients to fulfill customer (1)Technology
need. Data mining techniques facilitates the managers With the growth of technology and innovation the need
in manufacturing firm to identify and understand the of change arise in business organizations time to time.
patterns of customers claiming warranties and claim Application of KM technique created the need of
refund due to bad performance of product. So that they change in knowledge and data systems in firm.
would be ready to deal with it and ensure to retain Management faces the challenge of resistance from
consumers with them. employees because they are in comfort zone with
5. E-commerce businesses previous technology. Knowledge management
The e-commerce websites and online portals like implementation needs training sessions of employees to
Amazon and Jumia.com also benefitted from Data make them aware with new technology and obtain
mining and Knowledge management tools. These firms knowledge from it [27].
send recommendations as per customer previous (2)Individuals
patterns of buying and their queries. Personalized The ability to learn new skills and perception of
product offerings and promotions of products that is of individual that is major source of creating tacit
customer interest is delivered via data mining technique knowledge is one of key challenge to make information
[24]. sharing a culture. The employees retain Tacit
6. Health care sector knowledge and stay silent which restrict the knowledge
Doctors in hospitals can also use the data mining flow. Explicit knowledge must be encouraged along
techniques like clustering which guides them to with a culture of sharing problems, issues and
understand the demographics of infected patients from information lacks from many organizations creating
HIV, Cancer or other deadly viruses. With the help of challenge [27].
this knowledge doctors can make better treatment plan, (3)The Shared leadership
effective diagnostic mechanism and helps researching The workers with explicit and tacit knowledge are not
on these diseases [4]. promoted to leadership levels in different organizations
7. Telecom industry leads the disappointment in employees. Thus even after
As one of fastest grown global industries the Telecom many trainings and lectures from management the
industry also uses Data mining and Knowledge employees refrain themselves to share key knowledge
management techniques. Managers uses data of and information they have [27].Without effective
consumers to understand the pattern of their calling, arrangement of shared leadership the application of KM
sending text messages and usage of internet data based would be challenged.
on point of time. By using mined data and knowledge (4)Culture and cost of creating culture
management design the combo bundles, calling rates , The knowledge and information in business
internet packages and promote these using profiling organization stay in the human mind and technologies
technique. Sequential pattern analysis, data only capture, save, arrange and process the information
visualization and detection of illegal activities through using KM technique [27]. Creating the culture of
telecommunication are few significant techniques used human resource development and knowledge sharing
in industry. with skills development of employees are needed to

7
 Data mining and Knowledge management application to enhance business operations: An exploratory Study

fully implement KM. The cost of these supporting promotional campaigns targeting which leads to
activities sometimes outperforms the benefits. increased financial profitability.
Advancement of technology has taken the data
5.2. Limitations of Data Mining Application usage and data capturing to skies which creates the
The major limitations in the implementation of Data challenges for the implementation of Knowledge
Mining technique is use of huge data and privacy of management. Adoption of Knowledge management
consumer. There is need of protecting the rights of systems in organizations will be a must for those want
stakeholders involved like consumers, employees, and to compete and survive in competitive markets.
investors. Without fulfilling the ethical considerations Challenges of KM and DM application can be
and imposed the protection laws in applying Data identified and resolved with a team work of I.T
mining the information obtained and process remain department and employees at each layer systematically.
illegal without consent of consumers. Further the Since the data mining involved in knowledge
representation of data in database increased the generation and creation of data this could lead to clash
limitations because data if not properly managed and of these two techniques during operations that increase
save in homogeneous formats it would be failed to the need of integration of both these applications along
process it for decision making need. Data mining with operations. In future the need of advanced data
technique may not be succeed until assuring the mining tools will arise because of revolution in data
reliability of data because data obtained from reliable creation and accumulation. Businesses today know how
sources is integrated with outcome of analysis and the Data mining works but there needs get skills of
evaluation. The cost of buying networking and using Data mining and knowledge management tools so
computing hardware is declining but the price of that continuous improvement in operations, marketing
applications like Data mining has been increasing and customer relationships could be ensured.
which must be controlled because due to high cost
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