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The most common definition of information is that it is data which is organized and specified for certain purpose, is accurate and timely, in a context which gives it value and importance and can possibly lead to widening of understanding on a subject or decrease uncertainty. Importance of information lies within a fact that it can affect decision making, behaviour or an outcome of certain event. For example, on a stock exchange if there is an information of company reporting significant decrease in profits the price of shares is falling not because of decrease itself but because of the information of it which causes share owners to sell their shares causing the decrease in price.

Proper information is needed to perform various management functions, utilise many management techniques (such as SWOT analysis, PEST analysis), prepare strategic decisions. So it is important do prepare and maintain efficient information system within the organization.

Claude E. Shannon's theory of information

There are however many different approaches on defining the information one of the most famous is Shannon's model which defines information as quantitative measure of communicative exchanges. Based on his theory proposed in "The Mathematical Theory of Communication" information is specified as any fact, judgement or any data transmitted over a medium like telephone but not only the content of signals transmitted, also the capability of understanding the signals by receiver from sender making the receiver able to interpret in the intended way and delivering value for various purposes e.g. decision making, otherwise it is just data. On the other hand, stating that information which is perfectly clear for the receiver and easily understandable carries not much value and is just signals as there is low potential for different interpretations.

With his theories Shannon revolutionized the data transmission and built a foundation on which internet, high speed communication and file conversion was built. In Shannon's theory information is made of bits which reduce uncertainty on what was transmitted by source via channel of communication. It enabled technicians to specify the capability of communication channels taking into consideration loss of data upon transmitting. In his theory took into consideration messages consisting of just binary values of 1 or 0 s and how effective are they being transferred ignoring the physical state of communication medium.

Informationrecommended articles
Qualitative characteristicsCreative accountingCapital market theoriesObjectivity principleInformation theoryGlobal riskMarket positioningDescriptive modelSelective perception


  • Shannon C.E. The Mathematical Theory of Communication. Univ of Illinois Press, 1949.
  • Brillouin L., Science and Information Theory, Mineola, N.Y.: Dover 2004.
  • Gleick J., The Information: A History, a Theory, a Flood 2012.

Author: Konrad Kowalczyk