Business Intelligence is about extracting and transforming data held by systems and databases into clear, useful information for making faster and better business decisions and about making it readily available to the people who need to make those decisions.
To succeed in the competitive and constantly changing marketplace of today, visibility of information is becoming more important than ever for making timely decisions, responding to changing conditions and maintaining competitive advantage. To be able to improve business processes, measure progress and make well-informed decisions, businesses need the ability to easily access and analyse the right information quickly without having to sift through pages of data.
Business performance is ultimately improved by measuring and analysing key performance indicators in order to manage the internal business processes that drive those indicators for the purpose of improving efficiency and achieving business objectives. We can only manage effectively what we measure and it is important to measure the business metrics that matter. This is more than just knowing what happened but being able to compare ours business performance against ours internal targets and against industry benchmarks. Once we know what has happened, we then need to analyse why it happened. Only then can we take action to either perpetuate good performance or correct poor performance.
Business Intelligence can empower us to improve our business performance by providing the visibility for us to measure, analyse, and manage financial and operational performance at all levels. Enable us to manage by exception by providing early visibility of good or bad performance in our operations which gives us the opportunity to take appropriate action.
Business intelligence has helped boost Hallmark sales to its loyalty program members by 5 to 10 percent. Another organization that has benefited from business intelligence is the Cincinnati Zoo, as described in the Interactive Session on Organizations.
One company that uses business intelligence is Hallmark Cards. The company uses SAS Analytics software to improve its understanding of buying patterns that could lead to increased sales at more than 3,000 Hallmark Gold Crown stores in the United Sates. Hallmark wanted to strengthen its relationship with frequent buyers. Using data mining and predictive modelling, the company determined how to market to various consumer segments during holidays and special occasions as well as adjust promotions on the fly. Hallmark is able to determine which customer segments are most influenced by direct mail, which should be approached through e-mail, and what specific messages to send each group.
Business Intelligence Vendors
Business intelligence and analytics are products defined by technology vendors and consulting firms. They consist of hardware and software suites sold primarily by large system vendors to very large Fortune 500 firms. The largest five providers of these products are Oracle, SAP, IBM, Microsoft, and SAS. Microsoft’s products are aimed at small to medium-sized firms, and they are based on desktop tools familiar to employees Microsoft SharePoint collaboration tools, and Microsoft SQL Server database software.
According to the International Data Corporation, the global business intelligence and analytics market was $35.1 billion in 2012 and is expected to reach $50.7 billion by 2016 (Kern, 2012).
This makes business intelligence and business analytics one of the fastest growing and largest segments in the U.S. software market.
Elements in business intelligence
Data from the business environment: Businesses must deal with both structured and unstructured data from many different sources, including big data. The data need to be integrated and organized so that they can be analysed and used by human decision makers.
Business intelligence infrastructure: The underlying foundation of business intelligence is a powerful database system that captures all the relevant data to operate the business. The data may be stored in transactional databases or combined and integrated into an enterprise-data warehouse or series of interrelated data marts.
Business analytics toolset: A set of software tools are used to analyse data and produce reports, respond to questions posed by managers, and track the progress of the business using key indicators of performance.
Managerial users and methods: Business intelligence hardware and software are only as intelligent as the human beings who use them. Managers impose order on the analysis of data using a variety of managerial methods that define strategic business goals and specify how progress will be measured. These include business performance management and balanced scorecard approaches focusing on key performance indicators and industry strategic analyses focusing on changes in the general business environment, with special attention to competitors. Without strong senior management oversight, business analytics can produce a great deal of information, reports, and online screens that focus on the wrong matters and divert attention from the real issues. You need to remember that, so far, only humans can ask intelligent questions.
Delivery platform—MIS, DSS, ESS: The results from business intelligence and analytics are delivered to managers and employees in a variety of ways, depending on what they need to know to perform their jobs. MIS, DSS, and ESS, deliver information and knowledge to different people and levels in the firm—operational employees, middle managers, and senior executives. In the past, these systems could not share data and operated as independent systems. Today, one suite of hardware and software tools in the form of a business intelligence and analytics package is able to integrate all this information and bring it to managers’ desktop or mobile platforms.
User interface: Business people are no longer tied to their desks and desktops. They often learn quicker from a visual representation of data than from a dry report with columns and rows of information. Today’s business analytics software suites emphasize visual techniques such as dashboards and scorecards. They also are able to deliver reports on BlackBerrys, iPhones, and other mobile handhelds as well as on the firm’s Web portal. BA software is adding capabilities to post information on Twitter, Facebook, or internal social media to support decision making in an online group setting rather than in a face-to-face meeting.
Business intelligence and analytics requires a strong database foundation, a set of analytic tools, and an involved management team that can ask intelligent questions and analyse data.
BUSINESS INTELLIGENCE AND ANALYTICS CAPABILITIES
Over 80 percent of the audience for BI consists of casual users who rely largely on production reports. Senior executives tend to use BI to monitor firm activities using visual interfaces like dashboards and scorecards. Middle managers and analysts are much more likely to be immersed in the data and software, entering queries and slicing and dicing the data along different dimensions. Operational employees will, along with customers and suppliers, be looking mostly at pre-packaged reports.
Business intelligence and analytics promise to deliver correct, nearly real-time information to decision makers, and the analytic tools help them quickly understand the information and take action. There are six analytic functionalities that BI systems deliver to achieve these ends:
Production reports: These are predefined reports based on industry specific requirements.
Parameterized reports: Users enter several parameters as in a pivot table to filter data and isolate impacts of parameters. For instance, you might want to enter region and time of day to understand how sales of a product vary by region and time. If you were Starbucks, you might find that customers in the East buy most of their coffee in the morning, whereas in the Northwest customers buy coffee throughout the day. This finding might lead to different marketing and ad campaigns in each region.
Dashboards/scorecards: These are visual tools for presenting performance data defined by users.
Ad hoc query/search/report creation: These allow users to create their own reports based on queries and searches.
Drill down: This is the ability to move from a high-level summary to a more detailed view.
Forecasts, scenarios, models: These include the ability to perform linear forecasting, what-if scenario analysis, and analyse data using standard statistical tools.
IMPORTANT DIMENSIONS OF KNOWLEDGE
KNOWLEDGE IS A FIRM ASSET
- Knowledge is an intangible asset.
- The transformation of data into useful information and knowledge requires organizational resources.
- Knowledge is not subject to the law of diminishing returns as are physical assets, but instead experiences network effects as its value increases as more people share it.
KNOWLEDGE HAS DIFFERENT FORMS
- Knowledge can be either tacit or explicit (codified).
- Knowledge involves know-how, craft, and skill.
- Knowledge involves knowing how to follow procedures.
- Knowledge involves knowing why, not simply when, things happen (causality)
KNOWLEDGE HAS A LOCATION
- Knowledge is a cognitive event involving mental models and maps of individuals.
- There is both a social and an individual basis of knowledge.
- Knowledge is “sticky” (hard to move), situated (enmeshed in a firm’s culture), and contextual (works only in certain situations). procedure (conditional).
KNOWLEDGE IS SITUATIONAL
- Knowledge is conditional; knowing when to apply a procedure is just as important as knowing the procedure (conditional).
- Knowledge is related to context; you must know how to use a certain tool and under what circumstances.
In general, each organization needs Business Intelligence (BI) at some point. For example, when a retail company is started – there was no scope for ERP with minimal business transactions having few employees on the roll. As the business picked up, I wanted to find answers to some obvious questions like “What is the sales trend over a given period?”, “Which commodity is having more demand during festive seasons?”, “What is rate of growth year-wise?” etc. Having said that, even the tiniest organizations need some kind of analysed data, graphical display adds value.
Be it mid-sized or smaller companies (SMBs), they do have same need as the big companies do for using BI. It is required for better visibility of the business performance followed by corrective decisions. In summary, the intelligence reports are equally important for irrespective of the company size.
The truth is, most SMBs usually use the Excel spread sheet as a tool for analysis. Every day they enter the data and prepare the report manually. Several reports created by various employees very often without any real coordination resulting in-appropriate intelligent output. So, when management asks a simple question like, “What is the percent of growth rate compared to that in last financial year?” and the answers don’t match. In addition to that, it will take longer to deliver the reports. With time the company increases, with increase in employees, and thereby hike in transactions, it becomes too much to be handled for analysis. The need for Business Intelligence is necessitated.
Laudon, K. and Laudon, J., (2013) Management Information System. 13th ed. Harlow: Pearson Education Limited, pp. 447- 509.
Homburg, C., Kuester, S. and Krohmer, H., (2009) Marketing Management. Maidenhead: McGrow – Hill Higher Education, pp. 251-269.
Kotler, P., et al. (2012) Marketing Management. 2nd ed. Harlow: Pearson Education Limited, pp. 535, 801-803.
Chaudhuri, S., Dayal, U., Narasayya, V., (2011) ‘An Overview of Business Intelligence Technology’ Communications of the ACM. [Online]. Available from: http://cacm.acm.org/magazines/2011/8/114953-an-overview-of-business-intelligence-technology/fulltext [Accessed 8th September 2016].
Chen, H., Chiang, R., Storey, V., (2012) ‘Business Intelligence and Analytics: From Big Data to Big Impact’ MIS Quarterly. [Online]. Available from: http://hmchen.shidler.hawaii.edu/Chen_big_data_MISQ_2012.pdf [Accessed 9th September 2016].