Business Intelligence
Business intelligence (BI) can be described as "a set of techniques and
tools for the acquisition and transformation of raw data into meaningful and
useful information for business analysis purposes". The term "data surfacing"
is also more often associated with BI functionality. BI technologies are
capable of handling large amounts of structured and sometimes unstructured
data to help identify, develop and otherwise create new strategic business
opportunities. The goal of BI is to allow for the easy interpretation of these
large volumes of data. Identifying new opportunities and implementing an
effective strategy based on insights can provide businesses with a
competitive market advantage and long-term stability.
BI technologies provide historical, current and predictive views of
business operations. Common functions of business intelligence technologies
are reporting, online analytical processing, analytics, data mining, process
mining, complex event processing, business performance management,
benchmarking, text mining, predictive analytics and prescriptive analytics.
BI can be used to support a wide range of business decisions ranging
from operational to strategic. BI can be also used as an effective tool in
entrepreneurial ventures. Basic operating decisions include product
positioning or pricing. Strategic business decisions include priorities, goals
and directions at the broadest level. In all cases, BI is most effective when it
combines data derived from the market in which a company operates
(external data) with data from company sources internal to the business such
as financial and operations data (internal data). When combined, external
and internal data can provide a more complete picture which, in effect,
creates an "intelligence" that cannot be derived by any singular set of data.
Amongst myriad uses, BI tools empower organisations to gain insight into
new markets, assess demand and suitability of products and services for
different market segments and gauge the impact of marketing efforts.
Components
Business intelligence is made up of an increasing number of components
including:
Multidimensional aggregation and allocation
Denormalization, tagging and standardization
Realtime reporting with analytical alert
A method of interfacing with unstructured data sources
Group consolidation, budgeting and rolling forecasts
Statistical inference and probabilistic simulation
Key performance indicators optimization
Version control and process management
Open item management
Data warehousing
Often BI applications use data gathered from a data warehouse (DW)
or from a data mart, and the concepts of BI and DW sometimes combine as
"BI/DW" or as "BIDW". A data warehouse contains a copy of analytical data
that facilitates decision support. However, not all data warehouses serve for
business intelligence, nor do all business intelligence applications require a
data warehouse.
To distinguish between the concepts of business intelligence and data
warehouses, Forrester Research defines business intelligence in one of two
ways:
1. Using a broad definition: "Business Intelligence is a set of methodologies,
processes, architectures, and technologies that transform raw data into
meaningful and useful information used to enable more effective
strategic, tactical, and operational insights and decision-making." Under
this definition, business intelligence also includes technologies such as
data integration, data quality, data warehousing, master-data
management, text- and content-analytics, and many others that the
market sometimes lumps into the "Information Management" segment.
Therefore, Forrester refers to data preparation and data usage as two
separate but closely linked segments of the business-intelligence
architectural stack.
2. Forrester defines the narrower business-intelligence market as,
"...referring to just the top layers of the BI architectural stack such as
reporting, analytics and dashboards."
Comparison with competitive intelligence
Though the term business intelligence is sometimes a synonym for
competitive intelligence (because they both support decision making), BI
uses technologies, processes, and applications to analyze mostly internal,
structured data and business processes while competitive intelligence
gathers, analyzes and disseminates information with a topical focus on
company competitors. If understood broadly, business intelligence can
include the subset of competitive intelligence.
Comparison with business analytics
Business intelligence and business analytics are sometimes used
interchangeably, but there are alternate definitions. One definition contrasts
the two, stating that the term business intelligence refers to collecting
business data to find information primarily through asking questions,
reporting, and online analytical processes. Business analytics, on the other
hand, uses statistical and quantitative tools for explanatory and predictive
modeling.
In an alternate definition, Thomas Davenport, professor of information
technology and management at Babson College argues that business
intelligence should be divided into querying, reporting, Online analytical
processing (OLAP), an "alerts" tool, and business analytics. In this definition,
business analytics is the subset of BI focusing on statistics, prediction, and
optimization, rather than the reporting functionality.
Applications in an enterprise
Business intelligence can be applied to the following business purposes, in
order to drive business value.
1. Measurement program that creates a hierarchy of performance metrics
(see also Metrics Reference Model) and benchmarking that informs
business leaders about progress towards business goals (business process
management).
2. Analytics program that builds quantitative processes for a business to
arrive at optimal decisions and to perform business knowledge discovery.
Frequently involves: data mining, process mining, statistical analysis,
predictive analytics, predictive modeling, business process modeling, data
lineage, complex event processing and prescriptive analytics.
3. Reporting/enterprise reporting program that builds infrastructure for
strategic reporting to serve the strategic management of a business, not
operational reporting. Frequently involves data visualization, executive
information system and OLAP.
4. Collaboration/collaboration platform program that gets different areas
(both inside and outside the business) to work together through data
sharing and electronic data interchange.
5. Knowledge management program to make the company data-driven
through strategies and practices to identify, create, represent, distribute,
and enable adoption of insights and experiences that are true business
knowledge. Knowledge management leads to learning management and
regulatory compliance.
In addition to the above, business intelligence can provide a pro-active
approach, such as alert functionality that immediately notifies the end-user if
certain conditions are met. For example, if some business metric exceeds a
pre-defined threshold, the metric will be highlighted in standard reports, and
the business analyst may be alerted via e-mail or another monitoring
service. This end-to-end process requires data governance, which should be
handled by the expert.
Prioritization of projects
It can be difficult to provide a positive business case for business
intelligence initiatives, and often the projects must be prioritized through
strategic initiatives. BI projects can attain higher prioritization within the
organization if managers consider the following:
As described by Kimball the BI manager must determine the tangible
benefits such as eliminated cost of producing legacy reports.
Data access for the entire organization must be enforced. In this way
even a small benefit, such as a few minutes saved, makes a difference
when multiplied by the number of employees in the entire
organization.
As described by Ross, Weil & Roberson for Enterprise Architecture,
managers should also consider letting the BI project be driven by other
business initiatives with excellent business cases. To support this
approach, the organization must have enterprise architects who can
identify suitable business projects.
Using a structured and quantitative methodology to create defensible
prioritization in line with the actual needs of the organization, such as a
weighted decision matrix.
Success factors of implementation
According to Kimball et al., there are three critical areas that organizations
should assess before getting ready to do a BI project:
1. The level of commitment and sponsorship of the project from senior
management.
2. The level of business need for creating a BI implementation.
3. The amount and quality of business data available.
