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You can then deduce from the information gathered what adjustments need to be made.
Businesses realize that in this very competitive, fast paced, and ever-changing business environment, a key competitive quality is how quickly they respond and adapt to change. Business intelligence enables them to use information gathered to quickly and constantly respond to changes.
Benefits of BI
BI provides many benefits to companies utilizing it. It can eliminate a lot of the guesswork within an organization, enhance communication among departments while coordinating activities, and enable companies to respond quickly to changes in financial conditions, customer preferences, and supply chain operations. BI improves the overall performance of the company using it.
Information is often regarded as the second most important resource a company has (a company's most valuable assets are its people). So when a company can make decisions based on timely and accurate information, the company can improve its performance. BI also expedites decision-making, as acting quickly and correctly on information before competing businesses do can often result in competitively superior performance. It can also improve customer experience, allowing for the timely and appropriate response to customer problems and priorities.
Factors Influencing Business Intelligence
Customers are the most critical aspect to a company's success. Without them a company cannot exist. So it is very important that you have information on their preferences. You must quickly adapt to their changing demands. Business Intelligence enables you to gather information on the trends in the marketplace and come up with innovative products or services in anticipation of customer's changing demands.
Competitors can be a huge hurdle on your way to success. Their objectives are the same as yours and that is to maximize profits and customer satisfaction. In order to be successful you must stay one step ahead of your competitors. In business you don't want to play the catch up game because you would have lost valuable market share. Business Intelligence tells you what actions your competitors are taking, so you can make better informed decisions.
Business Partners must possess the same strategic information you have so that there is no miscommunication that can lead to inefficiencies. For example it is common now for businesses to allow their suppliers to see their inventory levels, performance metrics, and other supply chain data in order to collaborate to improve supply chain management. With Business Intelligence you and your business partners can share the same information.
Economic Environment such as the state of the economy and other key economic indicators are important considerations when making business decisions. You don't want to roll out a new line of products during an economic recession. BI gives you information on the state of the economy so that you can make prudent decisions as to when is the right time to maybe expand or scale back your business operations.
Internal Operations are the day to day activities that go on in your business. You need an in depth knowledge about the internal workings of your business from top to bottom. If you make an arbitrary decision without knowing how your entire organization works it could have negative affects on your business. BI gives you information on how your entire organization works.
Business Intelligence Technology
Business intelligence provides organizational data in such a way that the organizational knowledge filters can easily associate with this data and turn it into information for the organization. Persons involved in business intelligence processes may use application software and other technologies to gather, store, analyze, and provide access to data, and present that data in a simple, useful manner. The software aids in Business performance management, and aims to help people make "better" business decisions by making accurate, current, and relevant information available to them when they need it. Some businesses use data warehouses because they are a logical collection of information gathered from various operational databases for the purpose of creating business intelligence.
BI Technology Requirements
In order for your BI system to work effectively there must be some technical constraints in place. BI technical requirements have to address the following issues:
* Security and specified user access to the warehouse
* Data volume (capacity)
* How long data will be stored (data retention)
* Benchmark and performance targets
BI software types
People working in business intelligence have developed tools that ease the work, especially when the intelligence task involves gathering and analyzing large quantities of unstructured data. Each vendor typically defines Business Intelligence their own way, and markets tools to do BI the way that they see it.
Business intelligence includes tools in various categories, including the following:
* AQL - Associative Query Logic
* Scorecarding
* Business Performance Management and Performance Measurement
* Business Planning
* Business Process Re-engineering
* Competitive Analysis
* Customer Relationship Management (CRM) and Marketing
* Data mining (DM), Data Farming, and Data warehouses
* Decision Support Systems (DSS) and Forecasting
* Document warehouses and Document Management
* Enterprise Management systems
* Executive Information Systems (EIS)
* Finance and Budgeting
* Human Resources
* Knowledge Management
* Mapping, Information visualization, and Dashboarding
* Management Information Systems (MIS)
* Geographic Information Systems (GIS)
* Online Analytical Processing (OLAP) and multidimensional analysis; sometimes simply called "Analytics" (based on the so-called "hypercube" or "cube")
* Real time business intelligence
* Statistics and Technical Data Analysis
* Supply Chain Management/Demand Chain Management
* Systems intelligence
* Trend Analysis
* User/End-user Query and Reporting
* Web Personalization and Web Mining
* Text mining
History
An early reference to non-business intelligence occurs in Sun Tzu's The Art of War. Sun Tzu claims that to succeed in war, one should have full knowledge of one's own strengths and weaknesses and full knowledge of one's enemy's strengths and weaknesses. Lack of either one might result in defeat. A certain school of thought draws parallels between the challenges in business and those of war, specifically:
* collecting data
* discerning patterns and meaning in the data (generating information)
* responding to the resultant information
Prior to the start of the Information Age in the late 20th century, businesses sometimes struggled to collect data from non-automated sources. Businesses then lacked the computing resources to properly analyze the data, and often made business decisions primarily on the basis of intuition.
As businesses started automating more and more systems, more and more data became available. However, collection remained a challenge due to a lack of infrastructure for data exchange or to incompatibilities between systems. Analysis of the data that was gathered and reports on the data sometimes took months to generate. Such reports allowed informed long-term strategic decision-making. However, short-term tactical decision-making continued to rely on intuition.
In modern businesses, increasing standards, automation, and technologies have led to vast amounts of data becoming available. Data warehouse technologies have set up repositories to store this data. Improved Extract, transform, load (ETL) and even recently Enterprise Application Integration tools have increased the speedy collecting of data. OLAP reporting technologies have allowed faster generation of new reports which analyze the data. Business intelligence has now become the art of sifting through large amounts of data, extracting pertinent information, and turning that information into knowledge upon which actions can be taken.
Business intelligence software incorporates the ability to mine data, analyze, and report. Some modern BI software allow users to cross-analyze and perform deep data research rapidly for better analysis of sales or performance on an individual, department, or company level. In modern applications of business intelligence software, managers are able to quickly compile reports from data for forecasting, analysis, and business decision making.
In 1989 Howard Dresner, a Research Fellow at Gartner Group popularized "BI" as an umbrella term to describe a set of concepts and methods to improve business decision-making by using fact-based support systems. Dresner left Gartner in 2005 and joined Hyperion Solutions as its Chief Strategy Officer.
Future of Business Intelligence
In this rapidly changing world consumers are now demanding quicker more efficient service from businesses. To stay competitive, companies must meet or exceed the expectations of consumers. Companies will have to rely more heavily on their business intelligence systems to stay ahead of trends and future events. Business intelligence users are beginning to demand [Real time Business Intelligence] or near real time analysis relating to their business, particularly in frontline operations. They will come to expect up to date and fresh information in the same fashion as they monitor stock quotes online. Monthly and even weekly analysis will not suffice. "Business users don't want to wait for information. Information needs to be always on and never out of date. This is the way we live our lives today. Why should Business Intelligence be any different?" Charles Nicholls, CEO of SeeWhy, a Software company, Windsor UK.
In the not too distant future companies will become dependent on real time business information in much the same fashion as people come to expect to get information on the internet in just one or two clicks. "This instant "Internet experience" will create the new framework for business intelligence, but business processes will have to change to accommodate and exploit the real-time flows of business data." -- Nigel Stokes, CEO, DataMirror Corp., Toronto
Also in the near future business information will become more democratized where end users from throughout the organization will be able to view information on their particular segment to see how it's performing.
So, in the future, the capability requirements of business intelligence will increase in the same way that consumer expectations increase. It is therefore imperative that companies increase at the same pace or even faster to stay competitive.
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Key performance indicators
BI often uses Key performance indicators (KPIs) to assess the present state of business and to prescribe a course of action. More and more organizations have started to make more data available more promptly. In the past, data only became available after a month or two, which did not help managers to adjust activities in time to hit Wall Street targets. Recently, banks have tried to make data available at shorter intervals and have reduced delays.
The KPI methodology was further expanded with the Chief Performance Officer methodology which incorporated KPIs and root cause analysis into a single methodology.
KPI example
For example, for businesses which have higher operational/credit risk loading (for example, credit cards and "wealth management"), a large multi-national bank makes KPI-related data available weekly, and sometimes offers a daily analysis of numbers. This means data usually becomes available within 24 hours, necessitating automation and the use of IT systems.
Designing and implementing a business intelligence programme
When implementing a BI programme one might like to pose a number of questions and take a number of resultant decisions, such as:
* Goal Alignment queries: The first step determines the short and medium-term purposes of the programme. What strategic goal(s) of the organization will the programme address? What organizational mission/vision does it relate to? A crafted hypothesis needs to detail how this initiative will eventually improve results / performance (i.e. a strategy map).
* Baseline queries: Current information-gathering competency needs assessing. Does the organization have the capability of monitoring important sources of information? What data does the organization collect and how does it store that data? What are the statistical parameters of this data, e.g. how much random variation does it contain? Does the organization measure this?
* Cost and risk queries: The financial consequences of a new BI initiative should be estimated. It is necessary to assess the cost of the present operations and the increase in costs associated with the BI initiative? What is the risk that the initiative will fail? This risk assessment should be converted into a financial metric and included in the planning.
* Customer and Stakeholder queries: Determine who will benefit from the initiative and who will pay. Who has a stake in the current procedure? What kinds of customers/stakeholders will benefit directly from this initiative? Who will benefit indirectly? What are the quantitative / qualitative benefits? Is the specified initiative the best way to increase satisfaction for all kinds of customers, or is there a better way? How will customers' benefits be monitored? What about employees,... shareholders,... distribution channel members?
* Metrics-related queries: These information requirements must be operationalized into clearly defined metrics. One must decide what metrics to use for each piece of information being gathered. Are these the best metrics? How do we know that? How many metrics need to be tracked? If this is a large number (it usually is), what kind of system can be used to track them? Are the metrics standardized, so they can be benchmarked against performance in other organizations? What are the industry standard metrics available?
* Measurement Methodology-related queries: One should establish a methodology or a procedure to determine the best (or acceptable) way of measuring the required metrics. What methods will be used, and how frequently will the organization collect data? Do industry standards exist for this? Is this the best way to do the measurements? How do we know that?
* Results-related queries: Someone should monitor the BI programme to ensure that objectives are being met. Adjustments in the programme may be necessary. The programme should be tested for accuracy, reliability, and validity. How can one demonstrate that the BI initiative (rather than other factors) contributed to a change in results? How much of the change was probably random?
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