Introduction To Business Intelligence

Introduction To Business Intelligence

The Acronym “BI”

Let me start by providing the expansion to the acronym “BI”. Well, it stands for “Business Intelligence”. But that is not the only expansion for “BI”. I have heard business people use “Business Investment” or “Business Insight” or “Business Information” or “Business Improvement” for it too. Yes, Businesses may want to invest in “BI”. And yes, “BI” does provide insights into the Business. Businesses need information to run smoothly and to get that competitive edge and yes when BI is applied correctly, it will lead to improvement in the Business (in terms of good ROI).

What are the other terms for “BI”?

The terms that I can think of are as follows:

  • Marketing Research
  • Competitive Research
  • Business analytics
  • Reporting
  • Decision Support

The Meaning of “BI”

BI is a set of concepts and processes that allows one to make informed decisions. What is “informed decisions”? It is decision based on fact and fact alone. Why is it required to make “informed decisions”? The simple reason being informed decisions based on fact and not on gut feeling, more often than not are the correct decisions. It will lead to business benefits. It will provide insight into the operational efficiencies; it will help explore untapped opportunities; above all it provides a window to the business dynamics and performance.

Is the term “Data-warehouse” synonymous with “BI”?

Although used interchangeably, the term “Data-warehouse” is not a synonym for “BI”. Well, an organization might have a data-warehouse but if adequate front-end tools are not made available to the people, what use is the data-warehouse. Yes, it stores data but if the data is not converted to meaningful information and action is not based on the information, what use is the data? “BI” is more than just “Data-warehouse”.

Why “BI”?

BI is not only for the present context and scenario but also takes into consideration the past and the future. It helps answer the following:

  • What happened?
  • What is happening?
  • Why is it happening?
  • What will happen?
  • What is it that you want to happen?

How did it all start?

I would like to begin with ERP (Enterprise Resource Planning). ERP systems typically automate the transaction processes.

Example: A customer places an order. The finance department checks the credit line for the customer to either accept the customer’s order or reject it depending on whether the customer has outstanding dues against him. The order if accepted is passed onto the sales department. The sales department checks to find out if goods are in stock or production/manufacturing needs to be informed to fulfill the order. If goods are not in stock, production/manufacturing comes back with a date on which they will be able to ship the order. This way the transaction processes were in place. How about the transaction data? That’s when “data-warehouse” was born. The question to ask is “to run a business intelligently, is data and information supplied by data-warehouse enough”. The answer is no. You need external data such as “How does the market look? Will it be receptive to the launch of the new product?”, “Which product sells the most in region X?”, “What is the customer behavior?” etc…
These are not internal transaction data. They are external data. External data can be purchased. We have something called as the “data- crawlers”, a robot-like program that crawls through the web and looks for data that it is programmed to find.
Now that we have humongous amounts of data, next is the requirement for tools that will help extract data that is relevant and makes sense, analyze it and report it. So, business intelligence is also about analytical and reporting tools. Big players in the market are Tableau, Business Objects, Cognos, OBIEE etc.

Who is “BI” for?

It is a misnomer to believe that BI is only for managers or the executive class. True, it is used more often by them but “does that mean that BI can be used only for management and control?” The answer is No! This article will try to unravel the myth behind it. It will provide details on the areas where BI can be used. Let me make a list of the areas that I feel BI has/is making an impact.

  • BI for Management
  • Operational BI
  • BI for Process Improvement
  • BI for Performance Improvement
  • BI to improve Customer Experience (QCE – Quality of Customer Experience)

BI for Management: BI is a very powerful weapon in the hands of managers. Using BI front end tools, they are able to use the information made available to gain business value. Gone are the days when the managers had to wait for the end of the quarter to take stock of the situation. And more often than not, it did be a tad too late to take action. Now with BI, it is right information at the right time. There is no wait till the end of the quarter when the quarter results would indicate whether business is going the profit or the loss way. BI helps report:

  • How sales are in the various regions?
  • If the project is on budget or is overshooting
  • If costs are exceeding budgets

Operational BI: Whoever said BI relied on historical data only, needs to think again. Does BI help in the daily operations of a company? Yes it does. How? Let me explain with an example. Assume a typical Manufacturing-to-shipment scenario. A customer places an order. Before accepting the order, the customer service representative might want to check whether adequate inventory is available. For this he may look at a report generated within an order inventory system or furnished through BI solution. What is the primary difference between BI for management and Operational BI? Operational BI will have to interact either directly with a transaction system or be sourced by a data-warehouse that is updated in near real time several times in a day. This is not to say that BI for management will not use near real time data. It may but it can also be based on weekly or monthly data.

BI for Process Improvement: We have heard often times that BI leads to enhancement in the performance of enterprises. But the question to ask here is, “does it also contribute to improvement of processes?” The answer again is yes! Sometimes the process itself can be the bottleneck. Here is an example to explain the same. A retail store was running into the cash flow problem. Goods from the retail store were delivered to the customers on time. So on-time delivery was not the problem. The invoice was sent to the customer after about a week but before 10 days. If the delivery-to-invoice time could be curtailed, chances were that the retail store may not experience the cash flow problem. BI had helped the company to monitor this process and identify the road-block. Using this information, the store was able to act to reduce the delivery-to-invoice time to a couple of days and come out victorious.

BI for Performance Improvement: Let us begin by understanding “What is the measure for Business Performance?” The obvious ones are revenue, margin, profitability etc. “How does BI help to boost revenue?” Let us try to understand this with an example. BI helps a company “XYZ” identify customers who are regular buyers of leather shoes. The company’s representative makes it a point to send across catalogs of other leather accessories from various brands to the identified customers. This is essentially cross-selling. “How does BI help companies maintain a steady cash-flow” By identifying late-paying customers. “How does BI help increase profitability?” A company can use the BI tool to understand the customer demographics before the decision to launch a product in a particular region.

BI to improve Customer Experience: Businesses are all about providing an enhanced quality of customer experience. Let us take an example. BI can help air-lines identify frequent fliers. Airlines can then come up with schemes such as up-gradation from economy to business class based on availability, giving preference to frequent fliers club. A car dealer can use BI to monitor its warranty program and track down the root causes for warranty problems. This will help them serve the customers better and win the customers satisfaction, loyalty and advocacy. This will definitely do wonders for the business.

Decision–making is not new. It existed even without IT support. But it was more of a gut-feel kind of stuff and less based on facts. Now, IT and businesses have joined hands to make BI a mission-critical endeavor and one of the essentials for successful businesses.