Basic BI- introduction
1 July 2012
How many times have we heard of Business Intelligence and heard it is used by large organizations and makes work more efficient and effective regarding all aspects of decision making?
Yet, do we really understand what BI is?
Don't feel bad, I'm not entirely certain how this system works, what it does and how exactly it makes organizations' business performance more efficient and so I decided to write this article first and foremost for myself.
First, a few basic terms:
Business Intelligence refers to information systems meant to present decision makers with data that may assist them in making better business decisions, evaluating risks and chances better (Risk Management), detect profit and loss centers, follow investments, etc. Some view BI as more of a management "environment" and control than a certain data system. BI also increases business competitive advantages via data analysis and the organizational decision-making process.
Now, imagine you're driving your top-notch car with its elaborate dashboard which shows the weather, motor temperature, water/oil level, current/average speed, etc. While driving you must also pay attention to the road as well as near vehicles. The car you are driving is indeed the state of the art, but can you operate it and comprehend the various data displayed on several screens while driving without risking anyone?
As you might have guessed, the car is your organization and the elaborate dashboard is the vast amount it creates on a daily basis. While organizations do not usually risk matters of life or death, one characteristic of our day and age is the need to make decisions and manage organizations while considering various factors. This is where BI enters as an organizational knowledge tool:
As we all know, most organizations hold vast amounts of internal and external data; modern organizations struggle in a competitive environment of constant pressure to improve service and product quality and lower costs. The need for quick decision making is increasing.
Business Intelligence serves two main purposes: evaluating businesses' financial and functional health (reports, notifications, etc.) and transferring data to and from operational systems. Furthermore, Business Intelligence is the result of using analytical models while scientifically existing data to analyze the recommended course of action based on past experience. Its purpose can be delineating a business strategy or marketing to clients.
So, how does BI benefit us?
BI systems allow us to intelligently utilize data flowing in the organization and outside of it, contributing to process efficiency, profit increase and client retaining. BI provides organizations with one organizational truth supporting every decision-making process.
For example, an electronics company might have a customer service, display halls, HR management department, marketing and PR, sales, finances, etc. Each department holds a data system with its specific information. A BI system merges data from all departments and provides analysis and report tools that can help managers answer questions such as: what is the preferable target audience to offer special discounts? What complementary products can we grant as part of these special sales and to who (according to various segmentations)?
Likewise, the need for BI grew from the amount of data in organizations. A central BI method is Data Mining, a branch of BI which uses statistical algorithms from the field of AI to review and reveal trends in data and links between data and principles that other tools cannot detect. Data mining is usually used to forecast future trends.
The BI platform also provides a structured approach to implementing organizational strategy continuously and consistently through Enterprise Performance Management (EPM) that enables organizations to communicate their strategy and ensure business processes are performed according to strategy.
What uses can an organization make of a BI system?
Data analysis- quantitative and statistical analysis of processes in the organization according to defined indices (e.g. maintenance costs). The system will perform simulations for each process to reach an optimal performance scenario after which recommendations can be implemented.
Evaluation- evaluating process performance, benchmarking and reviewing how close the organization is to the goals it set.
Data sharing: an ability to share data with other systems and derive vital data from them.
Managing organizational information- data results and analysis serve the organizational BI system as a main source for retaining the organization's knowledge: client segmentation, process data, effectiveness, strategies, etc.
Online Analytical Processing (OLAP)- since the data in organizational systems is rapidly changing, online processing enables quick response to complex, multi-dimensional questions regarding sales, budget, marketing, maintenance, etc.
What is BI's target audience?
BI can and should provide solutions for various types of users, such as:
Senior management focusing on the organization as a whole, expecting data to be displayed graphically and comprehensively. If a manager spots an error (colored red) they should be able to find an answer, analyze the data and get to the bottom of this problem.
Decision-makers usually focused on one aspect of organizational activity (financial, sales and marketing, production) and therefore seek focused data on a certain subject/niche.
Data workers responsible for producing reports received from the system.
First-line workers to which the system is transparent. For example, service representatives offering clients offers based on data summaries on their screens derived from an analysis of the clients' properties and details performed behind the scenes.
Analysts performing in-depth analysis based on data, using it in their systems.
In conclusion, BI is an efficient and important tool that enables decision-makers to decide what, how, when, and why; thus improving organizational performance.