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Business Intelligence, Business Analytics, and Big Time

1 May 2010

Business intelligence and business analytics have become core tools for business decision-making, strategy development, and creating new opportunities.

Today, with excess information, it isn't easy to connect the correct information about customers and business conditions.

This is a paradox, as Jay Dittman, VP of Marketing Strategy at Hallmark Cards in Kansas City, knows well. After 13 million members in the loyalty program (club members) purchased thousands of different greeting cards and other items, he tracks trends and offers. "There are mountains of data to sift through to maximize our marketing budget," he explains. About two years ago, Hallmark initiated using Business Intelligence (BI) and Business Analytics (BA) to understand better the buying patterns of more than 3,000 Hallmark Gold Crown stores across the United States. The company wanted to further nurture its relationship with regular buyers through models, forecasts, and determining how to market different consumer segments during holidays and special events. As a result of this initiative, Hallmark improved sales while simplifying and improving the analytical process.

Business intelligence and business analytics are not new concepts. The idea of understanding relationships between pieces of data information began in the late 1950s, and in the late 1980s, people started to engage with BI.

Today, the cumulative ability to store, accumulate, and analyze data can lead to organizational crises or new opportunities. As a result, BI and BA have evolved as central tools guiding strategic decisions in diverse areas such as marketing, credit, research and development, customer service, and inventory management.

BI and BA are developing rapidly, and meeting business challenges and creating new opportunities is becoming difficult. According to the IT consulting firm Gartner, while nearly 5,000 global organizations are already using these tools, only 35% of them succeed in making wise decisions about significant changes in business market conditions. Additionally, tasks don't become easier when more data is received and when websites, Web 2.0, and others in the environment pull data from multiple sources.

In summary, Joseph Bugajski, a senior analyst at Burton Group, predicts that "BI and BA are on the verge of a significant change. There is progress towards a deeper understanding of business information, and emphasis has been placed on using better tools and better software in the hands of business decision-makers."

Data Overflow

As more organizations try to sift through data, it becomes increasingly clear that BI and BA are tools companies must utilize to avoid missing opportunities. Filtering and sorting data requires a robust infrastructure, efficient data collection tools, and software designed for data analysis. Only then can hidden trends, customer relationships, purchasing behavior, action patterns, financial patterns, business opportunities, and other vital information be identified.

BI and BA are separate tools, but they are related. While BI provides a way to sort through data to find information, usually through queries, reports, and online analytical processing (OLAP), BA tools are for analyzing quantitative statistical data that sample explanations and predictions. For example, BA can predict when customers close accounts and determine the optimal time to repair or replace a device.

Navigating BI and BA tools takes work. This is due to the many definitions and because the conditions apply loosely to a wide range of tools and situations. Many companies rely on spreadsheets as their primary BI tool, while others rely on special dedicated applications, such as those from IBM, Oracle, PivotLink, SAS, and Unica.

Steve Crawford, CEO of the consulting firm PwC, says that typical BI usually requires turning data into information and then disseminating it through dashboards and scorecards. Conversely, the analysis focuses on solutions and capabilities that create added value and turn information into knowledge.

A peek into the depth of data at the (Independent) Health Department in Buffalo, New York, with more than 300,000 insured in 8 counties in western New York, along with the emergence of health reform and the need to seek ways to improve efficiency, says Joe Soma, Knowledge Manager. "We look at health as a knowledge management business. It's good for us to perform; it's good that we can provide services and control costs."

This is a challenging task. While the organization achieves results, new things must be designed, and rethinking needs to be planned. "Making the right data accessible to cause vital use," explains Soma. Eventually, the organization focuses on three main initiatives: through analytical means for prediction, to rank the probability of "members getting sick (such as diabetes), to reduce costs, and to adapt advertising and marketing campaigns to the preferences and demographics of different customers from different sectors."

The (Independent) Health Department turned to SPSS Predictive Analytics (recently acquired by IBM) to take BA to a higher level. Among other things, it developed a series of models that assist in interpersonal communication with members, such as determining the preferred method of contact representatives need to use the proposal services.

In fact, by covering demographic data from Nielsen Claritas communications company and existing customer data, a focused marketing strategy is created that allows members to connect with each other through a shared channel, including phone, address, and email (via Facebook; in the future, it will be possible to tweet).

The results are impressive. The Independent Health Department improved efficiency and reduced advertising campaign costs by 27% while achieving a 35% decrease in the use of external suppliers (saving about $350,000 per year).

Moreover, the organization understands that up to 10% of direct costs can be saved when treated members receive preventive care, especially for conditions like diabetes and heart disease.

In the future, BI and BA can also be used to identify fraud. "This technology allows the organization to be more efficient," Soma adds.

Boris Evelson, a business intelligence analyst at Forrester Research, says what makes BI and BA powerful applications is the ability of other managers on the business frontline to use these solutions to extract meaningful results. "They are no longer an exclusive tool for powerful managers and analysts; they enable knowledge workers throughout the organization."

Analyze this!

First, organizations use these tools to integrate more diverse data sets, including unstructured data such as email, audio files, video, and documents. He estimates that about 80% of business intelligence is in spreadsheet files. "One of the biggest challenges facing organizations is the amount of data they miss," he says.

"Too often, important data is simply not accessible or available."

Part of the problem is that traditional BI tools are not very flexible, and most data is not designed for rapid change. Unfortunately, most major BI providers continue to produce products that don't interface well with unconventional data sources, including social media.

Evelson says, "These tools are a rich, powerful, and stable function," adding that they are often not adapted to today's complex computing environment. Additionally, many organizations lack business processes, standards, and procedures to help develop a comprehensive BI and BA strategy.

Unfortunately, the situation is not getting easier. As organizations link information with business partners and external sources, there is an increasing need to use mashup tools and Web 2.0, as well as mobile solutions that "push" BI and BA into the picture. Also, some organizations are turning to data storage, preservation, and information purification to increase the flexibility and range of their initiatives. Burton from the Bugajski group says younger workers demand more robust internet-based tools to expand.

Granting Access

Connecting to various data sources and building an efficient BI framework is a process that began in recent years in the County Council of Kent, Britain. They represent about 1.4 million citizens in southern England. The council is looking for ways to make information more accessible to employees and citizens to save costs.

"There's a lot of time-sensitive valuable information," says project manager Paula Rixon, "Unfortunately, it's already difficult to find and utilize it."

The council aims to build a model that will be available to the public, including various information and data. In 2009, the IBM Mashup Center said connecting to residents' data through spreadsheets and multiple databases was possible. They used an RSS application to pull data into the BI application.

Rixon explains, "We want to give citizens full control over the information." The initial pilot project offers two dozen of about 570 available datasets. Statistical data covers everything from traffic accidents to doctor and clinic availability data, all accessible through a standard web browser.

Rixon says that the system has received positive reviews from various components so far. The council plans to significantly expand its use in the coming years, and eventually, most of the data will be online and available in the system.

"We can provide information at a lower cost, make it available faster to a larger segment of users, and create greater interaction with the community and engagement," she explains.

Bukovsky, from the Burton Group, says that more new and better tools are reaching the sophistication level of BI and BA. "Organizations are looking to collect data in newer ways to understand events better, analyze events, and gain predictive capabilities."

The Challenges

The path to BI and BA success is fraught with obstacles. The significant challenges are the correct structure of the IT infrastructure and the ability to manage data and ensure that it is available and accessible throughout the organization. In many organizations, important data is stored in software, systems, and storage devices and is not accessible.

Worse, the data may be stored in different places and used in various ways. Mistakes can be made if and when the data is distorted or misinterpreted. Even tiny errors can lead to drastically different results.

Another challenge lies in the design of these systems. The organization must create an interface that allows people to use reporting and analysis system tools and the ability to navigate data. In some cases, unifying and adapting traditional reporting tools with complex analytical functionality is essential while providing a simple interface and environment for a wide range of businesses. The task is challenging because different departments may develop various tools and interfaces. Sometimes, data is pulled from ERP, CRM systems, and databases.

Integrating all the data requires the organization to adopt Burton's words when referring to the data services platform. These tools are designed to help connect the BI infrastructure in one environment. Vendors like Oracle and Composite Software have begun understanding the need for an integrated environment and sophisticated management capabilities.

Additionally, organizations are adopting and using virtualization to store and manage information. The ability to integrate different environments becomes even more essential. Bukovsky says that this reduces the demand for IT resources. Organizations can sometimes cut the number of servers required for BI and BA. There's also the ability to capture and examine data from multiple sources quickly.

Control is an equally important factor in achieving success with BI and BA. "The organization must have an effective oversight model, with policies and methods to ensure that the technology is properly implemented and enables the best results," he says.

Moreover, sponsoring the process and the strategic roadmap is paramount. "These initiatives require more than technology." "They require a focused approach," he says.

Hallmark Ditman knows this well. When the company wanted to implement its BA strategy, it used SAS Analytics to analyze the data and patterns to improve sales. "We have enormous amounts of data to sift through, and understanding customer behavior related to the 'club members' program is crucial to our success," he says.

Hallmark has a predictive model that can adapt and change card promotions. Today, it can determine which information segments the customer waived in direct mail, what information should be sent via email, and which specific messages to send to each group. The company can now assemble customer insights within 10 minutes, as opposed to the past, when it would take two days or more. Moreover, Hallmark has grown its club membership by 5 to 10 percent.

"Choosing the right customer and telling them the right thing at the right time is critical," Ditman explains, "Understanding business trends is vital."

Forrester says that managing BI and BA tasks is getting more challenging. However, organizations are looking to understand complex and changing factors more holistically and strategically, so data positioning will continue to be crucial.

He summarizes it this way: "BI and BA are not routine applications: they are the main competitive features at the forefront. Real-time monitoring, split-second reporting, and predictive models are the present and future of business."


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