1: Business Intelligence from the Business Side
The author defines "business intelligence" (BI) as the set of technologies and processes that allow people at all levels to access and analyze data. BI is a generic term that pertains to information. It may be referred to as competitive intelligence, reporting, business analytics, decision support, or various other names.
The human element is of key importance: the data collected is of no value unless it drives decisions. Hence the success of BI depends on its utilization throughout an organization: the information must be used to manage the business, improve performance, discover opportunities, and operate efficiently.
Of importance: the author excludes data warehousing, in and of itself. The mere collection of information in systems is not "intelligence." A data warehouse may be a component of a BI system, but it is no more productive or valuable to the business than unused machinery.
How BI Provides Business Value
Restated: BI can only provide business value when it is used effectively by people, so the value of BI varies according to the way in which it is implemented. In general, it can be stated that there is a correlation between the effective use of BI and company performance. (EN: I'm wary of this assertion - it's simple enough to prove that a technology creates value if you can dismiss any instance in which it fails to do so as an "ineffective us" of technology.)
In the most basic (and frequent) sense, BI provides information about the business operations, such as sales, expenses, inventories, and other metrics that are monitored to gauge the overall performance of the organization. Traditionally, this was done via periodic reporting, quarterly or monthly, but because of the widespread use of information systems, operations monitoring can be done in real time.
BI can also measure financial indicators such as revenue, margin, profitability, and costs to monitor the performance of a company, either in general or on a granular level, and to compare these metrics with benchmarks to facilitate gap analysis and tactical decisions.
Other examples of operational BU are provided, which include monitoring transportation systems, resource utilization, and process efficiency (such as wait time). Special attention is given to logistics and process improvement, which can help identify bottlenecks and pinpoint a cause for delays so that corrective actions can be taken.
BI can also be applied to improve customer service by monitoring service levels and receiving and processing customer feedback.
Examples are provided of BU in non-commercial situations: process monitoring to improve response time in police departments, monitoring of trends in the grades of students to evaluate teaching methods, monitoring of hospitals as a predictive and preventative measure against epidemics.
The BI Market
The processes for gathering information for the decision-making process originated well before information technology, though businesses generally relied more on "gut-feel" decisions based on anecdotal evidence or first-person experience with customers and products, and this was carried forward as computer information systems were introduced.
The term "business intelligence" emerged in the 1990's, and a variety of solutions were provided to aggregate and analyze business data, though it was largely regarded as ancillary data rather than a mission-critical element.
Presently, BI is a $20 billion market and its growth rate in recent years has been in the 11% range, which stands in contrast to the slowing rate of growth in IT as a whole.
This is credited, in part, to recent changes in the business landscape that now requires business to operate and compete on a global basis with 24/7 operations, largely driven by information technology that facilitates access to a wealth of information by both businesses and consumers. In order to remain competitive in this environment, a company must keep pace with changes, and the perception is that those who are most aggressive in their adoption of technology gain a competitive advantage.
The IT Conflict
There has been a shift within the workforce towards greater reliance on information technology. Those who are currently in senior management positions do not have a history of working with computers (they simply were not in widespread use when these individuals entered the workforce) and tend to view technology with a level of distrust and unease, as giving workers access to information is perceived as a threat to power.
Meanwhile workers who have entered the workforce in the past two decades "grew up" with computers and are often reliant upon them, having learned to use computers in elementary school and college, and data analysis is increasingly standard in current MBA programs.
The result is a cultural schism between the "boomer" senior managers, the more technically-savvy Generation X front-line managers, and the even more savvy Generation Y workers, and it is suggested that the refusal of some companies to embrace BI is evidence of a power struggle in which those who are least familiar with technology are in a position to deny or restrict these tools to those who are more capable of using them.
Aside of the generational conflict, there are also organizational conflicts between the traditional organizational elements (marketing, finance, production, etc.) and the information systems units that have developed rapidly from a maintenance role (repair copiers and telephones) to a mission-critical component that demands an increasing share of resources and power within the organization.
The rapid change in technology in recent decades has been both a help and a hindrance to the adoption of new technologies. While dramatic increases in speed and capacity have facilitated the collection and processing of business data, there has been an explosion in the amount of data available, resulting in information overload and a corresponding increase in the difficulty of deriving meaningful information from the vast amount of data.
An effect of rapid change is rapid obsolescence, and given that the implementation of BI systems requires significant capital investment and change management on an enterprise scale, some decision-makers are reluctant to invest (both capital and reputation) in systems with a limited lifespan, and those who are more aggressive often find that chaos results from constant changes to keep stride with the changes in technology.
The Research
To address the topic of BI, the author relied upon her own experience as a consultant, but augmented this knowledge by reviewing literature, considering case studies, consulting with peers, and surveying the field. (EN: The author provides details about each of these, but the methodology is incidental.)
Some of the findings of the study uncovered (or confirmed) successful BI practices:
- Measure success in multiple ways
- Use objective measures, but recognize the importance of phenomena that cannot be readily quantified.
- Support from the top of the organization is necessary to ensure that BI becomes an organization-wide process.
- Use existing data to build a foundation, but add to it and refine it constantly
- Align the BI strategy with the goals of the business, considering the needs of the business and its employees
- Ensure IT and business personnel have a cooperative rather than adversarial relationship
- Seek measures that are relevant for every worker in the company (as well as customers and suppliers)
- Use an agile development process (ongoing and incremental changes rather than "big" changes all at once) so that the pace of change is manageable
- Foster BI expertise across the organization
- Ensure that BI tools work within the technology standards that the existing IT department can effectively support.