What is Business Intelligence?

Business intelligence, or BI, is an umbrella term that refers to a variety of software applications used to analyze an organization’s raw data. BI as a discipline is made up of several related activities, including data mining, online analytical processing, querying and reporting.

Companies use BI to improve decision making, cut costs and identify new business opportunities. BI is more than just corporate reporting and more than a set of tools to coax data out of enterprise systems. CIOs use BI to identify inefficient business processes that are ripe for re-engineering.

With today’s BI tools, business folks can jump in and start analyzing data themselves, rather than wait for IT to run complex reports. This democratization of information access helps users back up—with hard numbers—business decisions that would otherwise be based only on gut feelings and anecdotes.

Although BI holds great promise, implementations can be dogged by technical and cultural challenges. Executives have to ensure that the data feeding BI applications is clean and consistent so that users trust it.

What kind of companies use BI systems?

Restaurant chains such as Hardee’s, Wendy’s, Ruby Tuesday and T.G.I. Friday’s are heavy users of BI software. They use BI to make strategic decisions, such as what new products to add to their menus, which dishes to remove and which underperforming stores to close. They also use BI for tactical matters such as renegotiating contracts with food suppliers and identifying opportunities to improve inefficient processes. Because restaurant chains are so operations-driven, and because BI is so central to helping them run their businesses, they are among the elite group of companies across all industries that are actually getting real value from these systems.

One crucial component of BI—business analytics—is quietly essential to the success of companies in a wide range of industries, and more famously essential to the success of professional sports teams such as the Boston Red Sox, Oakland A’s and New England Patriots.

With an analytical approach, the Patriots managed to win the Super Bowl three times in four years. The team uses data and analytical models extensively, both on and off the field. In-depth analytics help the team select players and stay below the NFL salary cap. Patriots coaches and players are renowned for their extensive study of game film and statistics, and Coach Bill Belichick reads articles by academic economists on statistical probabilities of football outcomes. Off the field, the team uses detailed analytics to assess and improve the “total fan experience.” At every home game, for example, 20 to 25 people have specific assignments to make quantitative measurements of the stadium food, parking, personnel, bathroom cleanliness and other factors.

In retail, Wal-Mart uses vast amounts of data and category analysis to dominate the industry. Harrah’s has changed the basis of competition in gaming from building megacasinos to analytics around customer loyalty and service. Amazon and Yahoo aren’t just e-commerce sites; they are extremely analytical and follow a “test and learn” approach to business changes. Capital One runs more than 30,000 experiments a year to identify desirable customers and price credit card offers.

Who should lead the way?

Sharing is vital to the success of BI projects, because everyone involved in the process must have full access to information to be able to change the ways that they work. BI projects should start with top executives, but the next group of users should be salespeople. Because their job is to increase sales and because they’re often compensated on their ability to do so, they’ll be more likely to embrace any tool that will help them do just that—provided, of course, the tool is easy to use and they trust the information.

With the help of BI systems, employees modify their individual and team work practices, which leads to improved performance among the sales teams. When sales executives see a big difference in performance from one team to another, they work to bring the laggard teams up to the level of the leaders.

Once you get salespeople on board, you can use them to help get the rest of your organization on the BI bandwagon. They’ll serve as evangelists, gushing about the power of the tools and how BI is improving their lives.

How should I implement a BI system?

When charting a course for BI, companies should first analyze the way they make decisions and consider the information that executives need to facilitate more confident and more rapid decision-making, as well as how they’d like that information presented to them (for example, as a report, a chart, online, hard copy). Discussions of decision making will drive what information companies need to collect, analyze and publish in their BI systems.

Good BI systems need to give context. It’s not enough that they report sales were X yesterday and Y a year ago that same day. They need to explain what factors influencing the business caused sales to be X one day and Y on the same date the previous year.

Like so many technology projects, BI won’t yield returns if users feel threatened by, or are skeptical of, the technology and refuse to use it as a result. And when it comes to something like BI, which, when implemented strategically, ought to fundamentally change how companies operate and how people make decisions, CIOs need to be extra attentive to users’ feelings.

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