Unit 1: Understanding Business Intelligence

 The Challenge of Decision Making

Digital transformation is the trending topic that everyone, from companies to academia,
wants to address. Now, nobody doubts that disruptive technologies transform business
models. This conviction is based on our everyday experience: you just need to subscribe
to a digital service or buy something online or carry out a digital transaction to realize
that the way business is done is no longer the same, and that companies have to evolve in
order to survive in the Digital Era.
Business Intelligence (BI) is one of the pillars of this digital transformation. Even though
this concept emerged in the 1980s and was popularized in the 1990s, it remains current
and its value has grown exponentially hand in hand with disruptive technologies. Rather
than being a specific tool, BI is a broad concept that encompasses good practices,
methodologies, processes, human capital and platforms than enable relevant data
collection, storage and analysis to support decision-making processes in organizations.
Although the Digital Era has generated an enormous, highly varied, at times unstructured
and extremely dynamic information flow, data generation, storage, visualization and
analysis, opening up significant areas of opportunity. The principal challenge is to
design BI systems that effectively and efficiently assist in decision-making processes and
generate specific value within the organization.
A common error when designing BI systems is to focus on the available information
rather than the necessary information. Another mistake is to place more importance on
the BI tool (visualization and exploitation) than on analyzing the data and model needs
related to decision-making processes, particularly those that really add value for the
organization.
As an EGADE Business School professor and business intelligence consultant, I have
identified three major challenges faced by organizations today when implementing BI
systems:
 Lack of clarity of the true purpose of intelligence systems. It’s not about generating a
large data warehouse or a colorful, spectacular-looking control panel, but rather trying to
obtain relevant data and perform a reliable analysis to support decision making.
 Consider all data sources, especially external ones. Most projects become a data push
offering, generating a large number of boards with information available in the central
systems, instead of the information the decision maker actually needs. A rigorous analysis
is not performed to determine whether external data (customers, competition, suppliers,
market, etc.) are more important than internal data (sales, inventories, collection, etc.).
 Independent management of BI projects. Very often, the areas responsible for
transactional systems handle a very extensive project and improvement portfolio, are
swamped with a lot of work and have to deal with late deliveries. Intelligence systems
should be executed by specialists, respond rapidly and undergo constant improvements.
The most successful organizations support their decision making with BI systems at
every level, from strategies to daily operations, generating competitive advantages based
on the use of valuable data. The three most interesting areas of opportunity to
capitalize on business intelligence are:
1. Know your customer: Digital transformation offers a solid platform of applications that
make it possible to collect information on our customers. A well-designed digital
platform unlocks a continuous channel that generates valuable information on our
customers’ likes and preferences, their level of satisfaction and their purchase intent. As
customer profile data are obtained, control boards can be designed to help marketing
teams apply solutions and services one by one.
2. Production and route scheduling optimization: Technology connects not only
customers, but also all the machines that produce goods within a plant. Large amounts of
 production process data are collected through sensors, in such a way that intelligence
systems can detect areas of improvement in real time and generate optimized production
schedules. Predictive maintenance is a reality: equipment failures can be forecast and
their root causes easily detected with the appropriate models. The real-time connection of
distribution equipment, for raw materials or finished product, can also optimize the fleet,
in equipment and locality, delivery routes, fuel consumption, etc.
3. Human resource analytics: The Digital Era demands highly trained and motivated
human resources. Each generation of collaborators has its strengths and weaknesses. BI
systems make it possible to collect data on the activities completed by collaborators and
manage their performance in real time. Tools are now available to talent management
areas for identifying the most productive profiles and for correlating work schedules and
working conditions, leading to the design of better incentive systems.
This list of areas of opportunity is by no means exhaustive, but offers a small example of
what can be accomplished with the appropriate design, development and implementation
of a Business Intelligence System. Despite the challenges implicit in this type of
initiatives, the outcomes can far surpass any efforts and investments. As a result, the
companies at the forefront of the Digital Era have focused on developing data collection
and analytics capacities. In short, such capabilities are the new way of competing in the
marketplace.
 What Is Business Intelligence?
Business intelligence combines business analytics, data mining, data visualization, data
tools and infrastructure, and best practices to help organizations make more data-driven
decisions. In practice, you know you’ve got modern business intelligence when you have
a comprehensive view of your organization’s data and use that data to drive change,
eliminate inefficiencies, and quickly adapt to market or supply changes. Modern BI
solutions prioritize flexible self-service analysis, governed data on trusted platforms,
empowered business users, and speed to insight.
It’s important to note that this is a very modern definition of BI—and BI has had a
strangled history as a buzzword. Traditional Business Intelligence, capital letters and all,
originally emerged in the 1960s as a system of sharing information across organizations.
The term Business Intelligence was coined in 1989, alongside computer models for
decision making. These programs developed further, turning data into insights before
becoming a specific offering from BI teams with IT-reliant service solutions. This article
will serve as an introduction to BI and is the tip of the iceberg.

BI methods
Much more than a specific “thing,” business intelligence is an umbrella term that covers
the processes and methods of collecting, storing, and analyzing data from business
operations or activities to optimize performance. All of these things come together to
create a comprehensive view of a business to help people make better, actionable
decisions. Over the past few years, business intelligence has evolved to include more
processes and activities to help improve performance. These processes include:

Data mining: Using databases, statistics, and machine learning (ML) to uncover trends in
large datasets
Reporting: Sharing data analysis to stakeholders so they can draw conclusions and make
decisions
Performance metrics and benchmarking: Comparing current performance data to
historical data to track performance against goals, typically using customized dashboards
Descriptive analytics: Using preliminary data analysis to find out what happened
 Querying: Asking the data-specific questions, BI pulling the answers from the data sets
Statistical analysis: Taking the results from descriptive analytics and further exploring the
data using statistics such as how this trend happened and why
Data visualization: Turning data analysis into visual representations such as charts,
graphs, and histograms to more easily consume data
Visual analysis: Exploring data through visual storytelling to communicate insights on
the fly and stay in the flow of analysis
Data preparation: Compiling multiple data sources, identifying the dimensions and
measurements, and preparing it for data analysis
 The Business Intelligence Value Proposition
In today’s competitive environment, critical & timely business intelligence significantly
impacts business outcomes such as improving customer relationships, increasing
revenues, optimizing cost & resources, improving performance, maximizing operational
efficiencies and even saving lives. The ability to make business decisions intuitively &
pertinently is heavily dependent upon availability & accessibility of business information
& data. Every business event, such as a customer purchasing a product, yields business
data. Such data, resulting from business applications, processes, transactions, operations,
business-partnerships, competition etc. inherently contains valuable knowledge &
business insights about customers, products, policies, systems, operations, competitors
etc., that helps in deriving business intelligence. Typical steps in deriving intelligence
involve collecting required data, analyzing data by applying intelligence-mining
techniques & business rules, extracting interesting insights & new intelligence,
understanding context & applicability of such information and finally arriving at
decisions in terms of what business actions can be taken.
The value proposition of business intelligence is measured in terms of its effectiveness in
generating expected benefits while accomplishing one or more business goals &
outcomes. There are many factors that affect the effectiveness or the value of business
intelligence. One of the key factors is the decision-action-latency which is defined as the
total time taken, after business event(s) occurred, to collect required data, analyze data,
extract new insights & intelligence, understand the applicability of such new information
and finally arrive at actionable decisions. According to Dr. Richard Hackathorn, an
eminent BI analyst & creator of Time-Value curves, the value of data required to make an
actionable business decision degrades as time lapses by after pertinent business events
have occurred. This is shown in the following Time-Value curve:
The decision-action-latency in turn is cumulative of 1] ‘data-latency’ defined as time
taken to collect and store the data, 2] ‘analysis-latency’ defined as time taken to analyze
the data & extract new insights & new intelligence and 3] ‘decision-latency’ a.k.a
'intelligence-latency', defined as time taken to understand the context & applicability of
such new insights & intelligence and to arrive at decisions in terms of what business
actions can be taken.
It has to be mentioned here that business intelligence can be strategic or tactical in nature.
In case of strategic intelligence, the value or effectiveness is potentially realized even
though the underlying data used can be very old accumulated over longer periods of time.
Essentially the slope of the curve would be small per se with very gradual decrease in
value over time. Typically, strategic intelligence is based on large data comprising of
historical observations collected from several business events over a period of time. A
retail store making a decision about when to run beer sales is an example of a strategic
intelligence. For example, a retail store after inferring from store sales data that men who
purchase diapers over the weekend also tend to buy beer at the same time can make
strategic decisions to capitalize on this information to put beer cases near diaper packs
and run beer sales over the weekends.
In case of tactical intelligence, the value or effectiveness of business intelligence is very
short-lived because underlying data/information is highly volatile and inherently contains
time-sensitive intelligence reflecting upon the momentary business performance.
Essentially, the slope of the Time-Value curve would be very high with the curve being
extremely steep. Typically, tactical intelligence pertains to a single business event or
transaction and hence is based on data collected from a single event that gets correlated
with associated/related data collected from relevant other most-recent business events.
Because such intelligence is highly volatile and time-sensitive, tactical intelligence
typically ends up being Real Time. Credit card fraud detection can be considered as a
tactical instantaneous intelligence. For example, a credit card company after inferring that
a credit card, being used somewhere across the globe, was used thirty minutes earlier in
Chicago, can make an immediate decision to capitalize on this intelligence to mark the
transaction as fraud and place a hold on the card.
Real-Time-Intelligence-Based Decision Systems:
Real-Time-Intelligence-Based decision system would churn & process varying business
operational & transactional data on a real-time basis, sense transitory business insights,
predict business foresights and use such reasoning to make real-time decisions that can
then effect immediate actions through business transactions & operations. Such decision
system would agglomerate capabilities such as Machine Learning, Data Mining, Rules
Processing, Complex Event Processing, Predictive Analytics, Operations Research type
of Optimizations, Artificial Intelligence & other Intelligence-Generating Algorithmic
techniques and would provide flexibility to mix & match such capabilities for more
complex decision orchestrations. The breadth of intelligence-deriving frameworks is
necessary because different business objectives require different analytical approaches.
For example, a rules engine works great when recognizing a customer for a milestone.
Likewise, event processing is well suited for identifying potential customer disservice
scenarios. Finally, optimization techniques work well when making decisions about
which promotions to place in front of the customer.
The value proposition of such Real Time systems is depicted above using a similar Time-
Value curve where the latencies are in micro to milliseconds and any perceived loss in
business value is almost nil.
Real-Time-Intelligence-Based decision system would process live-data from business
events as they occur, combining the event data with other valuable data or other events
data, gaining intelligence from such data and deciding on an action to be taken.
Sometimes, knowledge of the event is sufficient information to derive an insight and take
action. More often than not, additional data must be leveraged to correlate & improve
intelligence. One another key feature of such 'Real-Time-Intelligence-Based' decision
systems would be to instantaneously learn, adapt and adjust intelligence models &
business rules as soon as new data is fed-back from business events. Such spontaneous
processing of business events data and also instantaneous adaptation of intelligence
models based on data fed-back, effectively eliminates 'data-latency', 'analysis-latency' and
any latency incurred otherwise in re-engineering the models from ground-up. As such, the
maximum value associated with business event data is fully preserved & exploited while
effecting an immediate business action based on real-time business intelligence.