Business.com Guide to Business Intelligence (BI) Systems

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Contents

The Basics of Business Intelligence Systems 4

Three Major Capabilities of BI Systems 7

The Benefits of Business Intelligence Systems 11

Trends in Business Intelligence Systems 14

Top Tips for Evaluating BI Systems 17

Business.com Checklist for Business Intelligence Systems 19

Glossary of Business Intelligence Terms 22

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The Basics of Business Intelligence Systems

Business Intelligence (BI) software comprises various application tools to retrieve, analyze and report on raw historical and current data in order to identify and develop business opportunities as part of a

competitive marketing strategy.

Another way of looking at it is that BI software puts important business information in front of decision-makers when they need it, in a format they can understand and act upon quickly. The information has to be shareable, yet secure.

Every day, large BI systems analyze the activities of millions of individual customers making literally billions of transactions. Sophisticated software is able to continuously track the profitability of specific customers and products, and to detect fraudulent activities using algorithms that become more accurate over time. Something as simple as a spreadsheet is a business intelligence tool. On a very basic level, you manually enter data into a spreadsheet so you have an easy way to visualize relationships among the different data points and, in many cases, draw conclusions about what these relationships mean.

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At this very basic level, if your sales spreadsheet showed gross sales doubled in July and August, you might reasonably conclude your product is most appealing to consumers in the summer or during hot weather. Based on this information, you could decide to concentrate a larger portion of your marketing spend in the summer, as that’s likely when people are most interested in your product. Then again, you might also decide to move your marketing dollars toward the cooler seasons to improve year-round awareness of your product and boost off-season sales.

The moral here is that BI software doesn’t tell you what to do. It provides a means to quantify and visualize data so you can make more informed decisions based on the data you select. Some of the business problems that business intelligence software helps with include:

� Customer Satisfaction

� Problem Resolution

� Customer Loyalty/Value

� Customer Segmentation

� Customer Turnover

� Product Upsell/Cross-Sell

� Cost Control

� Revenue/Profitability

� Performance Management

� Product Defects

� Collections

� Marketing Effectiveness

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Just as there is an enormous amount of data to sort and categorize, there is a wide variety of BI tools that are both open-source (free) and commercial. Generally, open-source software is good for people with IT experience whereas commercial software usually comes with training and other useful customer support useful for those with minimal technical training.

While there are more expensive tools that automatically do more sophisticated processes than a spreadsheet can, almost all BI tools have an export to spreadsheet function. There are also several other ways to display data, including visualizations and infographics (i.e. charts and graphs), which most BI tools also generate.

Generally, open-source software is good for people with IT experience whereas commercial software usually comes with training and other useful customer support useful for those with minimal technical training.

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Three Major Capabilities of BI Systems

Just as there are different spreadsheet providers, some free and some not, there are various open-source and commercial software products for each BI tool. These tools can be broadly categorized as:

1. Data Management. These are tools that Extract, Transform and Load (ETL) data from various sources and place it into a central repository (data warehouse). Not all BI tools require a data warehouse, although data warehouses provide additional functionality and more seamless data retrieval and reporting. Additional tools “clean up” the data to delete errors and ensure usability.

2. Data Discovery. These tools refine the initial data extraction to make some sense of what you’re looking at.

¾ Data Mining. Identifies patterns, trends and associations among large quantities of data. Data mining is typically the first cut at sorting through data that other tools further refine.

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¾ Online Analytical Processing (OLAP). Sorts data by different “points-of-view” or “dimensions.” Example: You can request an OLAP tool to display product sales by month or by geographic region, and then compare it to last year’s sales by month and geographic region. In order to do this, data has to be tagged with certain attributes (e.g. month, region, year) or “dimensions,” and stored in a multidimensional database.

¾ Predictive Analysis. Anticipates future trends and probabilities by analyzing current and historical “predictors” - measureable variables such as age, gender, credit score, etc.- to forecast likely outcomes. Google used predictive analysis during the 2009 swine flu pandemic to predict the spread of the disease two weeks ahead of government reports and their predictions enabled local healthcare officials in the forecasted areas to stock medicine and prepare treatment response plans. Similarly, your business can use predictive analysis to anticipate probable customer behavior, product usage, and purchases.

¾ Text Analytics. Identifies patterns and trends among textual, as opposed to numerical, data. Example: Search engines “look” for certain word frequencies and associations to both refine results that are more likely to be of interest to you and push advertisements you are more likely to click on.

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3. Reports. Reports are easy-to-understand displays of information for the technically challenged in the form of spreadsheets, graphs and infographics that literally draw you a picture.

¾ Visualizations. Process information from databases and present it in graphical form. You can enter new data and immediately see the effects. An example is seeing a street map when you enter a new travel destination in a GPS system.

¾ Report Writers. Create customized, ad hoc reports from a wide range of data sources in response to specific queries. For example, you can create “what-if scenarios,” such as how changing variable cost per unit affects net profit.

¾ Dashboards. Browser-based displays of Key Performance Indicators (KPIs) linked to target values. These metrics determine whether a business unit or product line is meeting expectations. Example: What is the expected average time to repair a given product and what is the actual average time achieved?

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¾ Scorecards. Much like recording runs, hits and errors for a baseball game, scorecards attach a numerical value to performance achievements. For example, the scorecard might compare stores by the increase in quarterly revenues for stores open at least 12 months.

Much like recording runs, hits and errors for a baseball game, scorecards attach a numerical value to performance achievements

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The Benefits of Business Intelligence Systems

¾ No more guesswork. Without totally discounting your gut feelings, the problem in going with your gut is that too many times the results end up looking like something your actual gut produces. BI software presents you with the cold hard facts, historical trends and real-time updates, sliced and diced by just about any parameter you choose. It can even answer those “what if” questions that keep you up at night. You still make the decisions, but you’ve got better data to do it with than you would if you just used your gut feeling.

¾ Better understanding of your customers. What are they buying? What are they not buying? What type of customer (sorted by age, gender, geography, previous purchase, etc.) is purchasing particular products? Get key metrics such as these almost immediately simply by defining what you’re looking for and creating a customer report.

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¾ Identify new opportunities. BI data not only tells you where you’ve been, but where you’re going and, moreover, where you could be going. Predictive models point to where you can best focus your marketing efforts, suggest prospects for upgrades and cross-sales, and detect trends for product development.

¾ Improve manufacturing and operational efficiency. BI software can analyze your business to pinpoint excessive expenses and identify areas in need of improvement. For example, BI software can help you order the right amount of inventory at the right time so capital isn’t tied up in excessive inventory.

¾ Get the data you need when you need to get it, in a readily understandable format. One problem plaguing large organizations is getting information from different departments in a consistent format and conglomerating it in a way that retains intelligence. Data often needs to be discovered, then converted, merged, and tweaked before it can be put into a report. BI software helps centralize all that data and makes it viewable in dashboards that can generate reports. When implemented properly, it can save enormous amounts of time and increase efficiency.

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¾ Improve business negotiations. If you expect to negotiate prices and terms with your suppliers, business intelligence software can help give you a negotiating advantage. You can easily examine your entire relationship with a vendor or supplier and generate facts and figures that can be used in negotiations. For example, BI software might report the percentage of deliveries that are on-time, the percentage of defects noted, trends in pricing, or even what competing vendors charge for similar services. This information can be invaluable in negotiating contracts and discounts.

BI software might report the percentage of deliveries that are on-time, the percentage of defects noted, trends in pricing, or even what competing vendors charge for similar services. This information can be invaluable in negotiating contracts and discounts.

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Trends in Business Intelligence Systems

¾ Moving to the cloud. Storing data and software in the cloud - essentially a series of large servers shared by a multitude of users - is increasingly popular increased convenience and cost-effectiveness. Instead of hosting and maintaining a server and associated software on-site, a Software as a Service (SaaS) vendor does it for you.

¾ Going mobile. Just as everyone is looking up to the cloud, they’re increasingly doing so via a mobile device. Consequently, BI software vendors are emphasizing “on-the-go” access. With more and more people outside the IT department needing to access these tools, there is a parallel need to optimize ease-of-use and intuitive operation.

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¾ Open-source vs. commercial. You may be tempted to go the open-source route because the code is free. But, BI software could be virtually running your business and BI data could be valuable enough to warrant the kind of security found in closed-code commercial BI packages. Ask your IT team if they feel comfortable supporting an open-source package. Don’t have any IT staff or do you have limited resources? Then the answer is probably to look for a commercial service rather than open-source software.

¾ Improved usability for the non-geek. Initially, BI tools were for programmers and similar technical specialists. But, just as most people don’t need to know how to build and program a computer to use it, businesses want tools with low implementation costs that all the necessary employees can easily use and understand. Look for BI software vendors that emphasize their interactive visualization capabilities. The automation of data analysis and visualization has made it easier to access and manage data. While there is a counterargument that increased ease-of-use comes at the expense of more complex analyses, there’s little point in having a tool no one fully understands without expert guidance, sorting and decoding.

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¾ Everything is bigger. You’ll hear the term “big data” a lot because there is a lot of it and more of it every day, thanks in large part to the Internet. And as the amount of data available becomes larger and larger, it becomes all that more difficult to sort through and make sense of what you’re looking at.

The ability to analyze large data sets is a competitive advantage. It will make waves of growth in productivity, innovation, and abundant production possible. The rise of big data will challenge the capabilities of all leaders, not just information officers. The exploding volume of data collected by organizations, combined with the rise of multimedia and social media, will generate enormous troves of data that we will be learning from for decades. The challenge to business intelligence software vendors is to continually improve their capabilities to bring “big data” down to a manageable size.

The exploding volume of data collected by organizations, combined with the rise of multimedia and social media, will generate enormous troves of data that we will be learning from for decades.

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Top Tips for Evaluating BI Systems

¾ Avoid BI BS. You don’t always need a Ferrari to get to your destination. Don’t focus exclusively on brand names as that can easily lead to buying more than you necessarily need. Your BI software needs to fit what you are looking to discover about your business. Before you go shopping, use the Business.com Checklist for Business Intelligence Systems to match your needs with software that best accommodates them.

¾ Plan for your infrastructure. What’s your server and network capacity? What about the capacity of your vendor? This is particularly important for mobile applications, where users expect information to be available to them in real time. Equally important, of course, is that any business intelligence software you select should work with your existing infrastructure.

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¾ Don’t get technical. If a system requires a technical background to learn or use it, adoption will be limited to those with the technical know-how. Any system that requires contacting a technical support person to generate reports is going to lead to end-user frustration and low adoption rates. Many BI systems started out as something hacked together by IT people for IT people. If the intended users of your system are not IT people, look for a system that is easier to use.

¾ Get a timeline. BI systems are complicated by nature, since they usually involve the integration of information that used to be sectioned off, such as human resources and sales. It can take more time than you might imagine installing an infrastructure that can integrate these different components. Inquire about timelines from business intelligence vendors. In an open bidding process, look for a vendor who has a reputation of completing installations in three months or less as it might be worth paying more to get the job done on schedule.

¾ Don’t try to do everything at once. Focus on one key area, get used to how the BI tool works (or doesn’t work), and then gradually expand implementation based on evolving needs and what you’ve learned.

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Business.com Checklist for Business Intelligence Systems

My Needs Vendor 1 Vendor 2Capabilities DesiredCustomer SatisfactionProblem ResolutionCustomer Loyalty/ValueCustomer SegmentationCustomer TurnoverProduct Upsell/Cross-SellCost ControlRevenue/ProfitabilityPerformance ManagementProduct DefectsCollectionsMarketing EffectivenessOther

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My Needs Vendor 1 Vendor 2IT IntegrationData Warehouse RequiredIT PlatformIntegrates With Existing IT infrastructureMobileCloud- or Server-BasedPricingInstallationUser-Based or Server-Based?Software UpgradesMaintenanceTechnical SupportAdd-Ons

Implementation ScheduleProof-of-concept demoTime to convert a prototype into a toolTime to deploy a tool as a finished appModifiable

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My Needs Vendor 1 Vendor 2Usability

Learning curve; how many days of training (and/or days use) required for the following level of employees to gain a basic understanding and proficient use of tool:

IT/Business Analyst

Mid-Level Manager

Senior Executive

General Support Staff

Visualization Tools

Maintenance/Support Contract

User Community Support

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Glossary of Business Intelligence Terms

Ad Hoc Report: A custom report created in the moment by sending a query for specific information that is displayed as a report in the specified format.

Analytic Application: A turnkey software program for specific data needs, e.g. customer intelligence or market research.

Balanced Scorecard: Summarizes business performance measurements from multiple perspectives (e.g. financial, customer knowledge, internal business processes, learning and growth) on a single page or view.

Business Performance Management (BPM): A kind of internal BI application, BPM focuses on the effectiveness and efficiency of business units (e.g. finance, sales, human resources) as well as processes, such as planning and forecasting.

Data Dictionary: A list of all data elements and databases by name, structure, function, and other information about their usage.

Data Mart (DM): A specialized data warehouse with a predefined grouping of select data.

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Data Warehouse: A raw database created by integrating data from a variety of sources.

Drill Down/Up: The process to create summaries of data either more detailed (drill down) or less detailed (drill up).

Enterprise Portal: Access to BI software and reports via a password-protected website.

Executive Information Systems (EIS): Turnkey software with targeted level of detail for use by senior executives.

Granularity: Level of detail. The less detail, the lower the level of granularity. Conversely, the more detail, the higher the level of granularity.

Metadata: Describes the content, structure and processes of a data warehouse.

Relational Database System (RDBMS): Data organized by relations. In the broadest (and somewhat imprecise) terms, relations are defined as a series of yes/no propositions. Data queries sort according to what information is or is not contained in these relationships.

Structured Query Language (SQL): A standard programming language used to access and manipulate data in a relational database.