Compensatory Fuzzy Logic-based Business
Intelligence Analysis System
Rafael Espin Andrade, Jorge Marx Gomez, Nico Brehm, Fernando Belen, Ivet Cabanas, Maria Elena
Albert, Silvia Padron
Abstract—
Fuzzy Logic-based management is a scientific strategy to
support the strategic integration of companies. It uses
fuzzy-integrated management models which have been
developed in the Knowledge Engineering and Knowledge
Discovering area. This paper describes a Business
Intelligence Analysis System (BIAS) which implements
that strategy. In this system the rational analysis of all
processes and components is based on Compensatory
Fuzzy Logic, a new multivalued system with proven
properties as semantic normative approach for decision
making. SWOT-OA analysis is a Compensatory Fuzzy
Logic model; it joins knowledge about SWOT analysis and
objective maps like Balance Scorecard maps to provide a
way to integrate and to structure decisions in companies.
SWOT-OA in BIAS provides a way to integrate
intelligence, design and selection to get better and faster
decisions. Compensatory Fuzzy Ontologies allows in the
prototype evaluating, searching, and decision making.
Ontologies created by the system are used in combination
with other imported non fuzzy ontologies linked and used
by the fuzzy ones.
Key Words— Compensatory Fuzzy Logic, Business
Intelligence, Decision Making, Fuzzy Ontologies
I. INTRODUCTION
Business Intelligence (BI) provides amongst others
analytical knowledge about Business Data Warehouses and
improves their performance which reflects to both internal
processes and the market position of enterprises. Most
important objectives that Business Intelligence Systems
should support to achieve are the following [Gu97]:
1. Converting data into information
2. Creation of standard reports and queries
3. Data Mining in detailed data
4. Fact-based rational analysis
5. Better and faster decisions
There is a widespread consensus that better and faster
decisions cause external and internal impacts whereas BI is
supporting these decisions. For instance Howard Dresner
considers BI, as a set of concepts and methodologies to
improve decision making in business trough the use of facts
and fact-based systems [SB07].
If decision making is the objective, then the decision
making process has to be a key factor in the conception of
Business Intelligence systems.
Returning to objectives, we can observe that every one of
them is in some sense about evaluation and searching.
Converting data into information means to search useful
data, to evaluate it, and as a consequence to use it or not. The
idea is to find sense in that data; frequently evaluation of
sources using data is useful for future searching. Another
important way for converting data into information is planning
and controlling. For example Balance Scorecard systems are
applied to search and use relevant data to evaluate the
achievement of the companys objectives. Queries are a way of
getting sense from data and to transform it into information.
Standard reports are results of good systematical queries.
Queries are dependent on an evaluation process in order to be
answered .
Data Mining as a part of knowledge discovering is about to
search knowledge whereas an evaluation process is necessary
to get knowledge. Better and faster decisions means to search
alternatives or actions and to evaluate them faster and better.
Rational analysis means to evaluate using reasoning or
statistical inference in order to achieve any of the objectives
mentioned above.
Business Intelligence systems like Executive Systems and
Enterprise Information Systems, Geographic Information
Systems, Decision Support Systems, Management Support
Systems, Online Analytical Processing Systems, and Data and
Text Mining Systems focus on special functionalty that
contributes to one or some of the objectives above [Ha00].
This tool is used to be linked to make sooner and better
decisions, but it is difficult to achieve an actual integration
only with general tools for linking them. A system proposal to

contribute with all these objectives as a hole using a decision
making process based approach, and with evaluation and
searching as principal systems processes is presented here.
Strategic Integration is a way to obtain competitiveness in
Enterprises. This way is the alignment of all resources, human
and naturals, all functions and processes of the organization to
get the strategical objectives of the enterprise. It guesses that
all decisions of the organization are made rationally in
function of these strategical objectives, according with the
priorities of the organization established taking into account
expected sceneries.
All links in any value chain should contribute to get the
objectives about products and services. Strategic Integration
has two dimensions, a time dimension and a physical
dimension. Both should guarantee two processes each one, top
- down, and down - top.
In time dimension strategical objectives should be selected
according with expected sceneries, then tactical objectives
should be developed consequently to get for certain time (a
year, for example), and plans of actions, projects and planed
decisions should be thought to obtain the tactical objectives.
In inverse direction, actions, projects and decisions have to be
made in practice to get tactical objectives, and this success
should conduce to strategical objectives.
In physical dimension, Objectives of Business areas are
derived from objectives of the company, and objectives of the
different functions have to be derived from the Business areas
objectives. In inverse direction, in practice each operative
decision should be build the different functional objectives, to
obtain the objectives of the business areas and consequently
get the objectives of the company.
Fuzzy Logic Based Management [Es04] use Fuzzy
Integrated Models of Management obtained from Knowledge
Engineering Techniques using literature and Experts to create
and integrate digital systems which allow using information
and expert knowledge and opinions, to get the strategical
orientation of all decisions in the organization. This is the way
to get through the strategic rationality of each decision the
competitiveness of the enterprise.
Fuzzy Logic Based Management objectives are:
• The coherent relationship among decisions, institutional
strategy, institutional knowledge, and Management Sciences
• The rational incorporation in decision analysis of all the
elements, erasing qualitative-quantitative barriers, and taking
into account the uncertainty of enterprises environment and
the vagueness of knowledge
The achievement of both objectives is called here Decision
Coherency.
As part of the strategy of Fuzzy Logic Based Management
many problems of Management Decisions have been modeled
and applied; but a Business Intelligence System is necessary
to advance towards achievement of those objectives.
CCIA’2008 2
KnowledgeManagement
Decision Making
Enterprise Emergent
Data Strategic
Knowledge
Project
Expert
Fuzzy Knowledge
Literature
Integrated
Knowledge
Models
Data
Decision
Coherency
BIAS
Knowledge Engineering
Strategic Integration Knowledge Discovering
FIGURE 1.FUZZY LOGIC BASED MANAGEMENT
II. COMPENSATORY FUZZY LOGIC
Many revealing studies deal with multi-valued logics.
However, semantic properties of them remains limited,
because of the axiomatic performance of multivalued logics.
Fuzzy Logic uses to use then, to model Decision Making
Problems, only one selected operator or a pragmatic
combination of them.
Compensatory Fuzzy Logic (CFL) disregards the classical
concepts of norm and co-norm and all the Boolean properties
have been generalized by it in a special way [Es06]. It is a
semantic normative approach for decision making that
continues dialectically the classical tradition of Utility Theory.
It explained as rational the described performance of decision
makers, studied by Descriptive Prospects Theory, supported in
experimental material [Es07]. Truth value of universal
proposition have distributed probabilistically in a normal way,
it allows dealing with a new way of inference called
composed inference [Es07]. CFL have been used successfully
in decision making problems solution in Management and
Education [De05,Es04].
Sensibility to changes in values of basic predicates and the
possibility of interpretation of the composed predicates truth
value according to a nominal scale are properties that classic
multivalued logics don’t have at the same time. Usual
approaches from Fuzzy Logic using Norm and Conorms make
it not possible.
Both properties are very important modelling semantics, the
first one because of the subtility of concepts and its expression
using language; the second one because of the necessary and
desirably interpretability of the truth values of predicates to
offers semantic services as consults or Knowledge
Discovering.
Perhaps because of that, it is very frequent to define
operators and relations to deal with spatial semantics as mass
distributions of membership or other intuitive oriented ideas
that allows this sensibility and the possibility to be interpreted
as a mean.
Compensatory Fuzzy Logic allows both properties
 CCIA’2008 3

This proposal uses as conjunction operator (c) the important resource for semantic consults and knowledge
geometric mean, as negation the classical function n(x)=1-x discovering.
and as disjunction operator (d) the dual of geometric mean. This can be used as a compound inference modeling
Implication with the best properties in this context is called hypothesis with compensatory fuzzy logic predicates and
Generalized Zadeh implication (i(x,y) = d(n(x), c(x, y)), using this property of statistics nature to estimate the truth
although have been studied i(x,y)=d(n(x),y) too. Consequently value.
equivalence is e( x, y ) = i ( x, y ) ∧ i ( y, x) and universalExp
and Expected Utility Theory had been accepted during decades
existential quantifiers are introduced in the following way: as dominant normative and descriptive model of Decision
Making. Serious questioning has been made about its
descriptive character using experimental evidences during last
∀
x ∈U
p(x) =
x ∈U
∧
p(x) = n
x ∈U
p(x) = Π decades.
Prosp Prospects Theory is a successful proposal to get theoretical
⎧ 1
∑
fundaments of human decision making behavior under risk,
⎪⎪ exp( n ln( p ( x ))) si x p ( x ) ≠ 0 (1) using experimental material.
= ⎨ x ∈U
The l Last work about Compensatory Fuzzy Logic proving that
0 en cualquier otro caso
⎪ Described Behavior for Prospect Theory could be explained
⎪⎩ as a rational way to judge under risk is a very good step in the
way of Compensatory Logic towards a semantic normative

∃ ∨ Π
decision making paradigm inspired in classical paradigm
p(x) = p(x) = 1 − n (1 − p ( x )) =
x∈U x∈U x∈U
[Es07].

⎧ 1
⎪1 − exp(
=⎨ n
∑ ln( 1 −
x∈U
p ( x ))) si x p(x) ≠ 0 III. BUSINESS INTELLIGENCE ANALYSIS SYSTEM (BIAS)
Simon considers Intelligence, Design and Selection the
⎪⎩ 0 en cualquier otro caso three principal steps of Decision Making Process [Si97].
(2) He describes the first one as the searching and definition of
problems that requires solution, the second one like
Both quantifiers are extended to bounded sets of Rn, in a elaboration of possible action curses or alternatives to solve
natural way from conjunction and disjunction concepts using the problem. The third step is selection, the actions or
integration: [Es06] alternatives are selected in it.
According to [An61] every management activity belongs to
Formulas of Compensatory Logic Propositional Calculus Strategical Planning, Management Control or Operations
(CLPC) are composed functions of operators c, d, n e i. Control. He considers that each decision is part of one of
Consequently with definition 4, any function those activities.
f : [0,1] → [0,1] of CLPC is considered valid if f(x) >0 for
n Figure 2 illustrates Decision Making Process and the
associated activities. Notice it is a bow. These steps and
any element of the dominium activities can be executed at strategic, tactical or operative
∫ ln( f ( x )) dx level, but the importance of each activity and step is different.
[ 0 ,1 ]n Decision Making Process
∫ dx
1
and e [ 0 ,1 ]n
> . (3)
2
Valid formulas of CLPC are exactly the same that
1.Inteligence
Identification of 2.Design 3.Selection
valid formulas of Classic Propositional Calculus using Problems Elaboration of Decision itself
any of the before mentioned applications [Espin, 2006]. Course of
Actions
Other very important property of Compensatory Fuzzy Logic
3.Internal and
is the following: External Control 1.Planning 2.Implementation

If p(x)>0 for every x of the universe U, then universal

1
proposition ∀
x∈ M
p ( x ) = exp(
n
∑
x∈ M
ln( p ( x )) ) is

distributed as a consequence of the Central Limit Theorem as Enterprise Activities

σ 2
) , where σ is the variance of ln(p(x)) on U and Figure 2 Steps of Decision Making and Enterprise
2
N (u ,
n Activities
1
∑ ln( p( x)) is the mean of ln(p(x)) on U.
BIAS because of its decision making process structure can
u= support decisions about the three ones (see Figure 4). It can
n x∈U structure each decision taking into account the contribution of
Last property permits estimation of the universal actions and alternatives using SWOT-OA Analysis.
propositional truth value using a sample and it is very From the users point of view, the components of the system

are Evaluation of Strategic Company Project, Control and
Decision Making, Knowledge Management and Knowledge
Discovering. But internal components are the SWOT-OA
Analysis component, the Editor, and the Searcher. Each of
them with its graphical interfaces.
A model of Fuzzy Logic Based Management called SWOT-
OA [Es05] is the mean column of BIAS. Different piece of
research and applications have been made using Strategic
Maps (SM), mainly using Balanced Scorecard methodology
(BSC) of Kaplan and Norton [Ka04]. SWOT-OA analysis
[An71] is a theoretical and practical method to evaluate
strategic plans and to support the decision making process in
the framework of Fuzzy Logic; the method consists in a
system of predicates of Compensatory Fuzzy Logic [Es06].
This methodology takes into account the organizational
complexity, hence eliminating the theoretical and practical
simplifications made by BSC. In order to do so, it transforms
the organizational strategic thinking into practical priorities,
considering the inter-relationship among everything [Mo99];
it crosses the SWOT analysis matrixes with incidence matrices
among Objectives and Actions.
The key of integration of the system itself and the system
with ERP or Data Warehouses is SWOT-OA module. It deals
with Matrix Analysis using Compensatory Fuzzy Logic
predicates.
Because of this, many of the basic conceived objects will be
matrixes, and many of its methods are logical predicates. One
basic class is simple matrix. It is defined too complex matrix
like a new object with two lists, row list and column lists, and
too subclasses of matrixes, expert matrixes and organization
matrixes. Information of Associated Expert Matrixes should
be processed to obtain information of an Organization Matrix.
There are subclasses of Complex matrixes depending of its
content. There are another kind of class, composed for various
matrixes, because of this they are called Set of Matrixes.
All the processes of BIAS are about one organizational
area: the Organization Class. It is a set of Matrix Sets Object.
These objects are the direct structural link with a customized
ERP System. For instance, codes corresponding to different
organizational areas of SAP System would be the link
between Organization Objects of the BIAS and Organizational
Areas of SAP, for example accounting areas like Controlling
Areas, Credit Control Areas, Chart of Account, Company
Codes, and Business Areas, distribution areas like Sales
Organization, Sales Offices, Divisions and Distribution
Channels, and logistics areas like Plants, Storage locations,
Shipping Points, Purchasing Organizations, and Purchasing
Groups.
To each Organizational area of SAP is assigned one object
of different subclasses depending of the assigned ‘level’ of
each area.
A graphical user interface is used to customize BIAS
creating the different objects and assigning to them the
associated codes of SAP System organizational areas.
The three principal general processes, or BIAS workflow
types are Updating, Evaluation and Searching Process. The
CCIA’2008 4
first one is used to enter the data from the experts about
matrixes, to process, and to storage the information
corresponding to each organization. The second one is the
evaluation of every predicate of Compensatory Fuzzy Logic
corresponding to SWOT-OA Analysis or entered by the editor
with some modification or actualization; it includes fuzzy
querying about data. Searching Process is applying of
different methods to change parameters value of membership
functions, or predicate structure, looking for trust knowledge
according with data from the hypothetical predicate.
Updating and Evaluation are illustrated in Figure 3.
E valuatio n Process
Level n
Update Process M atrix Set E valuation BIAS
M atrix U ser Interface
.......
.
. G eneral
Interfaces
R elation
Level 2 BAPIs
M atrix Set
D iagram
ERP O bjects
Level 1 Business O bjects
M atrix Set
Figure 3
The Graphical User Interface is linked with an Editor
capable to code from analytical or graphical information; in
the form of predicates or from trees respectively. Selection of
membership functions class and parameters is included.
BIAS deal with four types of users: Administrators, Advisers,
Expert Users, Evaluators and Decision Makers.
Administrators are responsible to assign users to users
groups. Advisers deal with organizational areas as a hole,
they are in charge of general conception, and assigning text
contents to Expert Matrixes, BIAS receives their opinion from
the Expert Users wich only have the task to fulfill those
matrixes.
Evaluators are called as special experts to judge aspects of
Decision Making Problems.
Decision Makers introduce information about concrete
decisions; receive information, and recommendations in the
way of rankings and graphical information.
Advisers, Expert Users, Evaluators and Decision Makers
can work with the editor to get reports, to query, to evaluate
hypothesis and to search improving truth, about organizations
and topics corresponding with their responsibilities.
The System Process going trough Decision Making Process
of the Company is illustrated in Figure 3.
 CCIA’2008 5

Enterprise The use of SWOT-OA Analysis makes possible conception

Inteligence of BIAS and its link to ERP systems to implement Strategic
Design
Identification of Elaboration of Selection Integration trough Decision Coherency.
Course of Decision itself
Problems
Internal and External Control Actions Implementation CFL properties allows to deal with decision making and
Planning
Evaluation
reasoning as a common space where preferences are
Importance and Presence
of SWOT components, ‘deducted’ and knowledge is ‘decided as true’ trough
Objectives Evaluation
Achievement,
Reports, Queries,
(Objectives Evaluation
(Actions and
evaluating with it. Explained probabilistic property of CFL
Importance)
Hypothesis
Searching
Alternative
Convenience)
allows estimating truth value of Universal Propositions if the
Improving truth wi th
new Parameters BIAS data have properties of a sample.
or structures
BIAS is designed to allows better and sooner decisions,
converting data in information, trough standard reports,
Figure 4 queries, discovering knowledge in data, and everything with a
rational semantic analysis coming from that multivalued logic
system.
III. COMPENSATORY FUZZY ONTOLOGIES Compensatory Fuzzy Ontologies allows in the prototype
Fuzzy Ontologies are beginning to be actually present in the evaluating, searching, and decision making. Ontologies
field of Semantic Web and seem to be a consensus about the created by the system are used in combination with other
necessity to deal with fuzziness in that scientific field. There imported non fuzzy ontologies linked and used by the fuzzy
are different initiatives, going from simple none theory-based ones.
implementations of fuzzy ontologies like for instance in [P04] References
to formal conceptions dealing with logical extensions of [An71] Andrews, K.R. The Concept of Corporate Strategy. Homewood, Il:
languages like OWL Lite using multi-valued logics [S05]. The Irwin, 1971.
second kind of effort is limited to the performance of [De05] Delgado, T., Lance,K., Buck M., and H. Onsrud (2005) Assesing
multivalued logics. Because of that there are proposals to SDI’Readiness Index. Memories of FIG Working Weak and GSDI-
8. El Cairo. 2005.
introduce mixing of logical connectives of different logics, as [Es04] Espin, R. et al. (2004) ‘Logical Management: Fuzzy Logic
in other Fuzzy Logic applications, calling them strategies, Integrated Models for Decision Making in Enterprises’ Enterprises
which can be mixed, without the presence in their Intelligent Systems Congress. Sevilla. Spain
performance of any axiomatic restrictions as properties of set [Es05] Espin, R., Vanti, A. Revista BASE. Unisinos, São Leopoldo, Brasil,
pág. 69-77. Vol. 2, No. 2, mai'/agosto 2005.
of operators [L07]. [Es06] Espin, R., Fernández, E., Mazcorro, G., Marx Gómez, J. and Lecich,
The nature of Compensatory Fuzzy Logic properties allows M.I. ‘Compensatory Logic: A fuzzy normative model for decision making’.
the creation of Fuzzy Ontologies by a generalization of non- Investigación Operativa. Universidad de la Habana. Vol 3. 2006.
fuzzy ontologies, adding operators, membership functions, [Es07] Espin, R., Fernández, E., Mazcorro. Towards a Semantic normative
approach of Decision Making: Theoretical and Experimental
and hedges which rather match actual knowledge. relations among Compensatory Fuzzy Logic, Expected Utility
This is implemented in BIAS as an editor with analytical and Theory and Prospect Theory. Proceedings of Multicriteria Decision
graphical facilities. It allows creating new non-fuzzy Making Meeting. Sinaloa, Mexico. 2007.
ontologies in OWL language and the transformation in fuzzy [Gu97][Gupta, V. An Introduction to Data Warehousing- white paper
introducing Data Warehousing Concepts, 199[Ha00] Hashmi, N.
ones, of the new non-fuzzy ontologies created using the Business Information Warehouse for SAP. Prima Tech SAP’s book
editor. Also other ontologies can be processed by importing Series. 2000
OWL code. [Ka04] Kaplan, R, Norton, D. Strategy maps. HBS Press, 2004.
[Mo99] Morin, E., Moigne,J.L. L’intelligence de la complexité.
L’Hartmattan, Paris,1999.
[SB07] SAP Business Intelligence
IV. CONCLUSIONS AND RECOMMENDS http://searchsap.techtarget.com/onlineEventsTranscript/0,289691,sid2
1_gci535218,00.html, last access: 09/20/2007
Some integration of organizations is possible trough [Si97] Simon, H.A. Administrative Behavior: A Study of Decision-Making
Integrated Management Systems like SAP Systems, but it is Processes in Administrative Organizations. The Free Press, 1997.
not possible to achieve Strategic Integration, because most of [Tv05] Tversky A., and D. Kahneman (1992): Advances in Prospect Theory.
the integrated systems by pure informatics links preserves his Cumulative Representation of Uncertainty. Journal of Risk and
Uncertainty, 5, 297-323. Kluwer Academic Publishers.
on no wide outlook of performance. [St05] Stoilos, G. and others. Fuzzy OWL: Uncertainty and the Semantic Web.
The use of integrated fuzzy models getting from management Procedures Workshop OWL: Experiences and Directions. 2005.
science knowledge of experts and literature, allows a logical [Pa04] Parry, D. A Fuzzy Ontology for medical Document Retrieval.
integration that permits Strategic Integration trough the use of Conferences in Research and Practice in Information Technology. Vol 32.
DMWI2004. 2004.
BIAS. It can integrate expert criteria and integrated
[Lu07] Lukasiewicz, T., and Straccia, U. Tightly Integrated Fuzzy
information provided for ERP Systems to a unique analysis Description Logic Programs Under the Answer Set Semantics for the
quantitative-qualitative from the strategic point of view. It
uses information, knowledge, and strategic objectives, to get
competitiveness from strategic integration.
All organization areas can make coherence decisions from the
strategic point of view.
CCIA’2008 6