Lecture 8: Business Intelligence

Systems

Nga.lethiquynh@ueh.edu.vn
Study questions 2

Q1 Why do organizations need business

intelligence?
Q2 What business intelligence systems are
available?
Q3 What are typical reporting applications?
Q4 What are typical data-mining
applications?
Q5 What is the purpose of data warehouses
and data marts?
Q6 How Are Business Intelligence
Applications Delivered?
 3

Q1 Why do organizations
need business
intelligence?
Why do organizations need BI? 4

 Data communications and data storage

are essentially free, and enormous
amounts of data are created and
stored every day:
 12000 gigabytes per person of data,
worldwide, in 2009.
Why do organizations need BI? 5

 Businesses use BI systems to:

 Process data (from operational DB, Social
Data, purchased data, etc.)
 produce patterns, relationships, and other
forms of information;
 deliver that information on a timely basis to
users who need it.
 Example:
 Identifying changes in purchasing patterns
 BI for entertainment: Netflix has data on
watching, listening, and rental habits →
determines what people actually want
 6

Q2 What business
intelligence systems are
available?
Business Intelligence systems 7

 Organization needs

INFROMATION TO SUPPORT
OPERATIONAL DATA

BI systems Data
(tools) mining

MANAGERS
Knowledge
Reporting
Management
Business intelligence (BI) tools 8

BI systems provide valuable information for decision-

making.
Three primary BI systems.
1. Reporting tools
 integrate data from multiple systems
 sorting, grouping, summing, averaging, comparing data.
2. Data-mining tools
 use sophisticated statistical techniques, regression analysis
and decision tree analysis
 used to discover hidden patterns and relationships
 market-basket analysis.
Business intelligence (BI) tools 9

3. Knowledge-management tool
 createsvalue by collecting and sharing human
knowledge about products, product uses, best
practices, other critical knowledge
 usedby employees, managers, customers,
suppliers, others who need access to company
knowledge.
Tools versus applications 10
versus systems
 BI tool is one or more computer programs. BI
tools implement the logic of a particular
procedure or process.
 BI application is the use of a tool on a
particular type of data for a particular
purpose.
 BI system is an information system having all
five components that delivers results of a BI
application to users who need those results.
 11

Q3 What are typical

reporting applications?
Operations commonly used by reporting 12
tools
Basic reporting operations

sorting

grouping

filtering

Raw Data
calculating

formatting
 13

List of sales data

Source: textbook[1], pg 289

 14

Data sorted by
customer name

Source: textbook[1], pg 290

 15
Sales data,
sorted by
customer name and
grouped
by orders and
purchase amount

Source: textbook[1], pg 290

 16
Sales data filtered to show
repeat customers, and formatted
for easier understanding

Source: textbook[1], pg 291

Reporting application 17

 A reporting application is a BI
application that inputs data from one
or more sources and applies a reporting
tool to that data to produce
information.
 Important reporting applications:
 RFM analysis
 OLAP
RFM analysis 18

RFM analysis allows you to analyse and rank

customers according to their purchasing
patterns:
 R = how recently a customer purchased your
products
 F = how frequently a customer purchases your
products
 M = how much money a customer typically
spends on your products.
RFM tools classify customers 19

Divides customers into five groups and assigns a score

from 1 to 5:
• R score 1 = top 20 per cent of 'most recent orders'
• R score 5 = bottom 20 per cent (longest since last
order)
• F score 1 = top 20 per cent of 'most frequent
orders'
• F score 5 = bottom 20 per cent of 'least frequent
orders'
• M score 1 = top 20 per cent of 'most money spent'
• M score 5 = bottom 20 per cent 'who spent least'.
Example of RFM score data 20

Source: textbook[1], pg 291

Interpreting RFM score results 21

 Ajax has ordered recently and orders

frequently. M score of 3 indicates it does not
order most expensive goods:
 a good and regular customer but need to attempt to
up-sell more expensive goods to Ajax.

 Bloominghams has not ordered in some time,

but when it did, ordered frequently and
orders were of highest monetary value:
 may have taken its business to another vendor
 sales team should contact this customer
immediately.
Interpreting RFM score results 22

 Caruthers has not ordered for some

time, did not order frequently and did
not spend much:
 sales team should not waste any time on
this customer.
 Davidson in middle
 set up on automated contact system or use
the Davidson account as a training
exercise.
Online analytical processing (OLAP) 23

 OLAP: more generic than RFM.

 OLAP provides the ability to sum,
count, average and perform other
simple arithmetic operations on groups
of data.
 Remarkable characteristic of OLAP
reports: “dynamic”
 the viewer of the report can change
report's format.
 view online.
Features of OLAP reports 24

OLAP reports
 Have:
 measures: the data item of interest
 Example:Total sales, average sales, and
average cost
 Dimension: a characteristic of a measure
 Example:Purchase date, customer type,
customer location, and sales region
OLAP product family and store type 25

Source: textbook[1], pg 292

 A presentation like above is Also called OLAP cube:

 presentation of measure with associated dimensions.
 Users can alter format.
 Users can drill down into data, i.e. divide data into
more detail.
 May require substantial computing power.
OLAP product family and 26
store location by store type

Source: textbook[1], pg 293

OLAP product family and store 27
location by store type, drilled down
to show stores in California

Source: textbook[1], pg 295

OLAP servers 28

 Developed to perform OLAP analysis.

 Server:
 reads data from operational database
 performs calculations
 stores results in OLAP database.
 Third-party vendors provide software
for more extensive graphical displays.
OLAP SERVER 29

Source: textbook[1], pg 296

 30

Q4 What are typical data-

mining applications?
Data mining application 31

 Data mining is the application of statistical

techniques to find patterns and relationships
among data for classification and prediction.

Source: textbook[1], pg 296

Data mining application 32

 Data Mining = Knowledge Discovery in

Database (KDD)
 Categories:
 Unsupervised Data Mining
 supervised Data Mining
Unsupervised Data Mining 33

 Analysts do not create model before running analysis.

 Apply data-mining technique and observe results
 Analysts create hypotheses after analysis to explain
patterns found.
▪ No prior model about the patterns and
relationships that might exist
 Common statistical technique used:
▪ Cluster analysis to find groups of similar customers
from customer order and demographic data
Supervised Data Mining 34

 Model developed before analysis

 Statistical techniques used to estimate
parameters
 Examples:
▪ Regression analysis—measures impact of set
of variables on one another
▪ Used for making predictions
Market-Basket Analysis 35

 Market-basket analysis is a data-mining technique

for determining sales patterns.
▪ Uses statistical methods to identify sales
patterns in large volumes of data
▪ Shows which products customers tend to buy
together
▪ Used to estimate probability of customer
purchase
▪ Helps identify cross-selling opportunities
 "Customers who bought book X also bought book
Y”
Market-Basket Analysis 36

 Terms:
 Support: the probability that two items A
and B will be purchased together
 Confidence: the probability that a
customer will buy B if he/she bought A
 Lift = Confidence/base Support
→ shows how much the base probability
increases or decreases when other products are
purchased
Market-Basket Analysis example 37

Mask and Fins

Buy together
Support = 250/400
= 0.625
Buy mask → will buy fins
Confident= 250/270=
0.926

Lift= 0.926/0.7=
1.322

Source: textbook[1], pg 298

 38
Market-Basket Analysis
 39
Market-Basket Analysis
 40

Q5 What is the purpose of

data warehouses and data
marts?
What Is the Purpose of Data 41
Warehouses and Data Marts?
 Purpose:
▪ To extract, clean and prepare data from
various operational systems and other
sources
▪ To store and catalog data for BI processing
▪ Stored in data-warehouse DBMS
Components of a Data Warehouse 42

Source: textbook[1], pg 304

Data Warehouse Data Sources 43

 Internal operations systems

 External data purchased from
outside sources
 Data from social networking, user-
generated content applications
 Metadata concerning data stored in
data-warehouse meta database
Data Warehouses vs. Data Marts 44

Data mart is a collection of data

▪ Created to address particular needs
 Business function
 Problem
 Opportunity

▪ Smaller than data warehouse

▪ Users may not have data management
expertise
 Need knowledgeable analysts for specific
function
▪ Data extracted from data warehouse for a
functional area
Data Warehouse vs. Data Marts 45

Source: textbook[1], pg 307

 46

Q6 How Are Business

Intelligence Applications
Delivered?
How Are Business Intelligence 47
Applications Delivered?

Source: textbook[1], pg 312

BI Server - Management Functions 48

 the authorized allocation of BI results

to users
 BI servers can be:
 Website from which users can download, or
pull, BI application results
 Portal server with customizable user
interface.
 A BI application server: to support user
subscriptions to particular BI application
results. (e.g. alerts via email or phone
whenever a particular event occurs)
BI Server – Delivery Functions 49

 use metadata to determine what

results to send to which users and, on
which schedule.
 BI results can be delivered to “any”
device. .
 exception alert
a dramatic fall in a stock price or
exceptionally high sales volume.
Summary 50

Q1 Why do organizations need business

intelligence?
Q2 What business intelligence systems are
available?
Q3 What are typical reporting applications?
Q4 What are typical data-mining
applications?
Q5 What is the purpose of data warehouses
and data marts?
Q6 How Are Business Intelligence
Applications Delivered?
Additional Resources 51

 What is Business Intelligence?

 RFM analysis for customer segmentation
and loyalty marketing
 5 Techniques that make RFM analysis
work for you