CHAPTER 1

OVERVIEW AND
UNDERSTANDING
BUSINESS INTELLIGENCE

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A What is Business Intelligence?

 An umbrella term that combines architectures, tools,

databases, applications and methodologies in order to
enable interactive access to data, to enable manipulation of
data and to give business managers the ability to make
more informed and better business decisions

(Turban, 2010)

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Business Intelligence Process

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The Architecture of Business Intelligence

A Business Intelligence system has four major components

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 4 Major Components of Business Intelligence
Architecture
1. The data warehouse is a special database or repository of data
that had been prepared to support decision making applications
ranging from simple reporting to complex optimization

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 4 Major Components of Business Intelligence
Architecture
2. Business analytics are the software tools that allow users to
create on-demand reports, queries and conduct analysis of data:

• Originally they appear under the name online analytical

processing (OLAP)

• Data Mining - A class of information analysis based on

databases that looks for hidden patterns in a collection of data
which can be used to predict future behavior

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 4 Major Components of Business Intelligence
Architecture
3. Business performance management (BPM) based on balanced
scorecard methodology (BSC) – is a strategy performance
management tool that can be used by managers to keep track of the
execution of activities by the staff within their control and to
monitor the consequences arising from these actions (wikipedia)

The objective is to optimize overall performance of an

organization. A real-time system that alert managers to potential
opportunities, impending problems, and threats, and then
empowers them to react based on these knowledge.

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Business Process Management (BPM) - Balance Scorecards (BSC)

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 The architecture of Business Intelligence

4. User interface allows access and easy manipulation of BI

components

- Tools used to broadcast information

- Data visualization provides graphical, animation, or video

presentation of data and the results of data analysis

-The ability to quickly identify important trends in corporate and

market data can provide competitive advantage

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http://dashboardspy.com/img/terrorism-dashboard.jpg
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CHANGING BUSINESS ENVIRONMENTS AND
EVOLVING NEEDS FOR DECISION SUPPORT AND
ANALYTICS

 Increased hardware, software, and network capabilities

 Group communication and collaboration
 Improved data management
 Managing giant data warehouses and Big Data
 Analytical support
 Overcoming cognitive limits in processing and storing information
 Knowledge management
 Anywhere, anytime support

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Evolution of Computerized Decision Support to
Analytics/Data Science
• Figure 1.8 Evolution of Decision Support, Business Intelligence, and
Analytics

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 A FRAMEWORK FOR BUSINESS
INTELLIGENCE (1 OF 3)
 DSS → EIS → BI
 Definition of Business Intelligence
– [Broad Definition] An umbrella term that combines
architectures, tools, databases, analytical tools,
applications, and methodologies
– [Narrow Definition] Descriptive analytics tools and
techniques (i.e., reporting tools)
 A Brief History of BI – 1970s → 1980s → 1990s …
 The Origins and Drivers of BI (See Figure 1.9)
 The Architecture of BI (See Figure 1.10)

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A Framework for Business Intelligence (2 of 3)
• Figure 1.9 Evolution of Business Intelligence (BI) →

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A FRAMEWORK FOR BUSINESS
INTELLIGENCE (3 OF 3)
 The Architecture of BI
 Figure 1.10 A High-Level Architecture of BI

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Relation between BI and DSS

Their architectures are very similar because BI evolved from

DSS

DSS directly support specific decision making, while BI

provides accurate and timely information, and indirectly support
decision making

BI has an executive and strategy orientation, especially in its

BPM and dashboard components, while DSS, in contrast, is
oriented toward analysts

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Relation between BI and DSS

Most BI systems are constructed with commercially available

tools and components, while DSS is often built from scratch

DSS methodologies and even some tools were developed mostly

in the academic world, while BI methodologies and tools were
developed mostly by software companies

Many of the tools that BI uses are also considered DSS tools
(e.g., data mining and predictive analysis are core tools in both)

BI is a result of a continuous revolution and, as such, DSS is

one of BI's original elements
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The Value of Business Intelligence

• How can enterprises maximize their BI investments?

 Achieve operational excellence, customer intimacy and product leadership

• What BI functionality do enterprises need?

 What do managers need to know? Are there any unaddressed questions?

• What are some of the hidden costs associated with BI

initiatives?
 Purchase tools, development costs and will later on need maintenance
service

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Assessing the value of BI

• The methodologies of assessing BI values are complex –

difficult to measure success due to many intangible benefits
• One way to present the business value of BI is to pose business
questions and show how they are answered with the support of
BI

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 Towards Competitive Intelligence

 Competitive Intelligence (CI)

 Competitive intelligence is the process of obtaining as
much information as is legally and ethically possible about
one’s competitors, their plans and their products; then
organizing and analyzing it to provide a basis for
management decision making.
 Competitive intelligence implies tracking what competitors
are doing by gathering material on their recent and in-
process activities

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Towards Competitive Advantage

How can BI help obtain/sustain a competitive advantage in an

industry? (A competitive advantage is anything that enables a
firm to obtain a higher level of profitability compared to the
competitors):

 Can arise from an organization’s possession of unique resources or

competencies (Competencies can include such things as ability to
innovate, quality, customer responsiveness, and more. Many such
competencies can be enhanced via information provided by BI)

 Through building brand and customer loyalty using BI applications

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 The Major Theory of Business Intelligence

 BI is not transaction processing, hence OLTP vs. OLAP

OLAP

OLTP

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 TRANSACTION PROCESSING VERSUS
ANALYTIC PROCESSING

 Online Transaction Processing (O L T P)

 Operational databases
 E R P, S C M, C R M, …
 Goal: data capture
 Online Analytical Processing (O L A P)
 Data warehouses
 Goal: decision support
 Q: What is the relationship between OLTP and OLAP?
 A: OLAP is optimized for complex data analysis and reporting, while
OLTP is optimized for transactional processing and real-time updates
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OLTP vs. OLAP

 Online Transaction Processing Systems (OLTP)

 Systems that handle a company’s routine ongoing business.

 Online transaction processing is the use of information

systems to handle a company’s routine, on-going business
activities through recording data about events that take place
in the course of business operations as they occur and using
that data in other business operations.

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OLTP vs. OLAP
 Online Analytic Processing (OLAP)

 An information system that enables the user, while at a PC,

to query the system, conduct an analysis, and so on.

 Online analytical processing is the use of information

systems to analyze, with human guidance, historical data
obtained through ongoing business activities and other
sources to use as a basis for decision making.

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 APPROPRIATE PLANNING AND ALIGNMENT
WITH THE BUSINESS STRATEGY

 Planning and Execution → Business, Organization, Functionality, and

Infrastructure
 Functions served by B I Competency Center
 How B I is linked to strategy and execution of strategy
 Encourage interaction between the potential business user
communities and the I S organization
 Serve as a repository and disseminator of best B I practices between
and among the different lines of business.
 Standards of excellence in B I practices can be advocated and
encouraged throughout the company

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REAL-TIME, ON-DEMAND BI IS ATTAINABLE

 Emergence of real-time BI applications

 Justifying the need
 Is there a need for real-time [is it worth the additional
expense]?
 Leveraging the enablers
 RFID
 Web services
 Intelligent agents

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CRITICAL BI SYSTEM CONSIDERATIONS

 Developing or Acquiring BI Systems

 Make versus buy
 BI shells
 Justification and Cost–Benefit Analysis
 A challenging endeavor, why?
 Security
 Protection of Privacy
 Integration to Other Systems and Applications

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ANALYTICS OVERVIEW

 Analytics…a relatively new term/buzz-word

 Analytics…the process of developing actionable decisions or
recommendations for actions based on insights generated
from historical data
 According to the Institute for Operations Research and
Management Science (INFORMS)
 Analytics represents the combination of computer
technology, management science techniques, and
statistics to solve real problems.

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 Business Analytics
• Figure 1.11 Three Types of Analytics

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Descriptive Analytics

• Descriptive or reporting analytics

• Answering the question of what happened

• Retrospective analysis of historic data

• Enablers
– OLAP / DW
– Data visualization
▪ Dashboards and Scorecards
– Descriptive statistics

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Predictive Analytics

• Aims to determine what is likely to happen in the future

(foreseeing the future events)

• Looking at the past data to predict the future

• Enablers
– Data mining
– Text mining / Web mining
– Forecasting (i.e., time series)

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Prescriptive Analytics
• Aims to determine the best possible decision
• Uses both descriptive and predictive to create the alternatives, and then
determines the best one
• Enablers
– Optimization
– Simulation
– Multi-Criteria Decision Modeling
– Heuristic Programming
• Analytics Applied to Many Domains
• Analytics or Data Science?

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Analytics Examples in Retail Value Chain

Table 1.1 Examples of Analytics Applications in the Retail Value Chain
Analytic
Application Business Question Business Value
Inventory 1. Which products have high demand? 1. Forecast the consumption of fast-moving products and
Optimization 2. Which products are slow moving or order them with sufficient inventory
becoming obsolete? to avoid a stock-out scenario.
2. Perform fast inventory turnover of slow-moving products
by combining them with one in high demand.
Price Elasticity 1. How much net margin do I have on the 1. Markdown prices for each product can be optimized to
product? reduce the margin dollar loss.
2. How much discount can I give on this 2. Optimized price for the bundle of products is identified
product? to save the margin dollar.
Market Basket 1. What products should I combine to create 1. The affinity analysis identifies the hidden correlations
Analysis a bundle offer? between the products, which can elp in following values a)
2. Should I combine products based on slow- Strategize the product bundle offering based on focus on
moving and fast-moving characteristics? inventory or margin. b) Increase cross-sell or up-sell by
3. Should I create a bundle from the same creating bundle from different categories or the same
category or different category line? categories, respectively.

• For the complete table, refer to your textbook

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 35

A Brief Introduction to Big Data Analytics

• What Is Big Data? (Is it just “big”?)

– Big Data is data that cannot be stored or processed easily
using traditional tools/means
– Big Data typically refers to data that comes in many
different forms: large, structured, unstructured, continuous
▪ 3Vs – Volume, Variety,Velocity
– Data (Big Data or otherwise) is worthless if it does not
provide business value (and for it to provide business value,
it has to be analyzed)

• More on Big Data Analytics is in Chapter 7

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AN OVERVIEW OF THE ANALYTICS
ECOSYSTEM
 What are the key players in analytics industry?
 What do they do?
 Is there a place for you to be a part of it?
 There is a need to classify different industry participants in the broader
view of analytics to
 Identify providers (as an analytics consumer)
 Identify roles to play (as a potential provider)
 Identify job opportunities
 Identify investment/entrepreneurial opportunities
 Understand the landscape and the future of computerized decision
sport systems

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An Overview of the Analytics Ecosystem (1 of 3)

• Figure 1.13 Analytics Ecosystem

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AN OVERVIEW OF THE ANALYTICS
ECOSYSTEM (2 OF 3)
 Data Generation Infrastructure Providers
 Data Management Infrastructure Providers
 Data Warehouse Providers
 Middleware Providers
 Data Service Providers
 Analytics Focused Software Developers
 Descriptive, Predictive, Prescriptive
 Application Developers: Industry Specific or General
 Analytics Industry Analysts and Influencers

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AN OVERVIEW OF THE ANALYTICS
ECOSYSTEM (3 OF 3)
 Academic Institutions and Certification
Agencies
 Certificates
 Masters programs
 Undergraduate programs
 Offered by
 M I S, Engineering
 Marketing, Statistics
 Computer Science
 …
 Regulators and Policy Makers
 Analytics User Organizations

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BI Users

 There are three major types of BI users:

1. IT staff -the developers and administrators of the tools to
be used by the others.
2. Power users - people such as business analysts who have
advanced skills in the use of BI tools and use them
regularly.
3. Executives - top managers of any organization. Their
needs are typically met by tools such as dashboards,
which display measurements of critical success factors
and let users “drill down” into areas that catch their
interest.

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Figure 1.15 Plan of the Book

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