Understanding Business Intelligence - Page 1

Aug 31, 2005

David Roy

Business Intelligence (BI) is a competency developed by an organization to collect, manipulate and present key data by leveraging knowledge management and data mining capabilities for the sole purpose of providing business benefit.

This capability will help make informed business decisions, which in turn provide better insight for assessing risk and help to facilitate healthy financial gains through business growth opportunities.

Why BI?

You may have heard of the expression, “You don’t know what you don’t know.” Unfortunately, many organizations make critical decisions each day with limited factual information. They believe they are making the best informed decision with data from reports produced by their IT department or gut feelings.

The challenge with the IT reports is that the logical view portrayed can be misleading and the gut feeling decision is driven by a lack of data. Over a period of time, this type of decision making can turn out to be the catalyst of revenue decreases, market share erosion, and, in extreme cases, the demise of a company.

When to use BI?

In a perfect world, BI applies to all decisions made all of the time. This means every decision, theoretically, would have the correct information for all the required variables in the decision making process, to accomplish the desired outcome of the decision.

The reality is that many times decisions are made with a subset of data that doesn’t truly reflect the data trend over the actual time period required to make the correct decision, or key data variables in the decision making process are omitted.

So, how does a company or organization benefit from BI without implementing a perfect world solution?

Well, the answer is not simple, although there are some good rules of thumb:

  • Review your short term and long term business strategy and business plan, to decide where the investment should be made. Do not invest in areas where the potential benefit does not align or is minimal.
  • Look at your market share and revenue growth potential to build your ROI case to determine what type of investment and in which business areas are most beneficial.
  • Leverage outside counsel expertise for guidance and direction and find out what makes the best sense for your company or organization.

    The BI Benefits

    Revenue. Over the years, companies with BI capabilities have reaped some level of financial benefits from their implementations. With a well structured BI implementation, they are able to modify their service offering and level of service to their customer, to better align with their customer’s needs.

    Some companies with good BI implementation have not shown significant revenue growth, however, they have been able to control new competition and competitors with BI implementation to stay neutral, instead of going into the red.

    Market Share. Increasing your company’s market share is usually a good way to increase your revenue and stability.

    In today’s market place, monopolies are a thing of the past and new players are continuously entering the scene to grab up as much of your market share as they can. One example is a new comer under cutting prices for a set period of time in an attempt to grab up as much of your customers as possible.

    Many new customers’ loyalty goes as far as the price of the product or service and most customers are more than willing to jump ship. If this is the case, then how does a company prepare themselves?

    Some of the more financially stable companies can weather the storm and out last the new competition, while others can succumb to the new competition. Companies with a mature BI program have a much better chance of survival since they can usually react quickly with better decisions to retain market share and, many times, as a byproduct, enhance their offering or service, which in turn can increase their market share.

    Decision Making. The decisions you make are as good as the choices you have to choose from. A simple example: you are driving home listening to the traffic report. The traffic reporter reports that the local lanes (the route you usually use to go home) are backed up due to a stalled car in the left lane, and recommends that you take the express lane.

    You know that if you take the express lanes you will pass your exit and need to back track. However, you possess the knowledge that this type of traffic backup will delay your commute 30 minutes and the time you will spend back tracking is 15 minutes. With this information, your decision is to take the express lane; which minimizes the impact of your commute created by uncontrollable influences.

    BI works very similarly to this example. BI assists the decision makers of your organization in drilling down key information for the purpose of making the best-informed decision.

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