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What Is Business Intelligence?

Business Intelligence, or BI, is a relatively new concept in corporate IT circles and like many conceptually-oriented terms it has a number of different meanings to a number of different people. Perhaps the best way to describe Business Intelligence is to explain the movement toward it.

The past decade has seen tremendous advances in information and communications technology. These advances continue today, and as a result, businesses now have the ability to access and accumulate huge amounts of data relatively easily. The paradox of this enhanced ability, however, is that sifting through this data has become an increasingly daunting task. Businesses are now realizing that data alone, without context or meaning, is not particularly useful. Business Intelligence, therefore, seeks to define context for data and derive meaning from it so it can be used to help businesses better manage themselves. Business Intelligence encapsulates a broad range of technologies, software applications and business practices that allow businesses to distill data into useful information that can be shared, stored and applied throughout an organization.

In their book Business Intelligence, authors Elizabeth Vitt, Michael Luckevich and Stacia Misner describe the benefits from Business Intelligence from three different perspectives:

  • Making better decisions faster
  • Converting data into information
  • Using a rational approach to management

Making Better Decisions Faster

The primary goal of Business Intelligence is to help people make better decisions faster. Making better decisions increases the likelihood of success in achieving business objectives. Making these decisions faster allows you to adapt to external forces such as the economy, your customers and your competitors quickly.

BI improves decision making by analyzing the cause and effect relationship between a company's activities and its progress towards its strategic objectives. By specifying clear and measurable objectives, companies can use BI tools to gather data that is relative to their objectives and reflect on how their actions are impacting that data. Through continuous analysis, businesses can tune their data collection process and, if necessary, adjust their activities or strategic objectives to produce a desired effect. As the cyclical process of data collection and analysis improves and the feedback loop between cause and effect shortens, businesses are able to make better decisions in a timelier manner.

Converting Data Into Information

Good decisions depend on good information and Business Intelligence systems can assist businesses in acquiring good information by bridging the so-called "analysis gap" between the information that decision makers require and the slew of data that businesses collect every day.

BI systems provide access to huge stores of data, but filter and aggregate that data into information that is relevant to decision makers and easy for them to review and digest. The best BI systems allow users to dynamically specify what type of data they are interested in and how it should be aggregated. They also allow users to view the data from a variety of different perspectives in a variety of different formats including tables, charts and graphs. By providing users with a flexible and condensed view of organizational data, decisions makers can define the key performance indicators for there particular areas of interest and track them accordingly.

Using a Rational Approach to Management

Business Intelligence promotes a fact-based, rational approach to management and decision making. Dubbed the BI Attitude by Vitt, this organizational mindset is characterized by the following traits:

  • Seeking measurable, quantitative facts about the business
  • Using a systematic methodology for analyzing those facts
  • Developing models to explain the cause and effect relationship between a company's actions and the effect on its environment
  • Exploring alternate approaches to gathering feedback from stakeholders
  • Accepting that individuals do not always behave rationally
  • Committing to making decisions and taking action based on these characteristics

The BI Attitude is based on the scientific method that most of us learned in school. The approach parallels other management philosophies such as Six Sigma and thus, it is not uncommon for Business Intelligence tools to be used to support fact-driven management initiatives. Business Intelligence is based on the premise that decision making based on objective information derived from data and rational thought is superior to decision making based on subjective information and intuition.

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