Business Intelligence:

A Managerial Approach
(2nd Edition)

Chapter 1:
Introduction to Business
Intelligence
 Learning Objectives
 Understand today's turbulent business
environment and describe how organizations
survive and even excel in such an environment
(solving problems and exploiting opportunities)
 Understand the need for computerized support
of managerial decision making
 Describe the business intelligence (BI)
methodology and concepts and relate them to
decision support systems (DSS)
 Understand the issues in implementing BI

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 Changing Business Environment &
Computerized Decision Support
 Companies are moving aggressively to
computerized support of their
operations => Business Intelligence
 Business Pressures–Responses–Support
Model
 Business pressures result of today's
competitive business climate
 Responses to counter the pressures
 Support to better facilitate the process
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 Business Pressures–Responses–
Support Model

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 The Business Environment
 The environment in which organizations
operate today is becoming more and
more complex, creating:
 opportunities, and
 problems.
 Example: globalization.
 Business environment factors:
 markets, consumer demands, technology,
and societal.
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 Business Environment Factors
FACTOR DESCRIPTION
Markets Strong competition
Expanding global markets
Blooming electronic markets on the Internet
Innovative marketing methods
Opportunities for outsourcing with IT support
Need for real-time, on-demand transactions
Consumer Desire for customization
demand Desire for quality, diversity of products, and speed of delivery
Customers getting powerful and less loyal
Technology More innovations, new products, and new services
Increasing obsolescence rate
Increasing information overload
Social networking, Web 2.0 and beyond
Societal Growing government regulations and deregulation
Workforce more diversified, older, and composed of more women
Prime concerns of homeland security and terrorist attacks
Necessity of Sarbanes-Oxley Act and other reporting-related legislation
Increasing social responsibility of companies
Greater emphasis on sustainability
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 Organizational Responses
 Be Reactive, Anticipative, Adaptive, and
Proactive
 Managers may take actions, such as:
 Employing strategic planning.
 Using new and innovative business models.
 Restructuring business processes.
 Participating in business alliances.
 Improving corporate information systems.
 Improving partnership relationships.
 Encouraging innovation and creativity. …cont…>
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 Organizational Responses, continued
 Improving customer service and relationships.
 Moving to electronic commerce (e-commerce).
 Moving to make-to-order production and on-
demand manufacturing and services.
 Using new IT to improve communication, data
access (discovery of information), and
collaboration.
 Responding quickly to competitors' actions (e.g., in
pricing, promotions, new products and services).
 Automating many tasks of white-collar employees.
 Automating certain decision processes.
 Improving decision making by employing analytics.
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 Closing the Strategy Gap
 One of the major objectives of
computerized decision support is to
facilitate closing the gap between the
current performance of an organization
and its desired performance, as
expressed in its mission, objectives, and
goals, and the strategy to achieve
them.

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 Business Intelligence (BI)
 BI is an evolution of decision support
concepts over time.
 Meaning of EIS/DSS…
 Then: Executive Information System
 Now: Everybody’s Information System (BI)
 BI systems are enhanced with additional
visualizations, alerts, and performance
measurement capabilities.
 The term BI emerged from industry
apps.
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 Definition of BI
 BI is an umbrella term that combines
architectures, tools, databases, analytical
tools, applications, and methodologies.
 BI a content-free expression, so it means
different things to different people.
 BI's major objective is to enable easy access
to data (and models) to provide business
managers with the ability to conduct analysis.
 BI helps transform data, to information (and
knowledge), to decisions and finally to action.
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 A Brief History of BI
 The term BI was coined by the Gartner
Group in the mid-1990s
 However, the concept is much older
 1970s — MIS reporting — static/periodic reports
 1980s — Executive Information Systems (EIS)
 1990s — OLAP, dynamic, multidimensional, ad-hoc
reporting -> coining of the term “BI”
 2005+ — Inclusion of AI and Data/Text Mining
capabilities; Web-based Portals/Dashboards
 2010s — Yet to be seen
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 The Evolution of BI Capabilities

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 The Architecture of BI
 A BI system has four major
components:
 a data warehouse, with its source data
 business analytics, a collection of tools for
manipulating, mining, and analyzing the
data in the data warehouse;
 business performance management (BPM)
for monitoring and analyzing performance
 a user interface (e.g., dashboard)

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 A High-level Architecture of BI

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 Components in a BI Architecture
 The data warehouse is the cornerstone of any
medium-to-large BI system.
 Originally, the data warehouse included only
historical data that was organized and summarized,
so end users could easily view or manipulate it.
 Today, some data warehouses include access to
current data as well, so they can provide real-time
decision support (for details see Chapter 2).
 Business analytics are the tools that help
users transform data into knowledge (e.g.,
queries, data/text mining tools, etc.).
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 BI Examples
 Epagogix is an analytics based BI system
that specializes in predicting success of
movies based on a detailed analysis of
movie scripts.
 National Australia Bank uses data mining
to aid its marketing initiatives.
 Hoyt Highland Partners, a marketing
intelligence firm, assists health care
providers with growing their businesses.
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 Components in a BI Architecture
 Business Performance Management (BPM),
which is also referred to as corporate
performance management (CPM), is an
emerging portfolio of applications within the BI
framework that provides enterprises tools they
need to better manage their operations (for
details see Chapter 3).
 User Interface (i.e., dashboards) provides a
comprehensive graphical/pictorial view of
corporate performance measures, trends, and
exceptions.
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 Styles of BI
 MicroStrategy, Corp. distinguishes five
styles of BI and offers tools for each:
1. report delivery and alerting
2. enterprise reporting (using dashboards
and scorecards)
3. cube analysis (also known as slice-and-
dice analysis)
4. ad-hoc queries
5. statistics and data mining
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 The Benefits of BI
 The ability to provide accurate information
when needed, including a real-time view of
the corporate performance and its parts
 A survey by Thompson (2004)
 Faster, more accurate reporting (81%)
 Improved decision making (78%)
 Improved customer service (56%)
 Increased revenue (49%)
 See Table 1.2 for a list of BI analytic
applications, the business questions they
answer and the business value they bring.
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 Automated Decision Making
 A relatively new approach to supporting
decision making
 Applies to highly structured decisions
 Automated decision systems (ADS)
(or decision automation systems)
 An ADS is a rule-based system that
provides a solution to a repetitive
managerial problem in a specific area.
 e.g., simple-loan approval system
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 Automated Decision-Making
Framework

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 Automated Decision Making
 ADS initially appeared in the airline
industry called revenue (or yield)
management (or revenue optimization)
systems.
 dynamically price tickets based on actual
demand
 Today, many service industries use
similar pricing models.
 ADS are driven by business rules!
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 Intelligence Creation and Use

A Cyclical Process
of Intelligence
Creation And Use
 BI practitioners
often follow the
national security
model depicted in
this figure.

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 Intelligence Creation and Use
 Steps Involved
 Data warehouse deployment
 Creation of intelligence
 Identification and prioritization of BI projects
 By using ROI and TCO (cost-benefit analysis)
 This process is also called BI governance

 BI Governance
 Who should do the prioritization?
 Partnership between functional area heads
 Partnership between customers and providers
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 BI Governance Issues/Tasks
1. Create categories of projects (investment,
business opportunity, strategic, mandatory,
etc.)
2. Define criteria for project selection
3. Determine and set a framework for
managing project risk
4. Manage and leverage project
interdependencies
5. Continuously monitor and adjust the
composition of the portfolio
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 Intelligence and Espionage
 Stealing corporate secrets, CIA, …
 Intelligence vs. Espionage
 Intelligence
The way that modern companies ethically and
legally organize themselves to glean as much as
they can from their customers, their business
environment, their stakeholders, their business
processes, their competitors, and other such
sources of potentially valuable information
 Problem – too much data, very little value
 Use of data/text/Web mining (see Chapter 4, 5)
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 Transaction Processing Versus
Analytic Processing
 Transaction processing systems are
constantly involved in handling updates
(add/edit/delete) to what we might call
operational databases.
 ATM withdrawal transaction, sales order entry via
an ecommerce site – updates DBs
 Online analytic processing (OLTP) handles routine
on-going business
 ERP, SCM, CRM systems generate and store data
in OLTP systems
 The main goal is to have high efficiency
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 Transaction Processing Versus
Analytic Processing
 Online analytic processing (OLAP) systems
are involved in extracting information from
data stored by OLTP systems
 Routine sales reports by product, by region, by
sales person, etc.
 Often built on top of a data warehouse where the
data is not transactional
 Main goal is effectiveness (and then, efficiency) –
provide correct information in a timely manner
 More on OLAP will be covered in Chapter 2

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 Successful BI Implementation
 Implementing and deploying a BI initiative is
a lengthy, expensive and risky endeavor!
 Success of a BI system is measured by its
widespread usage for better decision making.
 The typical BI user community includes
 All levels of the management hierarchy (not just
the top executives, as was for EIS)
 Provide what is needed to whom he/she needs it
 A successful BI system must be of benefit to
the enterprise as a whole.
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 BI and Business Strategy
 To be successful, BI must be aligned with the
company’s business strategy.
 BI cannot/should not be a technical exercise for
the information systems department.
 BI changes the way a company conducts
business by
 improving business processes, and
 transforming decision making to a more
data/fact/information driven activity.
 BI should help execute the business strategy
and not be an impediment for it!
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 BI for Business Strategy
 Strategy should be aligned with BI/DW – has the
capability to execute the initiative by establishing
a BI Competency Center (BICC) which can:
 Demonstrate linkage – BI to strategy.
 Encourage interaction between the potential business
users and the IS organization.
 Both sides have a lot to learn from each other
 Serve as a repository and disseminator of best BI
practices among the different lines of business.
 Advocate and encourage standards of excellence.
 Help stakeholders understand the crucial role of BI.

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 Real-time, On-demand BI
 The demand for “real-time” BI is growing!
 Is “real-time” BI attainable?
 Technology is getting there…
 Automated, faster data collection (RFID, sensors,… )
 Database and other software technologies (agent,
SOA, …) are advancing
 Telecommunication infrastructure is improving
 Computational power is increasing while the cost
for these technologies is decreasing
 Trent -> Business Activity Management
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 Issues for Successful BI
 Developing vs. Acquiring BI systems
 Developing everything from scratch
 Buying/leasing a complete system
 Using a shell BI system and customizing it
 Use of outside consultants?
 Justifying via cost-benefit analysis
 It is easier to quantify costs
 Harder to quantify benefits
 Most of them are intangibles
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 Issues for Successful BI
 Security and Privacy
 Still an important research topic in BI
 How much security/privacy?
 Integration of Systems and Applications
 BI must integrate into the existing IS
 Often sits on top of ERP, SCM, CRM systems
 Integration to outside (partners of the
extended enterprise) via internet –
 customers, vendors, government agencies, etc.

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 Major BI Tools and Techniques
 Tool categories
 Data management
 Reporting, status tracking
 Visualization
 Strategy and performance management
 Business analytics
 Social networking & Web 2.0
 New/advanced tools/techniques to handle
massive data sets for knowledge discovery
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 Major BI Vendors
 In recent years, the landscape of BI vendors
has changed
 Cognos acquired by IBM in 2008
 IBM also acquired SPSS in 2009
 Hyperion acquired by Oracle in 2008
 Business Objects acquired by SAP in 2009
 Microstrategy
 May be the only independent large BI vendor
 Others include Microsoft, SAS, Teradata
(mostly considered a DW vendor)
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 BI Resources
 Teradata University Network
 A great and free academic resource for BI (the available
resources include cases, articles, tools including
Microstrategy, datasets, exercises, etc.
 The Data Warehousing Institute (tdwi.org)
 The OLAP Report (olapreport.com)
 DSS Resources (dssresources.com)
 Business Intelligence Network (b-eye-network.com)
 AIS World (isworld.org)
 Microsoft Enterprise Consortium
(enterprise.waltoncollege.uark.edu/mec)

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