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Strategic Information Infrastrucuture:
The Business Intelligence Improvement Cycle

online columnist Kevin Quinn     Column published in DMReview.com
January 12, 2006
 
  By Kevin Quinn

In this column, we will discuss how different products in the software category known as "business intelligence tools" each play a role in your strategic information architecture. Gartner Inc., an information technology research firm, coined the term business intelligence during the 1990s. Business intelligence (BI) generally refers to the information that is garnered from the raw data companies collect from their various processes. Because data in its raw form can only offer so much information, companies are increasingly electing to use business intelligence software to realize that data's full potential. BI software is comprised of specialized computer programs that allow an enterprise to easily aggregate, manipulate and display data as information.

For example, consider the data collected for each item that is sold at a supermarket. Tens of thousands or even hundreds of thousands of transactions of raw data are collected at the checkout counter every single day. If one looks at this transactional data in its raw form, it will give basic information such as which item was sold, when it was sold, and its selling price. However, by implementing BI software, the supermarket can turn that raw product data into information and use that information to gain more profound insight into their business. So, in addition to determining how many containers of milk were sold on any given day, the supermarket can determine "bigger picture" insight such as how many dairy products were sold compared to canned goods; the supermarket's best and worst selling products by department; the top-five ranked retailers; etc.

Armed with this knowledge, the supermarket's management can better plan for the future. By tracking buying trends of the customers, the purchasing department knows which products to stock up on. Moreover, management can obtain such information as products that are commonly purchased together, such as hotdogs and mustard, so that they can better position them on the shelves, thereby increasing sales and revenue.

By providing this type of window into vital information, BI enables companies to improve the way they do business. Companies are empowered with the ability to offer products and services at the lowest possible cost and with the greatest amount of efficiency and productivity possible - while returning the highest revenues and profits. Companies implement BI effectively through a four-phase business intelligence improvement cycle (BIIC).

The Four Linked Components

A healthy BI strategy should be viewed as the sum of four major processes that fit together in a constant cycle. These four processes are measure, analyze, plan and improve (see Figure 1).

Figure 1: Business Intelligence Improvement Cycle

Measure

The measure phase is by far the most widely deployed and far-reaching process of business intelligence. Think of the process of establishing a BIIC as blowing up a long thin balloon. As you blow up the balloon, the part of the balloon closest to your mouth expands first, then that expansion extends down the length of the balloon. If you wrote the words measure, analyze, plan and improve down the length of the balloon starting at the end you blow into, the measure section of the balloon would expand before you will see the other sections. Try to blow up any section of the balloon before the measure section and you will find it impossible. The same goes for the BIIC.

In the measure phase, companies "report" the current and historical status of key metrics used to manage their business. These measures tell a company the "what" (i.e., "What is the status or health of my business?"). Although most companies know which fundamental indicators to measure (e.g., sales, profit, etc.), it is not necessarily easy for them to obtain and distribute the status of these measures to the individuals throughout their organization. By employing an effective BI solution, an organization can successfully distribute this information to all the people who affect business inside and outside the enterprise. Through BI, an organization can uncover new ratios and metrics that provide even deeper insight and that could potentially modify or enhance that which is currently measured. Today, reporting and information delivery software used widely by IT departments provides the bulk of the aforementioned functionality in this initial phase of the BIIC.

During implementation of the measure stage, a stabilization of the company's overall BI infrastructure occurs. People viewing measures can determine inconsistencies with the aggregated measures and what is generally expected. This helps to uncover "glitches" in the collection processes. Determining problems with data collection and connecting them is a necessary evolution that takes place during the measurement stage. Without this weeding out of collection problems, companies cannot successfully move into the latter stages of the cycle because to base analysis and planning on a suspect measurement system makes no sense.

Analyze

The second phase in the BIIC is analyze. During this phase, analysts review and measure the data in new and different ways to see whether they can uncover hidden relationships that will help them answer "why" (i.e., "Why is this occurring?"). In the evolution of BI, several tools have emerged that simplify the analytical process - ad hoc query, online analytical processing (OLAP) and data visualization. It is not in the scope of this column to discuss the benefits of each; simply understand that these tools help people analyze data.

Plan

After determining some of the reasons "why" things occur in the analyze phase, companies then try to determine the effects on outcomes should they implement changes. This is when the third part of the cycle, the plan phase, begins. In this phase, companies use tools to play "what if" games with their data (i.e., varying scenarios that target the process changes they may need to make to help steer the company in the right direction). Software for this segment of the BIIC has been categorized as planning, budgeting and forecasting. Using these kinds of tools, you can perform scenarios such as "expected measures from the budgeting process" and then combine them with historical measures and forecasting algorithms to determine potential future outcomes. You can then vary your inputs to see how different courses of action might affect these outcomes.

For example, during the plan phase management may determine that based on expected operating expenses profits will be down in the next quarter. Using planning software, they can determine how much more they would need to sell to realize the same profits as last quarter. Or, they may try to see how an increase in price for certain items would affect their bottom line if the same number of items were sold. A planning application enables a company to determine what steps they will need to take to keep the company on a strategic course toward meeting its goals.

Improve

The plan phase logically progresses into the fourth stage of the BIIC called improve, or the "how" phase. In this stage, key players within the company discuss outcomes and potential solutions to the problems they have uncovered in the previous stages and then make decisions regarding how to improve them, such as what they can do to positively affect their bottom line. This is where collaboration as part of BI becomes crucial. During review, individuals can annotate and comment on reports and analysis that have resulted from the other stages or even vote on a course of action. Collaboration functionality within BI simplifies and documents this whole process so that each comment, vote or opinion can be weighed in the final decision. As a result of the improve phase, new areas or dimensions of measure may be added to the upcoming "measure" phase in order to track the progress of decisions made during the previous cycle.

In this way, a company's BIIC is a process of perpetual improvement that keeps inching the company toward perfection. Once the cycle begins, it is hard to stop it and, moreover, once you see its effect, you'll wonder how you could have lived without it.

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For more information on related topics visit the following related portals...
Business Intelligence.

Kevin Quinn, vice president of Product Marketing at Information Builders, researches new technologies for acquisition or adoption and defines the strategy and road map for the WebFOCUS business intelligence platform. In his 22 years of experience in IT, Quinn has helped companies worldwide develop information deployment strategies that accelerate decision making and improve corporate performance. Quinn is also the founder of Statswizard.com an interactive sports statistics Web site that leverages business intelligence functionality. You can reach him at KevinR_Quinn@ibi.com.



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