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Business Intelligence:
The Value of Business Intelligence Application: Part 1

online columnist Jonathan Wu     Column published in DMReview.com
May 28, 2001
 
  By Jonathan Wu

During the past 12 months, I have been contacted by readers and have spoken to other individuals who work for organizations that do not have a business intelligence (BI) application. Instead, the organization has a large staff of information technology professionals who provide the data to their users. These organizations could benefit by using BI applications in several ways, including:

  • Alleviating the bottleneck of information requests piling up within the IT department.
  • Providing users with the capability to access the data themselves.
  • Facilitating a structured view of the data and eliminating the need for users to understand the complexities of a database.
  • Improving the decision-making process by basing decision on fact.
  • Fostering an environment of collaborative efforts through information sharing.

As these organizations' managers read and understand more about the benefits that other organizations have achieved through BI applications, they will become more inclined to embrace the technology and champion users' more direct access to information within their organizations. One book that is strategically focused on demonstrating the value of BI is E-Business Intelligence -- Turning Information into Knowledge into Profit, published this year by McGraw-Hill. I recently met with the author, Bernard Liautaud, chief executive officer of Business Objects, to discuss the book and the field of BI. This column includes excerpts from the book and is the first of a three-part series that addresses the value of BI.

Making Data Accessible and Usable

Most organizations use information systems to automate the business processes of operations such as enterprise resource planning and customer relationship management. These systems collect, process and store vast amounts of data using relational database technology and are designed for efficient data entry and processing. However, extracting data from these systems and assembling it for reporting purposes can be difficult due to the complexity of data storage in a relational database. As a result, the organization often needs to retain experts with extensive knowledge of these database structures to develop needed reports. This process creates a bottleneck of information requests and delays that affect individuals' ability to make decisions based on fact.

According to a study on decision-making habits in corporations based in the United States and United Kingdom, which is summarized in Liautaud's book, "the lack of data access forces businesspeople to make important decisions without the necessary information." A few of the study's findings include:

  • Among managers, 88 percent admit to using gut feel over and above hard fact up to 75 percent of the time in making business decisions.
  • Company directors are intolerant of decisions made by managers based on gut feel, insisting that decisions should be based only on hard fact.
  • Within management, 93 percent of managers across all disciplines find that they are under pressure to make effective decisions within short time spans.
  • Although 99 percent of managers have access to a desktop computer, 62 percent admit that they do not receive the right amount of information to make a decision.

The current business environment requires individuals to make decisions quickly, and the demand is only going to accelerate. If these individuals do not have access to information when they need it, they will continue to use gut feel over hard fact despite the undisputed premise that information is essential to any well thought-out business decision.

Information-Based Decisions: An Example

BI applications allow users to obtain information on demand and to easily access data without having to know the data structure of the relational database. Users who are empowered with BI applications can base their decisions on information. For example, a regional sales manager for a grocery store chain generates an ad hoc query that analyzes sales of newly introduced products by store within her region. Through this analysis, a new sugar coated oat cereal is identified as selling very well but only in half of the stores within the region. The regional sales manager performs another analysis to obtain the demographic characteristics of the consumer groups purchasing the product and of the population surrounding the stores where sales of this new cereal are high. In these cases, the consumer groups purchasing the product and the population within the surrounding community of these stores had a high number of families with children and single adult males between the ages of 18 and 30.

Using this information, she informs the store managers in her region so that they can either increase or decrease shelf space of this product based upon the demographics of their community. In addition, she can share this information with other regional sales managers so that they can benefit from her findings. By using a BI application, the regional sales manager was able to identify a current trend, understand the basis of the trend, and capitalize on this information by having store managers allocate appropriate shelf space and avoiding product shortages.

Without a BI application, such a trend may not have been identified or acted upon as quickly even though the data is available. In addition, the data identified the market segment of single adult males between the ages of 18 and 30 as an important consumer group of this product, which may not have been identified if left to gut feel approach.

Summary

The value of BI is within the data itself and the ability to use that data efficiently and effectively to provide the greatest benefit to the organization. BI applications create value for an organization by providing users with the ability to access information when they want and without having to understand the complexities of a relational database. By providing users with the capability to obtain and analyze data, actual data can be used in the decision making process instead gut feel. Through BI applications, information can be shared so that other users can benefit from the information and knowledge.

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For more information on related topics visit the following related portals...
Business Intelligence and Operational Data Store.

Jonathan Wu is a senior principal with Knightsbridge Solutions. He has extensive experience designing, developing and implementing information solutions for reporting, analysis and decision-making purposes. Serving Fortune 500 organizations, Knightsbridge delivers actionable and measurable business results that inform decision making, optimize IT efficiency and improve business performance.  Focusing exclusively on the information management disciplines of data warehousing, data integration, information quality and business intelligence, Knightsbridge delivers practical solutions that reduce time, reduce cost and reduce risk. Wu may be reached at jwu@knightsbridge.com.



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