Business Intelligence: Fundamental Concepts and Principles

Introduction

In the contemporary business world, many developments have taken place with an effort to increase efficiency in business operations. One of the main areas in which organizations have emphasized in an effort to improve efficiency is through technology. Technology has been going under a tremendous improvement over the past. This has coincided with a business environment that has been characterized by a high level of competition. In this case, strategic decisions made in an organization become very important in determining the success of an organization. The market has become highly dynamic, the fact which has required the organization to act accordingly in order to adapt to the changes. Therefore, organizations must adopt new developments in order to maintain their competitiveness in such an environment. One of the ways through which organizations aim at maintaining a high level of performance is through Business Intelligence (BI).

Definition

Business intelligence can be defined in various ways. According to Langit (2007), business intelligence can be defined as the method of storage and representation of an organization data in such a way that it can easily be accessed by appropriate individuals and act upon it easily and timely (1). Effective business intelligence helps the people viewing the data to connect the data easily and understand how various figures were arrived at. This understanding plays a very significant role as it enables an organization to make appropriate future decisions concerning various aspects of the organization. An organization is also able to make accurate and appropriate results.

The business intelligence data is usually displayed in such a way that different users are able to retrieve the detailed data. The data is presented in such a way that it is usable to the policymakers. Business intelligence involves data warehousing, content and knowledge management, and business analytics tools. It can, therefore, be viewed as the process, technologies, and necessary tools that are necessary for transforming an organization’s information into knowledge and then knowledge into appropriate plans, which can lead to success in an organization. Business intelligence, therefore, is all about the process in which the business uses the data that makes it improve on its value.

History of BI

Over the past years, the processes of decision making have undergone tremendous changes. This has been changing as the level of technology changes with time. Organizations have been applying the intuitions in making critical organizational decisions. However, this form of decision making is characterized by a very high level of risks because it is related to many risks and uncertainties.

However, the improvement in the level of technology has led to changes in the decision-making process. In 1970, a tremendous improvement took place when the End-User Computing era began (Exforsys Inc 2008: par 3). By this time, the technology was embraced by many, and most people had learned on the application of technology in different cases and could easily deal with it.

Most of the earliest tools that were designed for reporting and query were not effective, and the users were required to perform many actions by themselves. In some cases, these applications did not provide a solution to the problems. However, improvements took place with time. By the 1970s, business intelligence vendors managed to offer business intelligence tools that were simple to use in data access and analysis (Exforsys Inc, 2008: par 5). This improvement marked a significant change in business intelligence in terms of efficiency and effectiveness.

The new formatting enabled the End-User to generate their own data and place such data in an arrangement that would be appropriate for the tool (Exforsys Inc, 2008: par 5). This was also important because the time of interpersonal databases had not yet proven themselves for conventional implementation of the end-use data (Exforsys Inc, 2008: par 7). As a result, the vendors had the obligation of offering their own data solutions.

There were several complications related to the application of the data using the earlier tools in business intelligence. For instance, such data was inaccessible and exclusive. Most of it was not diverse in usage and required a specific tool from a certain vendor in its analysis. Also, most of this data did not contain the form of the data needed.

Therefore, there were a lot of complications in the earlier tools applied in business intelligence. This made the process of data analysis complicated and less effective. It required a high level of expertise to analyze data using these tools. However, the tools applied in the contemporary world are now more efficient and effective. They are simple to use, and any employee in an organization can use it in analysis and hence coming up with appropriate decisions.

Purpose of BI

As already noted, business intelligence plays a significant role in every organization. The main purpose of business intelligence is to promote the organization’s mission and goals by ensuring that the decisions made in the organization are based on facts rather than instincts.

Business intelligence enables a firm to understand various aspects of an organization and be able to detect issues in an organization that could otherwise not be revealed easily. This enables an organization in the identification of risks and opportunities timely. For instance, an organization will be able to identify a certain risk just before it undergoes proliferation. This uplifts the performance of an organization.

Effective business intelligence also promotes rapid feedback concerning action. This promotes effectiveness in business operations. It also helps in saving time resources hence promoting the performance of an organization. It is also necessary for validation or discrediting assumptions. This ensures that the decisions made within an organization are certain. This minimizes the number of risks in an organization’s operations.

In the contemporary world, the need for business intelligence has grown significantly. This is due to the large impact which it has on organizations. Business intelligence technologies have a significant role in determining the operational performance in the contemporary world (Sabherwal and Fernandez 2009: 1).

One of the main advantages of business intelligence is the improvement in customer care. Through business intelligence, an organization is able to collect and present data about consumer behavior. It is possible to know what consumers like and their needs through the use of current as well as historical data. Therefore, an organization will be able to use this data in making more responsive and anticipative decisions based on consumer needs and requests (Vercellis 2009: 15). As a result, business intelligence will help in improving the quality of its services to customers. As a result, an organization will be able to retain its competitiveness in the cutthroat business world.

An organization can also use business intelligence to foresee the consequences of a change in any process affecting customers. This anticipation helps an organization to identify in time the future implication of various courses of action to an organization. This plays a significant role in protecting an organization from any risks. For instance, in case an organization discovers that a certain change in customer-oriented process will affect its performance negatively, then it is able to refrain from such actions on time before it plunges into the risk. Consequently, an organization is able to avoid unnecessary risks.

Business intelligence has helped many organizations in building their competitive advantage. Through business intelligence, an organization is able to come up with an accurate analysis of the markets. This helps an organization to identify the needs and requirements of the customers in each part on its market networks

Business intelligence also enables an organization to develop a profitable product in the market. By analyzing the past data on various products in the market, an organization will be able to identify the products which are highly demanded in a certain area. This will enable an organization to make certain decisions on the best products that will give maximum profits.

In some cases, an organization may need to form a merger while venturing into a new market. For instance, an organization may decide to use a merger to enter into a foreign market. In this case, business intelligence plays a significant role in the selection of the most appropriate company with which to form a merger. It is easy to analyze the performance of various companies in a particular market. An organization will, therefore, be able to come up with the most appropriate decision on the best candidates for the merger.

Business intelligence also plays a significant role in corporate planning. Through business intelligence, an organization is in a position to make appropriate plans which promote the goals of an organization. For instance, it provides an enlarged view of core competence to develop new opportunities (Thierauf 2001: 204). This is an important practice in an organization as it has a significant implication on an organization’s success. For instance, an organization is able to apply business intelligence to create new markets for its products and services. Through business intelligence, an organization is able to identify the markets which have not been exploited. By so doing, it becomes easier for an organization to identify the potential markets where it can use to expand its market networks. This presents a major opportunity for the organization since it will be in a position to access new markets before competition develops. This plays a significant role in promoting the performance of an organization. In other words, an organization is able to identify the needs of its customers before even they become aware of what they want (Volitich 2008: 58). This helps an organization to maximize its sales.

Competitive intelligence is one of the company’s integral parts that play a pivotal role in an organization. It is yet another important purpose of business intelligence. Competitive intelligence enables an organization to keep up with the changes which usually take place in the market. In the contemporary world, markets have become extremely dynamic. Therefore, the ability of an organization to adapt to these changes plays a significant role in promoting the overall performance of an organization. Competitive intelligence enables an organization to collect outside information about competitors. For instance, an organization is able to access information like emerging technologies, regulatory issues, customer activities, and other information that is important to an organization in making various decisions. Competitive intelligence will also include the collection of information about the competitors’ business practices and plans. However, it is advisable for an organization to conform to legal and ethical specifications while collecting information about the plans and practices of their competitors. The information collected is of great significance, especially ion the contemporary world, where the market has been increasingly becoming competitive.

Positive Effects of Business Intelligence

The application of business intelligence has a number of positive impacts on business operations. One of the main advantages of business intelligence is to authorize employees. Since the data is made accessible to everyone in an organization, then employees can use this data in making various decisions concerning an organization.

Business intelligence has also promoted the simplicity of the decision making process. Since various individuals involved in the decision-making process can access information from anywhere and at any time, then it becomes easier while proposing ideas because everyone is informed.

Another positive effect of business intelligence is the promotion of managerial efficiency. It simplifies teamwork and allocation. This has a significant improvement in the efficiency level. Different members of a team can freely share the information on the web in making important decisions in an organization. This promotes the performance of an organization.

Business intelligence has an impact on increasing insight. When business intelligence is effectively integrated into an organization, employees are able to apply the available strategy hence increasing their insight. Since the data is readily available to all, people can easily interact and come up with the best decisions.

In the contemporary business world, businesses are engaged in activities that are characterized by a high level of uncertainty. In such a case, an organization needs to have effective forecasting techniques in order to be able to make appropriate decisions. Business Intelligence has significantly contributed to improving the ability of organizations to predict the future and the feasibility of current courses of action. For instance, an organization can use the trends to predict within an organization. According to Murphy (2005), trends can be discerned more accurately when they have been established for some time (218). Through business intelligence, an organization is able to keep data covering a long period of time. Therefore, an organization is able to apply business intelligence to apply the data collected to make perfect predictions. This helps an organization in making effective decisions within their organizations.

Through business intelligence, an organization is able to analyze the data and information from the past to anticipate the possible future moves made by their competitors (Murphy 2005: 225). Such information is very useful as it helps an organization to gain competitiveness in a competitive market. In order for an organization to be in a position to anticipate correctly about the possible moves by their rivals, they must be in a position to detect the indications of the actions as well as the intentions of their rivals. This requires the organization to conduct an intensive search for evidence in order to be able to make the most feasible decisions. An organization must also be in a position to scan the available information in order to be able to make correct anticipations.

Negative Effects of Business Intelligence

Despite the above benefits associated with business intelligence, it has some negative effects on an organization. One of the negative effects of business intelligence on an organization is that it leads to the piling of historical data. However, only a small fraction of this data may be used. In some cases, historical data is not useful. For instance, the market is dynamic, and the historical data may not be applicable.

Another negative impact of business intelligence is based on the cost. Business intelligence may be too expensive for an organization, especially the small and medium organizations (Solanki 2011: par 3). This may, therefore, lead to a shrinking of the profit margins. The application of business intelligence also increases the complexity of the business. The implementation of the data can be complicated. Therefore, it can increase the rigidity of the business methods. These problems can affect the performance of an organization.

The implementation of business intelligence also consumes a significant amount of time. Many companies are not patient enough to give room for the implementation of business intelligence in their processes. For instance, it will take an organization about 18 months for the data warehousing system to be completely implemented in the system.

Effect of Business Intelligent on Management

As already noted, there has been an increased need for business intelligence in the contemporary world. Many organizations have adopted this technology in their operations with an effort to reach their optimal level of performance. The integration of this technology has significantly affected the aspects of management both in the structured and unstructured decision-making process.

Through business intelligence, every employee can access the organization’s data. They can use this data in making several decisions. Therefore, business intelligence authorizes employees to make decisions. This increases the efficiency within an organization since it facilitates the decision-making process.

An organization can be categorized into the front-end systems and back-end systems. The front-end systems include activities like customer relationship management, among others. On the other hand, back-management involves activities like supply chain management, among others. The main objectives of these arrangements are to facilitate the flow of data across the value chain.

The senior management has the responsibility for strategic planning. They are supposed to use the data analyzed to come up with the most effective strategies. The middle managers have the responsibility of management control while the front lines are supposed to conduct operational control.

Major BI tools

Data mining tools refer to warehousing software and statistical data mining. It may also include the software used in reporting and querying of data. Business intelligence tools play a significant role in tracing and analyzing the data for making critical decisions within an organization. There are several business intelligence tools that have been applied by a number of organizations over the recent past.

One of the widely used tools in business intelligence is spreadsheets. The spreadsheets usually contain a specific formula that directs how the values in a certain cell are calculated from other cells. A good example of these is Microsoft Excel, Apple numbers, Visilac, among others. However, Microsoft Excel is the most widely applied.

Another commonly used business intelligence tool is Digital Dashboards. Digital Dashboards are commonly used in tracking the flow of a certain business process that is undergoing the monitoring process (Solanki 2011: par 5).

Another important tool in business intelligence is MicroStrategy. This tool allows users to come up with timely and data-driven decisions in an organization. It helps in transforming the data into the form in which it can be understood easily to give appropriate insights. This helps an organization in coming up with strategies that help in generating revenues, forecasting potential business opportunities, and monitoring the progress of an organization in various fields.

QlikView BI tool is another important tool that is being applied in many organizations. QlikView Business Discovery platform plays a significant role in eliminating the differences between the standalone office productivity applications and traditional BI solutions. This promotes discovery and new ideas within an organization.

Case Study

Over the past years, a number of organizations have benefited from the application of business intelligence in its operations. Several companies have increased their sales after the integration of business intelligence in their activities.

Business Intelligence in Dunkin’s Donuts

Dunkin’s Donuts is one of the companies which has significantly benefited from the application of business intelligence in its operations. The company is located in the United States, where it has several franchises. The company has, for the past, been applying the business intelligence in the identification of the best locations for their franchises. The company has also been using business intelligence to identify the best franchise operators.

As already noted, Dunkin’s Donuts have several franchises that are located in various parts of the United States. Most of its franchises are located in Boston, New York, and other places on the Northern side. The company has been planning to increase its current number of franchises by about 7,000, which is from 8,000 to 15 000 (Sabherwal and Fernandez 2009: 20). The company aims to reach these targets by increasing its presence across the world.

However, the company is faced with a number of obstacles. For instance, the company has a number of competitors who offer great competition in the market. One of the main competitors is Starbucks. Starbucks has established its presence across the world, where it has more than 12,000 stores. In order for the Dunkin’s Donuts to expand its presence worldwide, it is required to apply effective measures.

Since Dunkin’s Donuts use franchises to reach various parts of the world, this poses a disadvantage to the company compared with its close competitor, Starbucks, since they don’t franchise. This creates a competitive advantage for Starbucks because they don’t face the difficulties of finding the willing and the most appropriate client for the business.

Recently, Dunkin’s Donuts has managed to overcome these problems through the introduction of BI in its operations. The managers, as well as the salespeople, have adopted a dashboard-type BI system. This has helped them to manage important information about franchise operators, which includes the stage of each deal and how the financing is going (Sabherwal and Fernandez 2009: 20). With the application of the BI system, the company is able to identify any problem areas and keep everything on track. The company is also able to obtain the geographic view of the areas experiencing problems after which they can track through a specific account in order to discover specific problems faced as well as the potential causes of these problems. The company is also in a better position to identify potential deals that are too close in proximity.

Through the application of the BI, Dunkin’s Donuts has, therefore, managed to maximize its efficiency and effectiveness. This has helped the company to spread fast worldwide. It has also reduced the average time spent in determining the most appropriate partners for franchises.

Conclusion

This discussion has clearly shown that business intelligence has a great significance in the contemporary business world. Business intelligence tools help an organization in converting the data in a form that can be used in making critical decisions. It helps in predicting the possible outcomes for taking a particular course of action. Therefore, it reduces the level of risks within an organization. When applied effectively, business intelligence improves the level of competitiveness. For instance, it becomes possible to access the plans and practices of the competitors. This information is of great significance as it enables an organization to access information on which the most effective decisions are based. By accessing such information, an organization is able to take the most appropriate courses of action. It is, therefore, important for every organization to ensure that it integrates BI in its operations in order to retain its competitiveness.

Reference List

Exforsys Inc (2008). Business Intelligence History. Web.

Langit, L. (2007). Foundations of SQL Server 2005 Business Intelligence. New York: Apress. Web.

Murphy, C. (2005). Competitive intelligence: gathering, analyzing and putting it to work. Gower Publishing, Ltd. Web.

Sabherwal, R, and Fernandez, I. (2009). Business Intelligence. New York: John Wiley and Sons. Web.

Solanki, P. (2011). Business Intelligence Tools. Web.

Thierauf, R. (2001). Effective business intelligence systems. New York: Greenwood Publishing Group. Web.

Vercellis, C. (2009). Business Intelligence: Data Mining and Optimization for Decision Making. U.K.: John Wiley and Sons. Web.

Volitich, D. (2008). IBM Cognos 8 Business Intelligence: The Official Guide. New York: McGraw-Hill. Web.