What Is Business Intelligence (BI)? Architecture, Applications and Advantages

Business Intelligence is the process of discovering and analyzing data to make informed business decisions. The management in any business needs this aspect of management as part of the companies integral infrastructure in today’s world in order for the business to succeed. The data collected from many of the data collecting sources is used to determine trends, or measure, manage and improve on the performances of individuals, processes, teams and business units. The enterprise refers to any business organization that uses computers as an integral part of their business and relies on it for that businesses development.

The History Of Business Intelligence

In 1958, IBM researcher Hans Peter Luhn was the first one to use the term BI and he defined intelligence in his words: “the ability to apprehend the interrelationships of presented facts in such a way as to guide action towards a desired goal”. The business intelligence that we understand today is evolved from the decision support systems whose development began from 1960 through 1980’s. In 1989, Howard Dresner coined the term Business intelligence as an umbrella term for all such systems. The term Business Intelligence was gain coined by the Gartner group in mid-1990s. But Business Intelligence was around before that, it originated in the Management Information Systems reporting systems of the 1970s. Reports in this era was only two fold, there was no analytical dimension to reporting. In the early 1980s, Executive Information Systems emerged. This introduced ad hoc (on demand) reporting forecasting, prediction, trend analysis, drill down to details, status access and critical success factors. It was available to top level managers who were the ones to make decisions for the businesses future. Some of the capabilities from the 1990s appeared in products along with some new ones and it was called Business Intelligence. A good Business Intelligence based enterprise information system contains all the information executives need. By 2005 Business Intelligence systems started to include artificial intelligence capabilities and more powerful analytical capabilities. The most sophisticated Business Intelligence Products include most of these capabilities.

The Architecture of Business Intelligence

A Business Intelligence system has four major components;

Data Warehouse: This is a main aspect of Business Intelligence. It is a discipline that results in applications that provide decision support capability, allows ready access to business information and creates business insight. The three main types of data warehouses are data marts, operational data stores and enterprise data warehouse. As the name suggest it’s a warehouse of data. A data warehouse is a pool of data produced to support decision making, as it contains current and historical data. This data is not or should not be haphazard data it should be concise and organize. The data should be structured in a form ready for analytical processing activities. A data warehouse is a subject oriented, integrated, time-variant, non-volatile collection of data in support of management decision-making process.
Business Analytics: This area encompasses the major aspect of Business Intelligence. The end user work with the data and information in the warehouse using tools of Reports and queries, Advance analytics, Data, text and Web mining. Reports and queries involve both static and dynamic reporting any different types of queries. The Business Analytics is the analysis of the data, using a broad category of applications and techniques for gathering storing and analyzing and providing access to data to help enterprise users make better business decisions. BA allows the automating of the thinking and a portion of decision making of the manager. It uses complex quantitative techniques, such as multivariate regression analysis, data mining, artificial intelligence or nonlinear programming.
Business Performance Management: This is an emerging portfolio of applications and methodology that contains evolving Business Intelligence Architecture and tools in its core. It extends the monitoring, measuring and comparing of sales, profit, cost, profitability and other performance indicators buy introducing the concept of management and feedback. One of its core tenets is planning and forecasting BPM provides a top-down enforcement of corporate-wide strategy.
User Interface: This is the dashboard and other information broadcasting tools. The dashboards provide a comprehensive visual view of corporate performance measures trends, and expectations. They integrate information from multiple business areas and present them in a graphical form. They show graphs that show actual performance compared to desired matrices. Another tool is a corporate portal, digital cockpits and other visualization tools. These tools range from multidimensional cube presentation to virtual reality.

How To Use Business Intelligence

Organizations are being compelled to capture, understand and harness their data support decision making in order to improve business operations. Businesses now have to move with the times in which they operate. The business cycle times are now extremely compressed; faster, more informed and better decision making is therefore a competitive imperative. The nature of any business is to make money, and in order to do so you must have a competitive edge. To be ahead of the competition so that the business can be successful. So the right information at the right time and in the right place is what will make or break a business in this era.

Because of the complexity of the methodologies for assessing the business value of Business Intelligence. It may prove a little difficult for a business to use the right tool and harness the correct data. The reason that the methodologies are so complex is because the benefits of Business Intelligence are intangible and so difficult to measure and the Data Warehousing is an infrastructure that serves many applications.

To implement a successful Business Intelligence tool into a business it is advised that a framework for planning be a necessary precondition, to implementation. At the business and organizational levels, it is important to define strategic and operational objectives. The management needs to consider a number of issues; these include the culture surrounding Business Intelligence in the business, building enthusiasm for the initiatives of the business and procedures for the intra-organizational sharing of Business Intelligence Best practices.

The management needs to asses the Information System and the skills of the personnel in that area, if the results of these assessments are favorable the company then proceeds with a plan.

Applications of Business Intelligence

As we have seen the implementation of business intelligence has helped organizations to achieve their goals in an effective way. Its application is not restricted to limited segments. It has a wide-spread use. It has now become mandatory for organizations to implement BI to sustain and maintain their market share in the competitive market. Some of the industries in which BI can be implemented are listed below:

Retailing: Business Intelligence can be used to forecast the demand and analyze its fluctuations over time. This will help in optimizing the size of inventory in order to meet the customer demands. It will also help the companies to better understand the consumer behavior in order to direct their marketing campaigns. It will also help in enhancing relationship with suppliers.
Banking: BI will help the banks and financial institutions in identifying the customer base. This will help them in planning their marketing strategies. It will also help the banks in deducing performance metrics and benchmarks in order to measure the business performance. It can also help in knowledge management or learning management. It will help in management of large amount of data.
FMCG: BI will provide predictive analysis to forecast demand and understand consumer behavior. Optimization of manufacturing processes and procurement functions will lead to better relationship with suppliers. Standardization will ease the load of transaction recording and multiple source reports.
Automobile: BI can help in optimization of production, research, HR, distribution, marketing and finance functions by providing effective decision making tools. In short Business Intelligence has enterprise wide applications in all departments.
Distribution and Logistics: BI will enhance communication with business partners which will lead to efficient and coordinated operations. BI will provide intelligent reports to optimize the whole operations of the enterprise.
Airways: BI will remove hindrances in the ticket management system. BI can be used to analyze the consumer behavior pattern and predict future behavior patterns in order to increase operations efficiency by improving flight management and improve sales revenue. Consumer demands can be satisfied efficiently.
Manufacturing: BI will enhance communications with suppliers and standardize all the transactions occurring with them hence increasing efficiency. BI will forecast the demand for product which will optimize inventory, production and procurement size. BI implemented in HR department will help in understanding the employee needs and difficulties and for their performance appraisal.
Hospitality: BI will help Hospitality companies to respond quickly to problematic situations. It will help them in handling problems in an efficient and timely manner. It will also give them an edge over their competitors by notifying them of new market opportunities and help them in taking advantage of it.
Pharmaceutical: BI will help these companies in understanding the customer behavior pattern. It will help them in research and development. It will enhance communication with suppliers and distributors.
Services: BI will help in people management. This is important as in services industries employees are a critical part of business success. Business Intelligence will also help in performance management of business through benchmarking and to enhance relationship with business associates. It will also help in managing huge amount of data within the company. It will also help in training the employees and in knowledge management.

Advantages of Business Intelligence

Listed below are some of the advantages of business intelligence implementation:

Single point access to data: By maintaining a data warehouses and data marts, BI can act as an access to point to the data present in these.
Implementation in all departments: BI can be implemented enterprise wide or it can be local to a single department. If implemented in all departments, organizations will benefit.
Timely solutions: BI allows users to make ad hoc requests and obtain ad hoc reports as and when needed in order to solve problems.
Customer or centrally driven: BI can be implemented in two ways: one where reports are generated according to customer demands and second where employees trigger the transactions.
Access to external users: By giving access of BI systems to external users like customers who might be interested in analyzing their buying behavior, can find out cost saving opportunities and suppliers can analyses the sales data.
Improve operational efficiency: By providing real time reports to customers and employees, BI enables quick solutions to problems and easy error detection and correction. Hence improving efficiency.
Reduction of delays and backlogs: BI systems allow users to design the queries in the system and get reports. Hence human resource can be managed efficiently by reallocating of backlog work to other employees, thus reducing delays.
Better relationship and deals with customers and suppliers: By analyzing historical data we can review the past performance of the suppliers like on-time delivery, quality, etc. which will help in negotiating with them. Understanding customer buying pattern will allow us to qualify some of the customers to discounts or other offers in order to maintain long term relationship.
Problem detection: BI systems provide historical, real time and predictive reports. This can be accessed by customers, suppliers and employees. This results in faster detection of problems or errors.
Minimize Wastage: By analyzing the performance of products, customers, projects and marketing strategies, we can allocate resources appropriately and minimize resource wastage.
Reduced inventory costs: BI systems give the optimum inventory level required at all times, thus reducing cost.
Leverage investment in ERP: By implementing BI with your existing ERP will allow non-technical users to reap the fruits and get tailor made reports.
Better Marketing Analysis: BI systems provide the performance of marketing strategies or campaigns, behavior of customers and existence of new opportunities.
Revenue through information: Revenue can be generated by selling information from BI to customers and suppliers.
Informed and qualified sales force: Sales force will be provided with previous sales figures, information about clients, brands and customers thus empowering them.
Better decisions: Through reports generated from BI, the decisions taken by managers will drastically improve and will be a result of thorough analysis.
Improved internal communication: BI systems result in improved job satisfaction, knowledgeable work force and better motivation.
Understand Customers: BI systems can be used to understand customers and improve customer experience.
Understand Competitors and Market: BI systems help mangers with information on latest trends in the market and the actions taken by competitors.
Guesswork Avoided: By providing thoroughly analyzed decision supporting reports reliance on guess work is minimized.
Improved Performance: All these factors result in improved performance of business.

Performance of Organizations using Business Intelligence

Companies of all sizes are implementing business intelligence to optimize the usage of their data. According to a survey by a leading research firm, Business Intelligence was the top priority of the organizations worldwide. Here are some of the companies who have implemented BI:

Volkswagen AG: This Company has implemented BI in all of its departments like finance, sales and marketing, purchasing, production and research and development. It is now the third largest car manufacturer in the world. It has a market share of 20 % in the world passenger car segment.
MasterCard International: It is an American multinational company, who process the payments between banks of merchants and the card-issuing banks who use credit and debit card for making purchases. It has extended its BI from internal users to external users as well. It allows merchants and advertising agents to monitor their business closely through access to BI.
Handspring, Inc: BI has standardized their transactions, report formats, etc and resulted in better efficiency.
Shell Services International: The implementation of BI has resulted in reduced working capital, increased turnover and margin and better deals with customers and suppliers. Shell is now the world leader in lubricant supply.
TruServ: Implementation of BI has resulted in better efficiency in logistic operations and reduces inventory costs by $50 million.
BOC Gases: It is one of the world’s leading industrial gas supplier and has incorporated BI with its ERP for better efficiency.
Owens & Minor: It is a medical supplies distributor company and implementation of BI has resulted in increased revenues up to $80 billion.
Ben & Jerry’s: It is an American ice-cream maker. BI has helped this company better understand the consumer behaviour and accordingly adopt appropriate marketing or promotional strategies. It has also helped them in satisfying the customer demands.
TaylorMade: The implementation of BI has helped this golfing products company empower its sales force with timely and accurate information resulting in increased sales revenue.
Ingram Micro: This Company is the world’s largest technology distributor and a leading technology sales, marketing and logistics company. It has used BI to achieve new levels of customer satisfaction.
British Airways: The implementation of BI has resulted in increased revenues and it has cut costs to about $100 million.
ABN AMRO: This bank has implemented BI in its HR department resulting better performance by employees and their contribution to business success.

Read: What is business intelligence (BI)? (IBM)