Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Business Plug-In B18 Business Intelligence

B18-2 LEARNING OUTCOMES 1.Explain the problem associated with business intelligence. Describe the solution to this business problem. 2.Describe the three common forms of data-mining analysis. 3.Compare tactical, operational, and strategic BI. 4.Explain the organization-wide benefits of BI. 5.Describe the four categories of BI business benefits.

B18-3 BUSINESS INTELLIGENCE Business Intelligence (BI)—Applications and technologies used to gather, provide access to, and analyze data and information to support decision-making efforts Parallels between the challenges in business and challenges of war: –Collecting information –Discerning patterns and meaning in the information –Responding to the resultant information

B18-4 THE PROBLEM: DATA RICH, INFORMATION POOR As businesses increase their reliance on enterprise systems such as CRM, they are rapidly accumulating vast amounts of data Businesses face a data explosion as digital images, in-boxes, and broadband connections doubles The amount of data generated is doubling every year, and some believe it will soon double monthly

B18-5 THE SOLUTION: BUSINESS INTELLIGENCE Improving the quality of business decisions has a direct impact on costs and revenue BI systems and tools results in creating an agile intelligent enterprise BI enables business users to receive data for analysis that is: –Reliable –Consistent –Understandable –Easily Manipulated

B18-6 THE SOLUTION: BUSINESS INTELLIGENCE

B18-7 OPERATIONAL, TACTICAL, AND STRATEGIC BI

B18-8 BI’S OPERATIONAL VALUE Data latency is the time duration to make data ready for analysis and loading the data into the database Analysis latency is the time from which data are made available to the time when analysis is complete Decision latency is the time it takes a human to comprehend the analytic result and determine an appropriate action The key is to shorten the latencies so that the time frame for opportunistic influences is faster, more interactive, and better positioned

B18-9 DATA MINING Data Mining—Process of analyzing data to extract information Data-Mining Tools—Use a variety of techniques to find patterns and relationships in large volumes of information –Classification –Estimation –Affinity grouping –Clustering

B18-10 CLUSTER ANALYSIS Cluster Analysis—A technique used to divide an information set into mutually exclusive groups such that the members of each group are as close together as possible to one another and the different groups are as far apart as possible CRM systems depend on cluster analysis to segment customer information and identify behavioral traits

B18-11 ASSOCIATION DETECTION Association Detection—Reveals the degree to which variables are related and the nature and frequency of these relationships in the information Market Basket Analysis—Analyzes such items as websites and checkout scanner information to detect customers’ buying behavior and predict future behavior by identifying affinities among customers’ choices of products and services

B18-12 STATISTICAL ANALYSIS Statistical Analysis — Performs such functions as information correlations, distributions, calculations, and variance analysis –Forecast—Predictions made on the basis of time-series information –Time-Series Information—Time-stamped information collected at a particular frequency

B18-13 BUSINESS BENEFITS OF BI Benefits of BI include: –Single Point of Access to Information for All Users –BI across Organizational Departments –Up-to-the-Minute Information for Everyone

B18-14 CATEGORIES OF BI BENEFITS Quantifiable Benefits –Include working time saved in producing reports, selling information to suppliers, and so on Indirectly Quantifiable Benefits –Evaluated through indirect evidence— improved customer service means new business from the same customer, and differentiated service brings new customers

B18-15 CATEGORIES OF BI BENEFITS Unpredictable Benefits –The result of discoveries made by creative users Intangible Benefits –Improved communication throughout the enterprise, improved job satisfaction of empowered users, and improved knowledge sharing