introduction to business analytics chapter 1: introduction to business intelligence matthew j....

Introduction to Business AnalyticsIntroduction to Business Analytics

Chapter 1: Introduction to Business Chapter 1: Introduction to Business IntelligenceIntelligence

Matthew J. LiberatoreMatthew J. Liberatore

Fall 2009Fall 2009

Learning ObjectivesLearning Objectives

Understand today’s turbulent business Understand today’s turbulent business environment and describe how organizations environment and describe how organizations survive and even excel in such an environment survive and even excel in such an environment (solving problems and exploiting(solving problems and exploiting

opportunities)opportunities) Understand the need for computerized support Understand the need for computerized support

of managerial decision makingof managerial decision making Describe the business intelligence/business Describe the business intelligence/business

analytics methodology Understand the major analytics methodology Understand the major issues in implementing business analyticsissues in implementing business analytics

Toyota uses BI to ExcelToyota uses BI to Excel1.1. In what ways did the old information systems create problems In what ways did the old information systems create problems

for Toyota?for Toyota?

2.2. What information needs of managers are satisfied by the new What information needs of managers are satisfied by the new BI system? What decisions are satis fied by the BI support?BI system? What decisions are satis fied by the BI support?

3.3. Relate the TLS problem to the supply chain (from factories, to Relate the TLS problem to the supply chain (from factories, to dealers, to consumers).dealers, to consumers).

4.4. List the decision support tools cited here.List the decision support tools cited here.

5.5. What strategic advantage can Toyota derive from this What strategic advantage can Toyota derive from this system?system?

6.6. Relate Toyota’s decision to make consumer-helping robots to Relate Toyota’s decision to make consumer-helping robots to the changing business environment.the changing business environment.

Changing Business Environments Changing Business Environments and Computerized Decision Supportand Computerized Decision Support

The Business Pressures-Responses-Support The Business Pressures-Responses-Support Model Model The business environment The business environment Organizational responses: be reactive, anticipative, Organizational responses: be reactive, anticipative,

adaptive, and proactive adaptive, and proactive Computerized supportComputerized support

• Closing the Strategy Gap Closing the Strategy Gap One of the major objectives of BI One of the major objectives of BI is to facilitate closing the gap between the current is to facilitate closing the gap between the current performance of an organization and its desired performance performance of an organization and its desired performance as expressed in its mission, objectives, and goals and the as expressed in its mission, objectives, and goals and the strategy for achieving themstrategy for achieving them

Changing Business Environments Changing Business Environments and Computerized Decision Supportand Computerized Decision Support

A Framework for A Framework for Business Intelligence (BI)Business Intelligence (BI)

business intelligence (BI) business intelligence (BI) A conceptual framework for decision support. It A conceptual framework for decision support. It combines architecture, databases (or data combines architecture, databases (or data warehouse), analytical tools and applications warehouse), analytical tools and applications

Remember that we definedRemember that we defined business analytics business analytics (BA)(BA) to include the access, reporting, and to include the access, reporting, and analysis of data supported by software to drive analysis of data supported by software to drive business performance and decision makingbusiness performance and decision making

From our perspective, BA and BI are the From our perspective, BA and BI are the essentially the same thingessentially the same thing

A Framework for A Framework for Business IntelligenceBusiness Intelligence


The Origins and Drivers of Business The Origins and Drivers of Business IntelligenceIntelligence Organizations are being compelled to capture, Organizations are being compelled to capture,

understand, and harness their data to support understand, and harness their data to support decision making in order to improve business decision making in order to improve business operationsoperations

Managers need the Managers need the right information right information at the at the right time right time and in the and in the right placeright place


BI’s Architecture and ComponentsBI’s Architecture and Components Data WarehouseData Warehouse Business AnalyticsBusiness Analytics Performance and StrategyPerformance and Strategy User InterfaceUser Interface


BI’s Architecture and ComponentsBI’s Architecture and Components Data WarehouseData Warehouse

• Data obtained from operational systems needed to Data obtained from operational systems needed to support decision makingsupport decision making


BI’s Architecture and ComponentsBI’s Architecture and Components Business AnalyticsBusiness Analytics

• Create on-demand reports and queries and Create on-demand reports and queries and analyze data (originally called online analytical analyze data (originally called online analytical processing – OLAP)processing – OLAP)

• Automated decision systemsAutomated decision systems: rule – based: rule – based App. Case 1.1 – price setting exampleApp. Case 1.1 – price setting example

• Data Mining: Data Mining: a class of information analysis based a class of information analysis based on databases that looks for hidden patterns in a on databases that looks for hidden patterns in a collection of data which can be used to predict collection of data which can be used to predict future behaviorfuture behavior


BI’s Architecture and ComponentsBI’s Architecture and Components business (or corporate) performance business (or corporate) performance

management (BPM)management (BPM) A component of BI based on the A component of BI based on the balanced balanced scorecard scorecard methodology, which is a framework methodology, which is a framework for defining, implementing, and managing an for defining, implementing, and managing an enterprise’s business strategy by linking enterprise’s business strategy by linking objectives with factual measuresobjectives with factual measures


BI’s Architecture and ComponentsBI’s Architecture and Components User Interface: Dashboards and Other User Interface: Dashboards and Other

Information Broadcasting ToolsInformation Broadcasting Tools• Dashboards Dashboards

A visual presentation of critical data for executives A visual presentation of critical data for executives to view. It allows executives to see hot spots in to view. It allows executives to see hot spots in seconds and explore the situation seconds and explore the situation

Examples of dashboards and scorecards:Examples of dashboards and scorecards:http://www.idashboards.com/?gclid=CIDDrpLR05QCFQNaFQodSWDQkQ


Time savings Time savings Single version of truth Single version of truth Improved strategies Improved strategies

and plans and plans Improved tactical Improved tactical

decisionsdecisions More efficient More efficient

processes processes Cost savingsCost savings

Faster, more accurate Faster, more accurate reporting reporting

Improved decision making Improved decision making Improved customer service Improved customer service Increased revenueIncreased revenue

Many benefits are intangibleMany benefits are intangible

The Benefits of BI


The Business Value of BIThe Business Value of BI How BI Can HelpHow BI Can Help

• Assess the readiness for meeting the challenges Assess the readiness for meeting the challenges posed by these new business realitiesposed by these new business realities

• Take a holistic approach to BI functionalityTake a holistic approach to BI functionality• Leverage best practices and anticipate hidden Leverage best practices and anticipate hidden

costscosts


The Business Value of BIThe Business Value of BI Key Issues and Framework for BI AnalysisKey Issues and Framework for BI Analysis

• How can enterprises maximize their BI How can enterprises maximize their BI investments?investments?

• What BI functionality do enterprises need, and What BI functionality do enterprises need, and what are they using today?what are they using today?

• What are some of the hidden costs associated with What are some of the hidden costs associated with BI initiatives?BI initiatives?

Intelligence Creation and Use Intelligence Creation and Use and BI Governanceand BI Governance


The general process of intelligence The general process of intelligence creation starts by identifying and creation starts by identifying and prioritizing specific projectsprioritizing specific projects

The project prioritization process within The project prioritization process within organizations is sometimes called organizations is sometimes called BI BI GovernanceGovernance


A typical set of issues for the BI governance A typical set of issues for the BI governance team is to addressteam is to address

1.1. Creating categories of projects (investment, business Creating categories of projects (investment, business opportunity, strategic, mandatory, etc.)opportunity, strategic, mandatory, etc.)

2.2. Defining criteria for project selectionDefining criteria for project selection3.3. Determining and setting a framework for managing Determining and setting a framework for managing

project riskproject risk4.4. Managing and leveraging project interdependencies Managing and leveraging project interdependencies 5.5. Continually monitoring and adjusting the composition Continually monitoring and adjusting the composition

of the portfolioof the portfolio


Intelligence GatheringIntelligence Gathering How modern companies ethically and legally How modern companies ethically and legally

organize themselves to glean as much information organize themselves to glean as much information as they can from their:as they can from their:• CustomersCustomers• Business environmentBusiness environment• StakeholdersStakeholders• Business processesBusiness processes• CompetitorsCompetitors• Other sources of potentially valuable informationOther sources of potentially valuable information


Intelligence GatheringIntelligence Gathering In order to be useful in decision making and In order to be useful in decision making and

improving the bottom line, the data must be:improving the bottom line, the data must be:• Cataloged Cataloged • TaggedTagged• AnalyzedAnalyzed• SortedSorted• FilteredFiltered

These activities are part of the BI creation These activities are part of the BI creation cyclecycle

The Major Theories and The Major Theories and Characteristics of Business IntelligenceCharacteristics of Business Intelligence

online transaction processing systems online transaction processing systems (OLTP) (OLTP)

Systems thatSystems that handle a company’s routine handle a company’s routine ongoing businessongoing business

online analytic processing (OLAP) online analytic processing (OLAP)

An information system that enables the user, An information system that enables the user, while at a PC, to query the system, conduct an while at a PC, to query the system, conduct an analysis, and so on. The result is generated in analysis, and so on. The result is generated in seconds seconds


Some Theories of BISome Theories of BI A factory and warehouseA factory and warehouse The information factoryThe information factory Data warehousing and business Data warehousing and business

intelligenceintelligence Teradata advanced analytics methodologyTeradata advanced analytics methodology Oracle BI systemOracle BI system

Toward Competitive Toward Competitive Intelligence and AdvantageIntelligence and Advantage

The Strategic Imperative of BIThe Strategic Imperative of BI Barriers to entry of a new competitor are being Barriers to entry of a new competitor are being

significantly diminishedsignificantly diminished Because of the Web revolution and increasing Because of the Web revolution and increasing

globalization, companies throughout the world are globalization, companies throughout the world are challenging major players in industrieschallenging major players in industries

The ability to deliver goods worldwide is making it The ability to deliver goods worldwide is making it easier for potential competitors to get products and easier for potential competitors to get products and services to more customers almost anywhereservices to more customers almost anywhere

Companies are finding better or less expensive Companies are finding better or less expensive suppliers all over the globesuppliers all over the globe

Toward Competitive Toward Competitive Intelligence and AdvantageIntelligence and Advantage

Competitive Intelligence (CI)Competitive Intelligence (CI) CI implies tracking what competitors are doing by CI implies tracking what competitors are doing by

gathering material on their recent and in-process gathering material on their recent and in-process activitiesactivities

• BI can obtain data from third-party vendors such as BI can obtain data from third-party vendors such as demographic datademographic data

BI can support a competitive strategy in an industryBI can support a competitive strategy in an industry• low-cost leaderlow-cost leader• market nichemarket niche

Sustaining competitive advantage through building Sustaining competitive advantage through building brand and customer loyalty using BI applicationsbrand and customer loyalty using BI applications

Successful Business Intelligence Successful Business Intelligence ImplementationImplementation

The Typical BI User CommunityThe Typical BI User Community IT staffIT staff Power usersPower users ExecutivesExecutives Functional managersFunctional managers Occasional information customersOccasional information customers PartnersPartners ConsumersConsumers

Each group uses different BI tools and functions at Each group uses different BI tools and functions at varying levels of strategic importancevarying levels of strategic importance

Successful Business Intelligence Successful Business Intelligence ImplementationImplementation

Appropriate Planning and Alignment with the Appropriate Planning and Alignment with the Business StrategyBusiness Strategy Planning and execution components Planning and execution components

• BusinessBusiness• OrganizationOrganization• FunctionalityFunctionality• InfrastructureInfrastructure

Define objectives while considering organization’s skills, Define objectives while considering organization’s skills, plan for change, prepare action planplan for change, prepare action plan

Establish a BI Competency Center (BICC) within Establish a BI Competency Center (BICC) within the Companythe Company Support dissemination, training, and best practicesSupport dissemination, training, and best practices

Successful Business Intelligence Successful Business Intelligence Implementation: Other IssuesImplementation: Other Issues

Real-time, On-Demand BI Is AttainableReal-time, On-Demand BI Is Attainable Developing or Acquiring BI SystemsDeveloping or Acquiring BI Systems Justification and Cost/Benefit AnalysisJustification and Cost/Benefit Analysis Security and Protection of PrivacySecurity and Protection of Privacy Integration of Systems and ApplicationsIntegration of Systems and Applications

Conclusion: Conclusion: Business Intelligence Today and TomorrowBusiness Intelligence Today and Tomorrow

Today’s organizations are deriving more Today’s organizations are deriving more value from BI by extending actionable value from BI by extending actionable information to many types of employees, information to many types of employees, maximizing the use of existing data assetsmaximizing the use of existing data assets

Visualization tools including dashboards Visualization tools including dashboards are used by producers, retailers, are used by producers, retailers, governments, and special agenciesgovernments, and special agencies

Conclusion: Conclusion: Business Intelligence Today and TomorrowBusiness Intelligence Today and Tomorrow More and more industry-specific analytical More and more industry-specific analytical

tools will flood the market to perform tools will flood the market to perform almost any kind of analysis and to facilitate almost any kind of analysis and to facilitate informed decision making from the top informed decision making from the top level to the user levellevel to the user level

A potential trend involving BI is its possible A potential trend involving BI is its possible merger with artificial intelligence merger with artificial intelligence (AI)(AI)

introduction to business analytics chapter 1: introduction to business intelligence matthew j....

Documents

business performance

business intelligence

business analytics slide

business intelligence

bi support

business analytics ba

business analytics chapter

changing business environments