Business Intelligence
What is Business Intelligence ?
A pretty misused term for a start!
Basically Business Intelligence (BI) is a blanket term which covers the use of a variety of reporting and analysis tools and methods, in order to gain insight into business activity. In current marketing speak, however, it translates to OLAP (On-Line analytical processing) techniques.
What is clear in most business today is that whilst we have lots of data about the business and its transactions, customers, suppliers and activities, we have not been great at turning the data into information, and even less successful in creating knowledge, or intelligence. There are a number of reasons we are not good at this. Some typical issues include;-
The time taken up by traditional reporting means we have no time
We have no tools or direction in order to perform multi dimensional analysis
We don't have the skills to perform the analysis and understand the cues and directions it provides.
Traditionally, business reporting has followed the lines of accounting thinking, and not really been all that focused on creating intelligence. That's to say we have reported transactions and balances, income and expenditures, budgets vs actuals, forecasted income etc.
Of course this is all pretty important stuff, but it doesn't always tell us something new about the way the business is running. It can, however highlight areas that need analysis, or signposts that point to an issue. Business Intelligence thinking is designed to help us follow that signpost and actually get to a destination. Traditional reporting is like a post full of signs pointing to lots of places, but it isn't really helping us decide where to go next, just where the places are.
In many ways the characterization is also that traditional reporting is pretty one dimensional, and the BI approach looks at multiple dimensions at once.
Let's consider an example, on a favorite topic of project/product profitability in a business.
Our traditional accounting approach would report that the business was (say) profitable at a gross profit ratio of 38% and a net profit of (say) 8%. We would then probably generate a product/project breakdown at the category or type level, and we might find that say Type A generates 44% GP and Type B generates 33% GP. We may even go further to find that a particular product or project has a particular level of profitability. Nothing wrong with that analysis, and indeed in one sense it is intelligence, as we know which products and projects are successful.
We may even do a similar level of analysis on our customers / clients by type of industry or size of business etc. Again it's a pretty one dimensional approach.
The sort of results that BI allows us to get to quickly, however, might highlight that Category 1 customers who use product / service Type A only generate a GP of 27% yet Category 3 customers who use product / service Type A actually generate 56% GP, and yet the trend reverses between customer types when a Type C product is involved. This might lead us to investigate further and find that Category 1 customers traditionally have not used our Type A product / service before, and are confused, requiring additional customer support and technical / warranty assistance, hence reducing the profitability in that circumstance. We might then change our pricing, sales technique or other deliverables in order to reverse the negative issues, and probably end up with happier customers as well as more profit.
The simple answer is that we could have got to this point with careful use of a traditional analysis technique, yet the BI approach takes us there relatively simply and easily through the use of on screen graphical analysis. Furthermore, as it is relatively easy and fast, one can include BI analysis techniques before there are other signs of a problem, and that can make a very significant difference.
One final important thing to understand is that BI is NOT a product; it is a collection of techniques and methodologies for which there are various tools available as software products. Understanding what to do, and which tools might best suit a particular requirement is a skill in itself, and surprisingly salesman are not necessarily the best people to ask……..