Business intelligence

• The process of collecting and processing

business information to derive insights and
make profitable business decisions.
• Business intelligence depends on the process
of business research to gather data that is
then turned into actionable insights, typically
using technological tools for deeper analysis.
• It comprises of collection, analysis, and
presentation of business related information
and is an outcome of business research which
enables smart business actions.
• For example, A restaurant owner wants to
understand the preference of his customers
about the type of cuisine they like, and thus
evaluate the demand for a particular cuisine.
• A survey is conducted to collect feedback on
various types of cuisines preferred. Based on
this information, the owner can evaluate
which cuisine is in demand amongst his target
audience and help him to make a business
strategy accordingly.
 Types of Business Intelligence
• strategic business intelligence
• operational business intelligence
 strategic business intelligence
• When managers have a good idea of what
they wish to analyze sales figures or customer
satisfaction stats but they are not aware of the
end results then most preferred tool is
strategic business intelligence. When decision
makers stand on the option they “don’t know”
strategic business intelligence is adopted.
The focus of strategic business intelligence is on
(1) collection, organization and storage of huge
amounts of data
(2) optimization of that data for rapid reporting and
analysis
(3) identification of key business drivers through the
analysis of historical facts
(4) assistance with answering key business
questions.
Questions answered by strategic business
intelligence can include:
•  Who are the most valuable customers?
• Which customers are most likely to
buy additional products / services?
•  Which products can be bundled together?
• Which territories or regions have the highest project
growth?
•  What is the optimal price of our products?
• What is the total cost associated with customer
acquisition?
 operational business intelligence
• Operational business intelligence (OBI or
operational BI) is the process of reviewing and
evaluating operational business processes,
activities and data for the purpose of making
tactical, strategic business decisions.
• OBI allows businesses to quickly react to
dynamic and continuously changing business
and customer requirements.
In general, operational business intelligence
provides time-sensitive, relevant information to
operations managers, business professionals,
customer-facing employees to support daily
work processes.
Tangible results of operational business intelligence can
include:
•  Invoices
•  Meeting Schedules and Badges
•  Receipts
•  Shipping Documents
•  Financial Statements
•  Marketing Mailing Lists
 Business Intelligence: Methodologies

Step 1 – Data Collection

Step 2 – Analysis
Step 3 – Reporting and Presentation
Step 1 – Data Collection
There are various methods to collect data, which can
provide reliable information for statistical analysis and
help an organization to make data driven decisions.
• Surveys
– Web/Online Surveys
– In-Person Surveys
– Mail Surveys
– Telephone Surveys
• Polls
• Forms
Step 2 – Analysis
Analyzing the data collected through various
methods will help an organization to understand,
what are customer opinions and where
improvements are needed. The software allows
you to compare scores (such as NPS, CES, CSAT) for
varied time periods and also among departments.
Step 3 – Reporting and Presentation
• After analysis, Conversion into visual
infographics can sometimes make it easier for
a person to understand. Such understanding
will enable an organization to find answers to
most pressing business, operational and
marketing questions.
 Why Data Mining
• Credit ratings/targeted marketing:
– Given a database of 100,000 names, which persons are the least likely
to default on their credit cards?
– Identify likely responders to sales promotions
• Fraud detection
– Which types of transactions are likely to be fraudulent, given the
demographics and transactional history of a particular customer?
• Customer relationship management:
– Which of my customers are likely to be the most loyal, and which are
most likely to leave for a competitor? :

Data Mining helps extract such information

 Data mining
• Process of semi-automatically analyzing large
databases to find patterns that are:
– valid: hold on new data with some certainity
– novel: non-obvious to the system
– useful: should be possible to act on the item
– understandable: humans should be able to
interpret the pattern
• Also known as Knowledge Discovery in
Databases (KDD)
 Applications
• Banking: loan/credit card approval
– predict good customers based on old customers
• Customer relationship management:
– identify those who are likely to leave for a competitor.
• Targeted marketing:
– identify likely responders to promotions
• Fraud detection: telecommunications, financial
transactions
– from an online stream of event identify fraudulent events
• Manufacturing and production:
– automatically adjust knobs when process parameter changes
 Applications (continued)
• Medicine: disease outcome, effectiveness of
treatments
– analyze patient disease history: find relationship between
diseases
• Molecular/Pharmaceutical: identify new drugs
• Scientific data analysis:
– identify new galaxies by searching for sub clusters
• Web site/store design and promotion:
– find affinity of visitor to pages and modify layout
 Decision Making

“Decision making is the process of making a

choice between a numbers of options and
committing to a future course of actions”.

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 Decision Making Process
There are 8 steps of Decision Making:
 Identification of problem
 Identification of decision Criteria
 Allocating weight to criteria
 Develop alternatives
 Analysis of Alternatives
 Selection of alternatives
 Implementation of the best alternatives
 Evaluation of decision effectiveness
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 Step1: Identifying The Problem
 A problem is defined as a discrepancy between an existing and a desired

state of affairs.

 Some cautions about problem identification include the following:

1.Make sure it’s a problem and not just a symptom of a problem.

2.Problem identification is subjective.

3.Discrepancies can be found by comparing current results with some standard.

4.Managers aren’t likely to characterize a discrepancy as a problem if they perceive

that they don’t have the authority, information, or other resources needed to act

on it.

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Identifying The Problem

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 Step2: Identifying Decision Criteria

 Decision criteria are factors that are relevant for Resolving the
problem.

A. Costs that will be incurred(investment required)

B. Risk likely to be encountered( chance of failure)

C. Outcomes that are desired (growth of the firm)

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Step3: Allocating Weights to the Criteria
• Decision criteria are not of equal importance:
– Assigning a weight to each item places the items in the
correct priority order of their importance in the decision
making.

• each possible solution must have features or cons and pros. A

manager should score the criteria according to the need of
the situation.

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 Step4: developing Alternatives

• as manager it is advised you select a viable

alternative that could also resolve the
problem. At this point we are just listing not
evaluating the alternatives.

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 Step5: Analyzing Alternatives

• Appraising each alternative strengths and

weaknesses
– An alternative’s appraisal is based on its ability to resolve
the issues identified in steps 2 and 3

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 Step6: selecting Alternatives
Choosing the best alternative or the one that scored the
highest total in step 5.

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Step 7: Implementing the Decision

• putting the decision into action by conveying

into those affected and getting their
commitment to it.

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Step8: Evaluating the Decision’s Effectiveness

• evaluating the outcome or result of the

decision to see if the problem was resolved.
• If the problem still persists, the managers
should re-assess the problem and start over
again.

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Business intelligence architectures
The architecture of a business intelligence system
includes three major components.
• Data sources. In a first stage, it is necessary to
gather and integrate the data stored in the
various primary and secondary sources, which
are heterogeneous in origin and type. The
sources consist for the most part of data
belonging to operational systems, but may
also include unstructured documents, such as
emails and data received from external
providers.
• Data warehouses and data marts. Using
extraction and transformation tools known as
extract, transform, load (ETL), the data
originating from the different sources are stored
in databases intended to support business
intelligence analyses. These databases are
usually referred to as data warehouses and data
marts
• Business intelligence methodologies. Data are finally
extracted and used to feed mathematical models and
analysis methodologies intended to support decision
makers. In a business intelligence system, several decision
support applications may be implemented, such as
 multidimensional cube analysis
 exploratory data analysis
 time series analysis
 inductive learning models for data mining
 optimization models
 Development of a
business
intelligence system