What is business intelligence?
Business intelligence, also known as BI, is a series of tools and techniques used to transform raw data into useful and meaningful information that can help companies gain an edge in the marketplace. It helps managers make better decisions based on their company’s historic information, from which they can project possible future trends.
Business intelligence should not be confused with competitive intelligence, which mainly analyzes data related to a business’s competitive environment from external sources. Business Intelligence, on the other hand, is mainly the management of a company’s internal data. Some people give BI a wider meaning, part of which includes competitive intelligence.
BI technologies can handle huge amounts of raw data to help identify, develop and create new strategic business opportunities.
Business intelligence turns unintelligible raw data into information people can understand and find useful.
Using past & current raw data to plan ahead
The aim of business intelligence is to turn these massive volumes of data into meaningful information that people can understand. It can detect behavioral patterns from which future patterns can be anticipated. This allows for actions to be decided upon and implemented well in advance.
Turning raw data into something that can help identify new opportunities and put into motion effective strategies can provide companies with a competitive edge and long-term stability.
BI technologies gather and process historic and current data on business operations, analyze them and make predictions.
Business intelligence can help managers make decisions regarding a wide range of business issues, from positioning and pricing a product, to decisions on operations and even strategy.
Larger companies may have their own in-house business intelligence group, while others will hire an outside agency.
The business intelligence experts gather data from within the company on how well it has been performing and where improvements could be made. They then analyze outside sources, which may include data (e.g. public records) of competitors, customer survey information and market analysis by third parties.
Examples of business intelligence
Christine McGeever writing in COMPUTERWORLD, gave the following two examples of BI applications being used by companies.
Example 1: with BI analytical applications, a hotel franchise company compiles statistics on average occupancy and room rates to work out revenue generated per room. It is also able to gather data on market share and customer surveys to gauge its competitive position in several markets.
All these data can be analyzed on an annual, monthly, and even daily basis, giving the franchise owner a good picture of how each individual hotel is performing.
Example 2: a bank uses BI software to bridge a legacy database with departmental databases, so that branch managers and other banking staff can determine who the most profitable customers are and which ones they should focus on when selling new products.
Ms. McGeever wrote:
“The use of these tools frees information technology staff from the task of generating analytical reports for the departments and it gives department personnel autonomous access to a richer data source.
More than 150 years old
According to Rob Meredith, who wrote in the Monash University Business Intelligence Blog, the term ‘business intelligence’ dates back to 1865, in Richard Millar Devens’ ‘Cyclopædia of commercial and business anecdotes’ (page 210). In a description of how the banker Sir Henry Furnese gained profit by receiving information about his environment before his competitors and acting on it, Mr. Devens wrote:
“Throughout Holland, Flanders, France, and Germany, he maintained a complete and perfect train of business intelligence. The news of the many battles fought was thus received first by him, and the fall of Namur added to his profits, owing to his early receipt of the news.”
Market intelligence is another area corporations spend money and resources. It is all about gathering and analyzing data on competitors, customers and products.
Video – What is business intelligence?
This video, by canada.hitachi-solutions.com, explains in easy-to-understand language what business intelligence is all about.