What is business intelligence?

What is business intelligence?

Business intelligence, or BI, is an umbrella term that refers to a variety of software applications used to analyze an organization’s raw data. BI as a discipline is made up of several related activities, including data mining, online analytical processing, querying and reporting.

Companies use BI to improve decision making, cut costs and identify new businessopportunities. BI is more than just corporate reporting and more than a set of tools to coax data out of enterprise systems. CIOs use BI to identify inefficient business processes that are ripe for re-engineering.

With today’s BI tools, business folks can jump in and start analyzing data themselves, rather than wait for IT to run complex reports. This democratization of information accesshelps users back up—with hard numbers—business decisions that would otherwise be based only on gut feelings and anecdotes.

Although BI holds great promise, implementations can be dogged by technical and cultural challenges. Executives have to ensure that the data feeding BI applications is clean and consistent so that users trust it.

What kind of companies use BI systems?

Restaurant chainssuch as Hardee’s, Wendy’s, Ruby Tuesday and T.G.I. Friday’s are heavy users of BI software. They use BI to make strategic decisions, such as what new products to add to their menus, which dishes to remove and which underperforming stores to close. They also use BI for tactical matters such as renegotiating contracts with food suppliers and identifying opportunities to improve inefficient processes.Because restaurant chains are so operations-driven, and because BI is so central to helping them run their businesses, they are among the elite group of companies across all industries that are actually getting real value from these systems.

One crucial component of BI—business analytics—is quietly essential to the success of companies in a wide range of industries, and more famously essentialto the success of professional sports teams such as the Boston Red Sox, Oakland A’s and New England Patriots.

With an analytical approach, the Patriots managed to win the Super Bowl three times in four years. The team uses data and analytical models extensively, both on and off the field. In-depth analytics help the team select players and stay below the NFL salary cap. Patriots coaches andplayers are renowned for their extensive study of game film and statistics, and Coach Bill Belichick reads articles by academic economists on statistical probabilities of football outcomes. Off the field, the team uses detailed analytics to assess and improve the "total fan experience." At every home game, for example, 20 to 25 people have specific assignments to make quantitative measurements of thestadium food, parking, personnel, bathroom cleanliness and other factors.

In retail, Wal-Mart uses vast amounts of data and category analysis to dominate the industry. Harrah’s has changed the basis of competition in gaming from building megacasinos to analytics around customer loyalty and service. Amazon and Yahoo aren't just e-commerce sites; they are extremely analytical and follow a "testand learn" approach to business changes. Capital One runs more than 30,000 experiments a year to identify desirable customers and price credit card offers.

Who should lead the way?

Sharing is vital to the success of BI projects, because everyone involved in the process must have full access to information to be able to change the ways that they work. BI projects should start with topexecutives, but the next group of users should be salespeople. Because their job is to increase sales and because they’re often compensated on their ability to do so, they’ll be more likely to embrace any tool that will help them do just that—provided, of course, the tool is easy to use and they trust the information.

With the help of BI systems, employees modify their individual and team work...