Posted by: A.R. Cherian | March 2, 2010

The Value Proposition for Business Intelligence

I’m learning about Business Intelligence (BI) in a class at UNR called Data Resources Management. BI is a hot topic right now in IT circles and departments. What is it and what value can it bring to your business?

In essence, “BI is any activity, tool, or process used to obtain the best information to support the process of making decisions” (Scheps, Swain: Business Intelligence for Dummies, Wiley Publishing, 2008). Scheps and Swain go on to say that BI gives your company timely, accurate, high-value, and actionable business insights, and the work processes and technologies used to obtain them.

In layman’s terms, BI is processes and technologies that are used to make you rely less on your gut and more on evidence and data to support decisions that your company faces.

There is mounting research and numerous examples that companies that make better decisions with the use of BI are more successful in the long term. Leaders in all types of organizations are faced with tough decisions daily. The difference between the roads taken and the roads not taken can make all the difference between successful and unsuccessful companies. Anything that can help decision makers make decisions intelligently and rely less on their gut is valuable.

Here are some examples how companies are using BI today (not an exhaustive list by all means):

  • Netflix (uses BI to customize services and make decisions that media moguls have always made by gut)
  • Rensselaer Polytechnic University (uses BI for which applicants to accept and how much financial aid they should receive)
  • UPS (logistics)
  • FedEx (logistics)
  • Walmart (supply chain management)
  • Amazon (customized web-site and analytics)
  • Oakland A’s (personnel hiring – written about in the book Moneyball)
  • Harrah’s (customer loyalty rewards)
  • Capital One (20% growth in EPS for many consecutive years)

These are all large for-profit corporations with the exception of RPI. However, BI can be used in small-medium companies and non-profits as well. BI has become widespread enough and cheap enough that organizations or any kind can employ BI of some level.

BI’s value proposition from the alphabet-soup of similar systems that came (and went) before it such as DSS, MIS, EIS is that BI has to be used across the entire company, rather than just in the realm of one department or technical-wizards. BI can give insights into your business that are not obvious. Every company has smart people who can connect the obvious dots. BI connects the dots that are not obvious. This can give your company a competitive edge that competitors cannot match.

So, why aren’t more companies using BI right now?

  • Don’t have the time and/or money that is necessary for it
  • Not willing to gather the necessary data
  • Not willing to develop the metrics that will measure business success
  • Not willing to study or use statistics
  • Do not see the value of it or cannot quantify a return-on-investment (ROI)

The fact that many businesses are not using BI right now can give you a competitive advantage if you decide to invest in it. Being different makes you remarkable if you apply it correctly.

Lastly, using BI is not easy nor is it automatic. It’s important to not to equate BI with only software and hardware. It’s not enough to install software and “flip a switch.” Good BI involves good people who can use the system and derive meaning from it. BI involves a change in management style and organizational structure for your company to truly differentiate itself. In my next post I’ll talk about some of the things it takes to make BI work for your company.

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Responses

  1. I agree with you that BI is more than simply software and hardware. Thinkers are also required throughout the process. More at:

    http://wjmc.blogspot.com/2010/04/business-intelligence-requires-thinkers.html

    Thanks for the opportunity to comment…

    • William, you are right. It’s so easy to buy the hype from all the software vendors when the hard part is putting in the people and processes in your company before you implement hardware and software for BI. Thanks for commenting!


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