CHAPTER 10: Business Intelligence

BUSINESS INTELLIGENCE CHAPTER 10: BUSINESS INTELLIGENCE 10.1 Managers and Decision Making 10.2 What Is Business Intelligence? 10.3 Business Intelligence Applications for Data Analysis 10.4 Business Intelligence Applications for Presenting Results 10.5 Business Intelligence in Action: Corporate Performance Management Copyright John Wiley & Sons Canada

Copyright John Wiley & Sons Canada LEARNING OBJECTIVES Identify the phases in the decision-making process, and use a decision-support framework to demonstrate how technology supports managerial decision making. Describe and provide examples of the three different ways in which organizations use business intelligence (BI). Specify the BI applications available to users for data analysis, and provide examples of how each might be used to solve a business problem at your university. Copyright John Wiley & Sons Canada

LEARNING OBJECTIVES (CONTINUED) Describe three BI applications that present the results of data analyses to users, and offer examples of how businesses and government agencies can use each of these technologies. Describe corporate performance management, and provide an example of how your university could use CPM. Copyright John Wiley & Sons Canada

CASE 10.1 CHAPTER OPENING CASE QUALITY ASSURANCE AT DAIMLER AG The Problem Dating back to the 1980s, German automaker Daimler AG housed warranty data on its Quality Information System (QUIS), a mainframe-based platform and the diagnostic and warranty data were located in different information silos. The organization was unable to take full advantage of the data and the diagnosis database had reached the limits of its capacity. Quality assurance: the company guarantees complete customer satisfaction. Source: Alperium/Shutterstock Copyright John Wiley & Sons Canada

CASE 10.1 CHAPTER OPENING CASE QUALITY ASSURANCE AT DAIMLER AG The IT Solution Over a three-year period, Daimler consolidated its data on a data warehouse, making these data available to users through a shared interface. The new system is called Advanced Quality Analysis (AQUA).The company intended AQUA to provide support for two strategic goals: (1) to increase customer satisfaction and (2) to reduce costs. Copyright John Wiley & Sons Canada

CASE 10.1 CHAPTER OPENING CASE QUALITY ASSURANCE AT DAIMLER AG The Results AQUA has enabled Daimler to achieve deeper insights into how to optimize its production processes. Defects can be detected more quickly, resolved, and eliminated from future models. AQUA supports Daimler’s strategic goals of quality leadership, customer satisfaction, and profitability. Copyright John Wiley & Sons Canada

CASE 10.1 CHAPTER OPENING CASE QUALITY ASSURANCE AT DAIMLER AG What We Learned From This Case BI enables decision makers to quickly ascertain the status of a business enterprise by examining key information BI systems provide business intelligence that you can act on in a timely fashion. Copyright John Wiley & Sons Canada

10.1 Managers and Decision Making Management is a process by which an organization achieves its goals through the use of resources (people, money, materials, and information). Management is a process by which an organization achieves its goals through the use of resources (people, money, materials, and information). These resources are considered to be inputs. Achieving the organization’s goals is the output of the process. The ratio between the input & outputs is an indication of the organization’s productivity. Copyright John Wiley & Sons Canada

THE MANAGER’S JOB AND DECISION MAKING Managers have three basic roles (Mintzberg 1973) : Interpersonal Informational Decisional Interpersonal roles: figurehead, leader, liaison Informational roles: monitor, disseminator, spokesperson, analyzer Decisional roles: entrepreneur, disturbance handler, resource allocator, negotiator Copyright John Wiley & Sons Canada

THE MANAGER’S JOB & DECISION MAKING (CONTINUED) Decisions and Decision making Decision is a choice among two or more alternatives that individuals and groups make. Decision making is a systematic process. Economist Herbert Simon (1977) described decision making as composed of three major phases: intelligence, design, and choice. Copyright John Wiley & Sons Canada

FIGURE 10.1 DECISION MAKING PROCESS The decision-making process starts with the intelligence phase, in which managers examine a situation and identify and define the problem or opportunity. In the design phase, decision makers construct a model for the situation. They do this by making assumptions that simplify reality and by expressing the relationships among all the relevant variables. Managers then validate the model by using test data. Finally, decision makers set criteria for evaluating all of the potential solutions that are proposed. The choice phase involves selecting a solution or course of action that seems best suited to resolve the problem. This solution (the decision) is then implemented. Implementation is successful if the proposed solution solves the problem or seizes the opportunity. If the solution fails, then the process returns to the previous phases. Copyright John Wiley & Sons Canada

WHY MANAGERS NEED IT SUPPORT The number of alternatives is constantly increasing. Most decisions must be made under time pressure. Decisions are becoming more complex. Decision makers, as well as the information, can be situated in different locations. What Information Technologies Are Available to Support Managers? discovery, communication, and collaboration tools (BI) data warehousing expert systems (ES) and neural networks Copyright John Wiley & Sons Canada

FIGURE 10.2 A FRAMEWORK FOR COMPUTERIZED DECISION ANALYSIS The Decision Matrix: Lower-level managers usually perform the structured and operational-control oriented tasks in cells 1, 2, and 4. (Blue color above). Middle managers and professional staff usually perform the tasks in cells 3, 5, and 7. (Orange color above). Senior executives usually perform the tasks in cells 6, 8, and 9. (Yellow color above.) Copyright John Wiley & Sons Canada

Copyright John Wiley & Sons Canada PROBLEM STRUCTURE The first dimension deals with the problem structure, where the decision making processes fall along the continuum ranging from highly structured to highly unstructured decisions. Structured Semi-structured Unstructured Example: Evaluating Employees Structured problems are routine and repetitive problems for which standard solutions exist. Unstructured problems are fuzzy, complex problems for which there are no cut-and-dried solutions. Semistructured problems are problems in which only some of the decision process phases are structured. Example: Inventory Control Example: New Services Copyright John Wiley & Sons Canada

THE NATURE OF DECISIONS the second dimension of decision support deals with the nature of decisions. Three categories of managerial decision making: Operational control Management control Strategic planning Operational control involves executing specific tasks efficiently and effectively. Management control involves decisions concerning acquiring and using resources efficiently in accomplishing organizational goals. Strategic planning involves decisions concerning the long range goals and policies for growth and resource allocation. Copyright John Wiley & Sons Canada

10.2 WHAT IS BUSINESS INTELLIGENCE? Clicking on the links will take you to each company’s home page SAS IMB SAP Business intelligence (BI) is a broad category of applications, technologies, and processes for gathering, storing, accessing, and analyzing data to help business users make better decisions. Clicking on the logos above right will take you to each company’s home page. Copyright John Wiley & Sons Canada

THE SCOPE OF BUSINESS INTELLIGENCE Smaller Organizations Excel spreadsheets Larger Organizations Data mining, predictive analytics, dashboards and data visualization Not all organizations use BI in the same way. For example, some organizations employ only one or a few applications, while others use enterprise-wide BI. Copyright John Wiley & Sons Canada

THE SCOPE OF BI (CONTINUED) Three specific BI targets that represent different levels of change: development of one or a few related BI applications (Example: campaign management in marketing) development of infrastructure to support enterprise-wide BI (Example: enterprise data warehouse) support for organizational transformation (Example: support for new business model) These targets differ in terms of their focus; scope; level of sponsorship, commitment, and required resources; technical architecture; impact on personnel and business processes; and benefits. Copyright John Wiley & Sons Canada

10.3 BUSINESS INTELLIGENCE APPLICATIONS FOR DATA ANALYSIS Multidimensional Analysis or Online Analytical Processing (OLAP) Data Mining Decision Support Systems A good strategy to study the ways in which organizations use business intelligence applications is to consider how the users analyze data, how the results of their analyses are presented to them, and how managers and executives implement these results. A variety of BI applications for analyzing data are available. They include multidimensional analysis (also called on-line analytical processing, or OLAP), data mining, and decision support systems. Copyright John Wiley & Sons Canada

MULTIDIMENSIONAL ANALYSIS OR ONLINE ANALYTICAL PROCESSING (OLAP) “slices & dices” data stored in a dimensional format, drills down in the data to greater detail, and, aggregates the data. BI applications include on-line analytical processing (OLAP), also referred to as [KT]multidimensional analysis capabilities. Copyright John Wiley & Sons Canada

Copyright John Wiley & Sons Canada DATA MINING Data mining can perform two basic operations: predicting trends and behaviours identifying previously unknown patterns Data mining: is the process of searching for valuable business information in a large database, data warehouse, or data mart. Numerous data mining applications are used in a variety of industries such as retailing and sales, banking, manufacturing and production, insurance, police work, health care, and, marketing. Copyright John Wiley & Sons Canada

Copyright John Wiley & Sons Canada 10.1 IT’S ABOUT BUSINESS Data Analytics Helps Kelley Blue Book Remain Competitive Since 1926, Kelley Blue Book has been a publishing company known for its guide to used and new car values. They needed to devise new strategies to generate revenue and compete with new on-line rivals. Kelley invested in a data warehouse and it purchased business intelligence and data analytics software from MicroStrategy and the SAS Institute in order to analyze its warehouse data more efficiently and effectively. The bottom line is that data analytics has enabled Kelley to provide more rapid and accurate quotes, develop new sources of revenue, and remain competitive with the on-line companies. Clicking on the links in this slide takes you to the company’s website. Copyright John Wiley & Sons Canada

DECISION SUPPORT SYSTEMS (DSSS) DSS capabilities Sensitivity analysis What-if analysis Goal-seeking analysis Decision support systems (DSSs) combine models and data in an attempt to analyze semi-structured and some unstructured problems with extensive user involvement. Models are simplified representations, or abstractions, of reality. DSSs enable business managers and analysts to access data interactively, to manipulate these data, and to conduct appropriate analyses. Sensitivity analysis is the study of the impact that changes in one or more parts of a decision-making model have on other parts. What-if analysis attempts to predict the impact of a change in the assumptions (input data) on the proposed solution. Goal-seeking analysis represents a “backward” solution approach. It attempts to find the value of the inputs necessary to achieve a desired level of output. Copyright John Wiley & Sons Canada

10.4 BUSINESS INTELLIGENCE APPLICATIONS FOR PRESENTING RESULTS Capabilities of Dashboards: Drill-down Critical success factors (CSFs) Key performance indicators (KPIs) Status access Trend analysis Exception reporting Dashboards evolved from executive information systems, which were information systems designed specifically for the information needs of top executives. Today all employees, business partners, and customers can use digital dashboards. Click on Dashboards in this slide to watch a 10-minute online demonstration of a digital dashboard. See Table 10.1 for the full descriptions of the capabilities of dashboards highlighted in this slide. Copyright John Wiley & Sons Canada

FIGURE 10.3 SAMPLE PERFORMANCE DASHBOARD A dashboard provides easy access to timely information and direct access to management reports. It is user friendly, is supported by graphics, and, most importantly, enables managers to examine exception reports and drill down into detailed data. Copyright John Wiley & Sons Canada

FIGURE 10.4 BLOOMBERG TERMINAL An example of a dashboard is the Bloomberg Terminal. Bloomberg LP, a privately held company, provides a subscription service that sells financial data, software to analyze these data, trading tools, and news (electronic, print, TV, and radio). All of this information is accessible through a colour-coded Bloomberg keyboard that displays the desired information on a computer screen, either the user’s or one that Bloomberg provides. Users can also set up their own computers to access the service without a Bloomberg keyboard. The subscription service plus the keyboard is called the Bloomberg Terminal. Clicking on the graphic in this slide takes you to the “Bloomberg Terminal” website. Source: Carlos Osario/Zuma Press Copyright John Wiley & Sons Canada

FIGURE 10.5 HUMAN RESOURCES DASHBOARD/SCORECARD This slide displays a human resources dashboard/scorecard developed by iDashboards (www.idashboards.com), one of the leading BI software vendors. At a glance, users can see employee productivity, hours, team, department, and division performance in graphical, tabular, summary, and detailed form. The selector box to the left enables the user to easily change between specific analysts to compare their performance. Source: MicroStrategy. Copyright John Wiley & Sons Canada

FIGURE 10.6 MANAGEMENT COCKPIT A management cockpit is a strategic management room containing an elaborate set of dashboards that enable top-level decision makers to pilot their businesses better. The goal is to create an environment that encourages more efficient management meetings and boosts team performance via effective communication. To help achieve this goal, the dashboard graphically displays key performance indicators and information relating to critical success factors on the walls of a meeting room called the management cockpit room (illustrated in this slide). The cockpit-like arrangement of instrument panels and displays helps managers visualize how all the different factors in the business interrelate. Copyright John Wiley & Sons Canada

DATA VISUALIZATION TECHNOLOGIES Geographic Information Systems is a computer-based system for capturing, integrating, manipulating, and displaying data using digitized maps Reality Mining allows analysts to extract information from the usage patterns of mobile phones and other wireless devices. Example: integration of GIS and GPS Data visualization: after data have been processed, they can be presented to users in visual formats such as text, graphics, and tables. Click on the link in this slide that that you to esri Canada a GIS solutions provider. Copyright John Wiley & Sons Canada

Copyright John Wiley & Sons Canada FIGURE 10.7 REAL TIME BI CBS (Canada Blood Services) keeps track of six distinct metrics using its BI software, including blood inventory levels, donor appointment cancellation rates, donor no-show rates, and blood collection volume. These indicators might signal a change in supply, which is critical for hospitals across Canada—the main customers of CBS. These indicators are updated in real time instead of once or twice a week as it used to be. Figure 10.7 shows a screenshot of CBS’s real-time BI dashboard. Copyright John Wiley & Sons Canada

10.5 BUSINESS INTELLIGENCE IN ACTION: CORPORATE PERFORMANCE MANAGEMENT Click below to review corporate management performance solutions at http://www.phophix.com Corporate performance management (CPM) is the monitoring and managing of an organization’s performance according to key performance indicators (KPIs) such as revenue, return on investment (ROI), overhead, and operational costs. Click on the graphic to review corporate management performance solutions at http://www.prophix.com/ Copyright John Wiley & Sons Canada

Copyright John Wiley & Sons Canada CHAPTER CLOSING The three-step decision-making process includes: intelligence, design, and choice. There are three major ways that organizations use BI: development of one or a few related BI applications development of infrastructure to support enterprise-wide BI support for organizational transformation Copyright John Wiley & Sons Canada

CHAPTER CLOSING (CONTINUED) BI applications available to analyze data include multidimensional analysis, data mining, and decision support systems. Three BI applications that present the results of data analyses to users include dashboards, geographic information systems and reality mining Corporate performance management (CPM) is involved with monitoring and managing an organization’s performance according to key performance indicators (KPIs) and operational costs. Copyright John Wiley & Sons Canada

Copyright John Wiley & Sons Canada