UNIT 1

Introduction to Business Intelligence (BI)

Business Intelligence Introduction :

Business intelligence refers to a collection of mathematical models and analysis

methods that utilize data to produce valuable information and insight for making
important decisions. Business intelligence (BI) is a technology-driven process for
analyzing data and delivering actionable information that helps executives, managers
and workers make informed business decisions. As part of the BI process,
organizations collect data from internal IT systems and external sources, prepare it for
analysis, run queries against the data and create data visualizations, BI dashboards and
reports to make the analytics results available to business users for operational
decision-making and strategic planning. Business intelligence (BI) is a set of
technological processes for collecting, managing and analyzing organizational data to
yield insights that inform business strategies and operations.
Leveraging Data and Knowledge for BI :

The ability to leverage data requires that we develop an overall architecture and
strategy for it. Ensuring that the data models which support the key functional domains
are appropriate and that data quality is consistent is key. Likewise with respect to
security, access control, roles and the stewarding of data in the organisation.
Understanding who owns the data, which systems master it, which systems need
access to that master data, how we enrich it and what events generate it, all help shape
the overall strategy. There may be an industry data model the organisation can leverage
or should be working with. For some organisations there may be a competitive edge to
be yielded from its data if it is leveraged the right way. Organisations need to
understand the value of their data and see it as an asset. When the data is understood,
an organisation’s ability to extract value from it is driven by their capability in integration
terms. Organisations with a high level of integration capability possess a strategy for it,
an overall integration framework, the technical skills with the tooling, the body of
knowledge associated with the discipline of integration and the understanding of
how/when to lean on the technology.

BI Components :

Main Components of Business Intelligence System:

1. Data Source
2. Data Mart / Data Warehouse
3. Data Exploration
4. Data Mining
5. Optimization
6. Decisions

1. Data Source:

To begin, the first step is gathering and consolidating data from an array of primary and
secondary sources. These sources vary in origin and format, consisting mainly of
operational system data but also potentially containing unstructured documents like
emails and data from external providers.

2. Data Mart / Data Warehouse:

Through the utilization of extraction and transformation tools, also known as extract,
transform, load (ETL), data is acquired from various sources and saved in databases
designed specifically for business intelligence analysis. These databases, commonly
known as data warehouses and data marts, serve as a centralized location for the
gathered data.

4. Data Exploration:

The third level of the pyramid offers essential resources for conducting a passive
analysis in business intelligence. These resources include query and reporting systems,
along with statistical methods. These techniques are referred to as passive because
decision makers must first develop ideas or establish criteria for data extraction before
utilizing analysis tools to uncover answers and confirm their initial theories. For
example, a sales manager might observe a decrease in revenues in a particular
geographic region for a specific demographic of customers. In response, she could
utilize extraction and visualization tools to confirm her hypothesis and then use
statistical testing to validate her findings based on the data.

5. Data Mining:

The fourth level, known as active business intelligence methodologies, focuses on

extracting valuable information and knowledge from data. Part II of this book will delve
into various techniques such as mathematical models, pattern recognition, machine
learning, and data mining.

5. Optimization:

As and ascend the pyramid, and encounter optimization models that empower and to
choose the most optimal course of action among various alternatives, which can often
be quite extensive or even endless. These models have also been effectively
incorporated in marketing and logistics

6. Decisions:

At last, the pinnacle of the pyramid reflects the ultimate decision made and put into
action, serving as the logical end to the decision-making process. Despite the
availability and effective utilization of business intelligence methodologies, the decision
still lies in the hands of the decision makers, who can incorporate informal and
unstructured information to fine-tune and revise the suggestions and outcomes
generated by mathematical models.

Business Intelligence: Advantages & Disadvantages

Advantages of Business Intelligence (BI)

✅ Improved Decision-Making: Provides real-time data and insights, allowing users to

make informed decisions based on accurate and up-to-date information.

✅ Increased Efficiency: Automates manual data analysis, saving time and resources
for other business tasks.

✅ Better Data Management: Helps organize and manage data, making it easier to
find the necessary information for decision-making.

✅ Greater Visibility: Offers a comprehensive view of business operations, helping

identify areas that need improvement.

✅ Enhanced Customer Understanding: Analyzes customer behavior and

preferences, allowing businesses to tailor products and services to meet their needs.

✅ Cost Savings: Identifies inefficiencies and cost-saving opportunities, leading to

increased revenue and profitability.

✅ Better Forecasting: Uses historical data to predict future trends, enabling

businesses to plan more effectively.

✅ Competitive Advantage: Provides valuable insights that help businesses stay

ahead of competitors by making data-driven strategic decisions.

✅ Improved Collaboration: Facilitates data sharing between teams and departments,

enhancing teamwork and decision-making.

✅ Better Monitoring: Tracks key performance indicators (KPIs) like revenue,

customer satisfaction, and employee performance, ensuring businesses stay on track

Disadvantages of Business Intelligence (BI)

❌ Complex Implementation: Setting up and maintaining BI systems can be difficult,

❌ High Costs: BI tools can be expensive to purchase and implement.​
especially for small businesses.​

❌ Data Accuracy Issues: If data is inconsistent, outdated, or incorrect, BI insights

❌ Security Risks: BI systems handle sensitive data, making them vulnerable to
may not be reliable.​

❌ IT Dependency: BI solutions often require IT support, which may slow down data
security breaches if not properly protected.​

access for non-technical users.​

❌ Scalability Limitations: Some BI systems struggle to handle very large amounts of
data efficiently.

Applications of Business Intelligence (BI)

📌 1. Decision-Making:
●​ Helps company leaders make informed decisions based on real-time and
historical data.
●​ Supports strategic planning, budgeting, and performance evaluation.

📌 2. Data Mining:
●​ Extracts useful knowledge and patterns from large datasets.
●​ Identifies trends, correlations, and anomalies to improve business strategies.

📌 3. Operational Analytics & Management:

●​ Monitors and optimizes day-to-day business operations.
●​ Improves supply chain management, inventory control, and customer service.

📌 4. Predictive Analytics:
●​ Uses past data to forecast future trends, risks, and opportunities.
●​ Helps businesses anticipate market demands, customer behavior, and potential
issues.

📌 5. Prescriptive Analytics:
●​ Provides recommendations and actionable insights for better decision-making.
●​ Uses AI and machine learning to suggest the best possible business strategies.

📌 6. Structuring Unstructured Data:

●​ Converts raw, unstructured data (e.g., social media, emails, customer reviews)
into meaningful structured data for analysis.

📌 7. Decision Support System (DSS):

●​ Aids businesses in complex decision-making by analyzing large volumes of data
and generating reports.

📌 8. Executive Information System (EIS):

 ●​ Provides high-level business insights and summaries for top executives.
●​ Helps in monitoring company performance and making strategic decisions.

Business Intelligence Tools and Software

🔹 Tableau: A BI and data visualization tool for creating interactive dashboards and
sharing insights.

🔹 Microsoft Power BI: A cloud-based BI tool for connecting to multiple data sources
and generating visual reports.

🔹 QlikView: A BI platform for creating interactive dashboards and exploring data

innovatively.

🔹 SAP BusinessObjects: A comprehensive BI suite with data visualization, reporting,

and analytics tools.

🔹 IBM Cognos: A performance management and BI tool for building reports,

scorecards, and dashboards.

🔹 Oracle Business Intelligence: A full BI suite offering data visualization, reporting,

and analytics.

🔹 MicroStrategy: A BI and data visualization tool for creating dynamic dashboards

and reports.

🔹 SAS Business Intelligence: A complete BI suite with data visualization, reporting,

and analytics capabilities.

🔹 TIBCO Spotfire: A BI and data visualization tool for interactive dashboard creation
and data exploration.

🔹 Looker: A BI and data visualization tool for building interactive dashboards and
exploring data.

BI Dimensions and Information Hierarchy

📌 BI Dimensions
Business Intelligence (BI) dimensions refer to the different perspectives from
which data can be analyzed to gain insights.

These dimensions help businesses analyze data from multiple angles for better
decision-making.
Key BI dimensions include:

1️⃣ Time Dimension: Analyzing data over different time periods (daily, monthly,
yearly) to identify trends.​
2️⃣ Product Dimension: Evaluating sales, performance, and profitability of different
products or services.​
3️⃣ Customer Dimension: Understanding customer behavior, preferences, and
demographics.​
4️⃣ Geographical Dimension: Analyzing data based on locations, regions, or
countries.​
5️⃣ Department/Business Unit Dimension: Comparing performance across
different teams, departments, or business units.​
6️⃣ Supplier Dimension: Monitoring supplier performance, delivery efficiency, and
cost-effectiveness.

📌 Information Hierarchy in BI
Information Hierarchy : The Information Hierarchy graph below organizes data,
information, knowledge, and wisdom in layers, with an increasing level of
abstraction and addition of knowledge, starting from the bottom-most data layer.
Various analytical systems help to transform content from one layer to a higher
one so as to be better comprehended by analysts.

Data Layer
 Data are transactional, physical, and isolated records of activity (e.g., business
transactions, customer interactions, facts or figures obtained from experiments
or surveys). Data are, for example, numbers, texts, images, videos, and sounds,
in a form that is suitable for storage or processing by a computer. Data are the
most basic level and by itself have little purpose and meaning.

Information Layer
Information is the semantic interpretation of data, and may represent
relationships among data with meaning and purpose (e.g., a customer called for a
specific type of support). Information therefore has been organized and
presented in a systematic fashion to clarify the underlying meaning.

Knowledge Layer
Knowledge is the general awareness or possession of information, facts, ideas,
truths, or principles. Knowledge is generally personal and subjective. Knowledge
can also be extracted from underlying information by applying some form of
induction.

Wisdom Layer
Wisdom is the knowledge of what is true or right coupled with just judgment as to
action. Wisdom requires a specific kind of knowledge and experience to make the
right decisions and judgments in actions.

Business Intelligence (BI) and Business Analytics (BA)

1. Definition:

●​ Business Intelligence (BI):​

Business Intelligence refers to the technologies, applications, and
practices used to collect, integrate, analyze, and present business data to
support better decision-making. BI systems are often data-driven Decision
Support Systems (DSS) that help businesses understand historical,
current, and predictive views of their operations. It primarily focuses on
analyzing past data to improve current business performance.​

●​ Business Analytics (BA):​

Business Analytics focuses on using historical data and statistical
 techniques to analyze past business performance and generate insights for
future planning. BA involves using advanced mathematical and statistical
models to predict future outcomes, identify growth opportunities, and
mitigate risks.​

2. Difference Between Business Intelligence and Business Analytics:

Aspect Business Intelligence (BI) Business Analytics (BA)

Focus Analyzes past and present data for Analyzes past data to predict
current business needs. and improve future business
operations.

Objective Supports daily business operations Aims at altering business

and decision-making. operations to improve
efficiency and growth.

Tools SAP BusinessObjects, QlikSense, Statistical tools, Excel,

TIBCO, Power BI, Tableau. Google Docs, MS Office, R,
Python.

Applicatio Primarily used by all large-scale Used by companies aiming

n companies for operational for future growth and
decisions. efficiency.

Data Uses historical and current data to Uses historical data to

Usage analyze performance. forecast future trends and
drive decision-making.
Key Skills Data collection, data management, Strategic thinking,
domain knowledge, and communication skills, and
understanding of data sources. presentation abilities.

3. Similarities Between Business Intelligence and Business Analytics:

●​ Data Analysis: Both BI and BA focus on analyzing data to gain insights that
can inform decision-making and improve business performance.
●​ Data Collection: Both fields involve collecting large amounts of data from
various sources, including internal databases, external data sources, and
social media.
●​ Tools & Technologies: Both use similar tools like data mining, data
visualization, and predictive analytics to process and transform data into
actionable insights.
●​ Improved Decision-Making: The ultimate goal of both BI and BA is to
support business decision-making by providing insights from data.

4. Applications of Business Intelligence and Business Analytics:

●​ Business Intelligence (BI):​

○​ Decision-Making: BI helps in making informed decisions based on

past and present data trends.
○​ Performance Monitoring: It tracks business performance across
departments and functions.
○​ Reporting & Visualization: BI tools are used for generating reports
and visualizations, such as dashboards and scorecards.
○​ Cost Efficiency: Identifying cost-saving opportunities by analyzing
current business operations.
●​ Business Analytics (BA):​

○​ Predictive Analytics: BA helps businesses forecast future trends and

outcomes, such as sales, customer behavior, and market changes.
○​ Strategic Planning: It aids in setting long-term goals and developing
strategies for business growth.
○​ Risk Management: BA can identify potential risks and suggest ways
to mitigate them.
○​ Optimization: By analyzing performance data, BA suggests
improvements for business processes and efficiency.