Unit 1

BIDA

Q1. Define Business Intelligence and Explain the main purpose of Business
Intelligence System and give their benefits.
Ans.
1. Business Intelligence (BI) is the process of collecting, analysing, and
using data to help businesses make better decisions.
2. It uses tools and techniques to turn raw data into meaningful
information, such as reports, charts, and dashboards, that show trends,
patterns, and insights.
3. With the help of Business Intelligence, businesses can:
 Understand Performance: See how well the company is doing.
 Identify Trends: Spot changes in customer behaviour or market
conditions.
 Make Informed Decisions: Use data to decide what to do next.
 Solve Problems: Analyse data to find the cause of issues.
4. BI combines technology, data, and analysis to help businesses work
smarter and achieve their goals.
5. Business intelligence is about using data to make better decisions. It
turns data into useful information and knowledge.

The main purpose of Business Intelligence (BI) is to help businesses make

better, data-driven decisions. It does this by turning raw data into meaningful
and actionable information that can guide decision-making.
 Benefits of a Business Intelligence (BI) System:

This diagram compares two approaches to decision-making: traditional

decision-making versus decision-making enhanced by business intelligence
(BI).

Top Section: Traditional Decision-Making

1. Analysis and Questions → Alternative Actions → Decision:
o In this process, a person analysis the situation and generates
questions.
o Based on this analysis, they evaluate a limited set of alternative
actions.
o Finally, they make a decision based on their understanding,
experience, and judgment.
Bottom Section: Decision-Making with Business Intelligence
2. Analysis and Questions → Business Intelligence → Alternative Actions
→ Decision:
o Business intelligence (BI) tools and systems are introduced into the
decision-making process.
o These systems process large volumes of data, consider more
alternative actions, and provide insights through advanced
analytics.
o The decision-maker is supported by accurate, data-driven
conclusions generated by the BI system.

Q2. Explain the term Data, Information and Knowledge.

Ans.
Data:
 Data means raw facts or details that have not been processed or
organized yet. It can be numbers, words, pictures, sounds, or videos.
 Data is collected to be used for a specific purpose, like studying
something or solving a problem.
 Data is the starting point of information and knowledge.
 It gives basic details about things, events, or situations but doesn't
explain them on its own.
 Data can come in various forms, such as numbers, text, images, audio, or
video, and is typically gathered from observations, experiments, surveys,
sensors, or other recording methods.
 By organizing, analysing, and contextualizing data, we can derive
meaningful patterns, trends, or insights, transforming it into useful
information.
 Data basically acts as the building blocks for understanding and decision-
making, much like bricks are the fundamental units in constructing a
structure. Without processing and context, data remains a raw, unrefined
resource.
Information:
  Information is what you get when raw data is processed to make it useful
and meaningful.
 This involves organizing, analysing, and understanding the data to
answer questions or provide insights.
 Data is raw and not yet useful, while information is organized and
meaningful.
 Information helps people understand things better or make decisions in
a specific area.
 For example, in a retail company, a sales manager doesn't just care about
raw data like the number of receipts or purchases.
 They need information that helps them see trends or changes in how
customers are behaving.
 In summary, information is data that has been organized to make sense
and be useful. It turns raw facts into helpful insights, helping people
make decisions.

Knowledge:
 Knowledge is what happens when we use information to make decisions
and take action.
 It is the process of using information, along with the experience and
skills of those making decisions, to solve problems and make
improvements in a specific area.
 For example, if a retail company sees that customers near a new
competitor are buying less, that's useful information. It becomes
knowledge when the company takes action, like offering free home
delivery to keep customers from shopping with the competitor.
 Knowledge can be gained in two main ways:
o By simply looking at information and deciding what to focus on,
based on experience and expertise.
o By using advanced tools like math models or computer programs
to analyse the data more deeply and find new insights.

In short, knowledge is about using information to make smart decisions

and take actions that improve things.
Q3. Explain Business Intelligence Architecture.
Ans.
Business Intelligence Architecture

The architecture of a business intelligence system includes three major

components.
Data Sources:
 The first step is to collect and combine data from different places.
 These sources can be very different from each other.
 Most of the data comes from systems that run day-to-day operations,
but it can also include things like emails and data from outside providers.
 Data sources are places where we get information from. The first step is
to collect data from both main sources (like daily business systems) and
other outside sources (such as research reports or data from third-party
providers).
 The data can be different types. Some of it is well-organized, like
numbers in a spreadsheet, while other data might be messy or
unorganized, like emails or text documents. The goal is to bring all this
data together so we can use it to understand things better and make
decisions.

Data warehouses and data marts:

Using Extraction and Transformation tools which is known as ETL (Extract,
Transform and Load) data can be gathered from different sources.
ETL tools are used to gather data from different sources, clean it up, and then
store it in databases that help businesses analyse and make decisions.
1. Extract: In this first step, data is collected from different sources, which
could include operational systems, external databases, or even
unstructured data like emails. This data might be in various formats, such
as text, numbers, or images.
2. Transform: Once the data is collected, it often needs to be cleaned and
converted into a format that can be easily used for analysis. This step
might involve removing errors, filling in missing information, or changing
the data into a standard format. The transformation process ensures that
the data is accurate, consistent, and ready for analysis.
3. Load: Finally, the cleaned and transformed data is loaded into a storage
system, such as a database. These databases are designed to hold large
amounts of data and support business intelligence (BI) tools that analyse
it.
The two main types of databases used for this purpose are data warehouses
and data marts:
 Data Warehouse: This is a large, central repository where data from
different sources is stored and organized for complex analysis. It's
designed to hold vast amounts of historical data and make it available for
decision-making across the entire organization.
 Data Mart: A smaller, more focused version of a data warehouse,
designed to store data relevant to a specific department or business
area, such as marketing or sales.

Business intelligence methodologies:

 Business intelligence methods involve collecting and analysing data to
help decision-makers.
 The data is used in mathematical models and analysis tools to support
decision-making.
  A business intelligence system may include various applications to assist
with decision support.

Q4. Explain the main components of Business Intelligence System.

Ans.
The main components of a business intelligence system:

The above pyramid shows the building blocks of a business intelligence system.

1. Data Exploration:
At the third level of data exploration, we use tools to analyse data, like
reports and simple statistics. These tools are called "passive" because
you first need to have a question or idea to check.
For example, if a sales manager notices sales are down in one area, she
can use these tools to look at the data, create charts, and confirm if her
idea about the problem is correct.
2. Data Mining:
The fourth level focuses active tools to find information and patterns in
data. These include machine learning, data mining, and pattern
recognition.
Unlike the previous level, you don’t need to have a question or guess
first. These tools automatically find new patterns and give you new
insights.

3. Optimization:
At the next level of the pyramid, we find optimization models. These
models help find the best solution from many possible options,
sometimes even an unlimited number.
For example, these models can be used in fields like marketing and
logistics to make better decisions, as explained in later chapters.

4. Decisions:
At the top of the pyramid is the final decision-making stage. This is
where a specific decision is chosen and implemented, completing the
decision-making process.
Even with advanced tools and methods, the final choice is made by
decision-makers. They can also use informal information or adjust
recommendations from the models to fit the situation better.

As we move up the pyramid, business intelligence tools become more

advanced and active. The roles and skills involved also change:
 At the bottom, tasks are handled by database administrators who
manage the data.
 In the middle, analysts and experts in math and statistics work with
models.
 At the top, decision-makers take charge, using the tools to make final
decisions in their field.
Q5. Explain the phases in development of Business Intelligence System.
Ans.

Phases in development of Business Intelligence System

1. Analysis Phase:
It is the first phase wherein the organization's needs must be clearly
identified. This is done by talking to employees in different roles. The goals,
priorities, costs, and benefits of the project should be clearly defined.

2. Design Phase:
This is the second phase which consist of two parts and focuses on planning
the system’s structure for the future.
o Check current systems: Look at what data tools are already in
place.
o Understand decision-making needs: Figure out what information
is needed to support key decisions.

3. Planning Stage:
In this stage, we figure out what the business intelligence system needs to
do in detail. First, we check the existing data and see if we need more data
from other sources. This helps us design the system’s data structure,
including a main data warehouse and smaller data marts.

4. Implementation and Control:

This phase is the final step in setting up a business intelligence system
and has five parts.
First, the data warehouse and data marts are created to store the
needed data.
To help understand the data, a metadata archive is set up, explaining
what the data means and how it was changed.
Then, ETL (Extract, Transform, Load) procedures are used to get data
from other sources, change it if needed, and put it into the warehouse
and marts.
After that, the main business intelligence tools are created to help
analyse the data.
Finally, the system is tested to make sure it works and then launched for
use.
Q6. Write a note Abstract representation of System.
Ans.

A system is a group of connected parts that work together to achieve a

common goal. Examples of systems include the solar system, the nervous
system in our body, or even the justice system. All systems have boundaries,
which separate what is inside the system from the outside environment. Based
on these boundaries, systems can be:
 Open systems: Things like materials and information can move in and
out of the system freely.
 Closed systems: Nothing goes in or out of the system.

Every system works in three main steps:

1. Input: The system receives resources like materials, services, or
information. For example, a factory receives raw materials to make
products.
 2. System/Transformation Process: The system takes these inputs and
changes them into something useful. This process is controlled by:
o Internal conditions: Things inside the system, like how well it is
organized or how efficient it is.
o External conditions: Things outside the system, like market
demand or customer needs.
3. Output: After processing the inputs, the system produces results. These
results could be products (like cars), services (like repairs), or information
(like reports).
To check how well a system is working, we measure its performance. This
includes factors like:
 Profitability: How much money it earns.
 Quality: How good the results are.
 Dependability: How reliable it is.
 Flexibility: How easily it can adjust to changes.
Some systems also have a feedback mechanism. This means that part of the
output (the result) is sent back into the system as a new input to make it better.
For example, in marketing campaigns, customer feedback helps improve future
advertisements. Systems that use feedback like this are called closed-cycle
systems.
The diagram (Figure 2.1) shows how a system works step-by-step. It starts with
inputs, transforms them, and produces outputs. By clearly defining the
boundaries, inputs, and outputs, this model can describe many real-life
systems, such as how a business operates or how public services are managed.
This makes it a simple and useful way to understand how things work together
in an organized way.
Q7. Give Logical Flow of Problem-solving process.
Ans.

Logical Flow of a Problem-Solving Process visually explains how decisions are

made to solve a problem.
It further includes:

1. Problem:
This represents the issue or challenge that needs to be resolved. It serves
as the starting point for the problem-solving process.
2. Environment:
This refers to the external and internal factors that influence the
situation. The environment can provide constraints (like limited
resources) or opportunities (like helpful tools).
3. Alternatives:
These are the possible solutions or actions you can take to solve the
problem.
o The problem and the environment together help you identify
these alternatives.
o For example, if a company is deciding how to increase sales,
alternatives could include launching a new product or increasing
advertising.
 4. Criteria:
These are the standards or benchmarks used to evaluate the
alternatives. They help you decide which solution is best. For example,
criteria could include cost, time, or expected outcomes.
5. Decision:
This is the final choice made after evaluating all alternatives based on the
criteria. The decision is what you believe will best solve the problem.

Logical Flow:
 The problem and environment helps to identifying alternatives.
 These alternatives are assessed using specific criteria.
 Based on the evaluation, a decision is made.

The diagram shows that problem-solving involves systematically moving from

understanding the problem and its environment to creating and evaluating
options and then making a decision.
Q8. Explain Logical Structure of a decision making process.
Ans.

Logical Structure of the Decision-Making Process explains how decisions are

made in a step-by-step way.

1. Alternative Options:
 These are all the possible choices or solutions you could consider to
solve a problem.
 Example: If you're deciding how to travel, the options might include
driving, taking a train, or flying.
2. Constraints:
 These are the limitations or restrictions that might prevent some options
from being valid.
 Types of constraints include:
o Operational: Whether it fits into current processes or systems.
o Technical: Whether the technology or tools exist to make it
possible.
o Procedural: Rules or steps required to follow.
o Legal: Whether it’s allowed by laws.
o Social: Whether it aligns with societal norms.
o Political: Whether it matches policies or organizational priorities.

3. Feasible Options:
 After removing the ruled-out options, you are left with only the valid or
workable solutions.
 Example: If some travel options are too expensive or not allowed, the
feasible options might be reduced to just driving or taking a train.

4. Criteria:
 The criteria are the factors or rules you use to compare the remaining
options and decide which one is the best.

5. Decision:
 After evaluating the feasible options based on the criteria, you choose
the best one.
 This becomes your final decision.
Q9. Explain the phases in Decision making process.
Ans.

Phases of Decision Making Process

Intelligence:
 In the intelligence phase, the decision-maker's job is to identify and
clearly define the problem in the system. They analyse the situation and
available information to understand the issue and decide on corrective
actions.
 For example, in a project, this phase might involve comparing current
progress with the original plan. It's important not to mistake symptoms
for the actual problem.

Design:
 In the design phase, the decision-maker plans and creates solutions to
solve the problem. Their experience and creativity are important to
develop effective options that achieve the goal.
 If there are only a few options, they can list and evaluate them to find
the best one. However, if there are many options, they use general rules
to narrow them down. For example, these rules might define what
actions are possible based on certain limits or conditions.
Choice:
 After identifying all possible actions, the next step is to evaluate them
based on important factors like performance.
 Optimization models help find the best solution when there are many
choices.
 Decision trees are useful when decisions involve uncertainty.
 These tools are used to pick the best option.

Implementation:
 Once the best option is chosen, it is turned into an action plan.
 This plan assigns tasks and responsibilities to everyone involved to
ensure the solution is carried out properly.

Control:
 After the action is carried out, it is important to check if it meets the
original expectations and goals.
 This involves comparing the planned performance indicators with the
actual results. Any differences are measured and analysed.
 In a well-designed decision support system (DSS), these evaluations
provide valuable lessons and information, which are stored for use in
future decisions.
Q10. Write a note on types of decisions.
Ans.

Decisions are of three types: structured, unstructured, and semi-structured.

Each type is used at different levels of decision-making: strategic, tactical, and
operational. This classification helps in designing Decision Support Systems
(DSS) because similar types of decisions can use similar methods for support.

1. Structured Decisions:
Structured decisions are routine and follow a clear, step-by-step process.
These decisions are well-defined, meaning there is a specific method to
handle them every time they occur. Because they are repetitive and
predictable, they are often automated using algorithms or software
systems.
For example, when a store's inventory drops below a certain level, a system
might automatically place an order for more stock. The inputs (current stock
level), the process (checking against the reorder threshold), and the output
(placing an order) are all clearly defined.
 2. Unstructured Decisions:
An unstructured decision is one where the process is not clear or
predefined. This happens when the inputs, outputs, or steps cannot be fully
described or organized into a specific sequence.
Unstructured decisions usually occur when dealing with a new or rare
situation. In such cases, the expertise of decision-makers (knowledge
workers) is crucial. Business intelligence systems can help by providing quick
and flexible access to relevant information, supporting the decision-making
process.

3. Semi-Structured Decisions:
A semi-structured decision is a mix of both structured and unstructured
parts. Some steps are clear and follow a set process, while others require
judgment or creativity.

Depending on their scope, decisions can be classified as strategic, tactical and

operational.
Strategic Decisions: Strategic decisions are important choices that affect the
whole organization or a large part of it for a long time. These decisions set the
main goals and rules for the company. Because of their impact, strategic
decisions are made by top management, the highest level of the organization.

Tactical Decisions: Tactical decisions affect only specific parts of the company,
usually within one department. These decisions are made for the medium
term, typically up to a year. They are guided by the company’s overall strategic
goals. In a company, tactical decisions are usually made by middle managers,
like department heads.

Operational Decisions: Operational decisions are about day-to-day tasks and

don’t affect the future much. They follow the rules set by strategic and tactical
decisions. These decisions are usually made by lower-level managers, like team
leaders or supervisors.
Q11. Explain the various approaches to decision making process.
Ans.
There are two main ways people make decisions: the rational approach and
the political-organizational approach.

1. Rational Approach:
In the rational approach, decision-makers take time to think carefully and look
at important factors like costs, rules, and other facts to pick the best option.
They make sure they have clear steps to follow to compare different choices.
A Decision Support System (DSS) helps in two ways:
 Passive support: The DSS gives helpful information when needed.
 Active support: The DSS uses special models or math to suggest the best
choice.

There are two types of decisions in the rational approach:

 Absolute Rationality: This is when all the important factors (like costs,
stock levels, and time) are put into one simple measurement, like money.
This makes the decision easier because everything can be compared
directly.

 Bounded Rationality: Sometimes it’s hard to put everything into one

simple measure. So, instead of looking for the best answer, decision-
makers set limits for what is acceptable. For example, a manager might
decide that the cost should be under a certain amount, and the stock
should not be too low. As long as the decision meets these limits, it’s
good enough.
2. Political-Organizational Approach:
In the political-organizational approach, decisions are made more by feelings
and less by following strict steps. The options are not always clear, and the
decision-maker might not know all the factors in advance.
A Decision Support System (DSS) can only help by giving information. It is not
used to make the final decision, but it helps by providing facts during meetings
or discussions, especially when multiple people or departments are involved in
making the decision.
Summary:
 The rational approach is careful, logical, and uses clear rules and data.
 The political-organizational approach is more flexible and based on
discussions with others.
Both approaches help decision-makers, but they are used in different situations
depending on how clear the decision is and how many people are involved.

Q12. Describe the extended structure of a decision support system.

Ans.

Extended Structure of decision Support System

This diagram shows how a Decision Support System (DSS) works to help
decision-makers.
1. Data Sources:
o Data comes from operational systems (like company databases)
and external sources (like market data).
2. Data Warehouse:
o All this data is collected and stored in one central place for
analysis.
3. Data Mart:
o A smaller, focused part of the data warehouse, used for specific
areas like sales or marketing.
4. DSS (Decision Support System):
o Uses models (built-in or custom) to analyse data and generate
insights.
o Has an interface so users can interact with it.
5. Decision Maker:
o The person who uses the system's insights to make decisions.
6. Knowledge Management:
o Stores insights and knowledge for future use.

Flow:
Data → Warehouse → Analysis → Insights → Decision Maker.
The goal is to make better decisions based on clear, analysed information.
Q13. Explain phases in the development of a Decision Support System.
Ans.

Phases in the development of a Decision Support System

Requirement Phase:
 This phase decides what the system should do and collects the
information needed to build it.
 Key activities include finding out what users and the organization need,
gathering details about features, data, performance, and security, and
setting clear goals.
 The outcome is a list of what the system should achieve and the
conditions it must meet.

Planning Phase:
 The planning phase focuses on determining whether a Decision Support
System (DSS) should be developed.
 It means checking if the system is needed and whether it can work
effectively.
 The main goal is to see if the system can help to make better decisions.
 This step helps decide if the project should continue.
  If it does, a plan with tasks and responsibilities is made for the next
steps.

Analysis Phase:
 The analysis phase focuses on clearly understanding what the Decision
Support System (DSS) needs to do.
 This includes studying how decisions are currently made and figuring out
how the DSS can improve them.
 Data sources are checked to see what information is already available
and what needs to be collected from outside.
 By the end of this phase, it should be clear what the DSS will achieve,
who will use it, and how it will work.

Design Phase:
 The design phase plans how the system will work and connect with
users.
 It includes setting up hardware, software, networks, and databases.
 Here, a decision is made to either build the system in-house or hire an
external team.

Implementation Phase:
 The implementation phase focuses on building, testing, and deploying
the Decision Support System (DSS).
 The system is built as per the design plan and thoroughly tested to
ensure it functions properly and meets the requirements.
 After testing, the DSS is launched and made available for use within the
organization.

Delivery Phase:
 The delivery phase ensures the Decision Support System (DSS) is
successfully handed over to users and operates effectively in a real-world
environment.
 Key activities include training users on how the system works, giving
them manuals and technical details, and setting up support for fixing
problems and maintenance.
 User feedback is collected to identify areas for improvement or future
updates.
 The outcome is a fully working system that is delivered, supported, and
ready to help users make better decisions.