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Combining new technologies with traditional business intelligence techniques can fulfil the promise of positive business outcomes.
By Michael L. Gonzales

Powerful transaction-oriented information systems are commonplace in every major industry, effectively leveling the playing field. Getting ahead of the competition now requires analysis-oriented systems that can revolutionize an organization’s ability to use information it already owns. These analytic systems derive insight from available data and deliver information that’s conclusive, fact-based, and actionable.

Business intelligence (BI) improves corporate performance in any information-intensive industry. Most companies have the raw data and the people knowledge BI requires. Operational systems generate vast quantities of product, customer, and market data from point-of-sale, reservations, customer service, and technical support systems. But the challenge is to extract and exploit this data, transforming it into information and actionable insight.

Many companies take advantage of only a small fraction of their data for strategic analysis, let alone tactical applications. The remaining untapped data — often combined with data from external sources such as government reports, trade associations, analysts, the Internet, and purchased information — is a gold mine waiting to be explored, refined, and shaped into information. This knowledge can be applied in a number of ways, ranging from charting overall corporate strategy to communicating personally with vendors, suppliers, and customers through call centers, kiosks, billing statements, the Internet, and other touch points that facilitate genuine one-to-one marketing on an unprecedented scale.
Today’s business climate requires the BI environment to evolve beyond the implementation of traditional data warehousing tools and techniques. A fusion of traditional and advanced technologies is necessary to support a broad analytical landscape and serve up a rich blend of historical trending, real-time reporting, and predictive analytics. Finally, the overall environment must improve the knowledge and performance of the enterprise as a whole, ensuring that actions taken as a result of analysis are fed back into the environment.

Business Value

Every BI environment, to achieve real and significant impact, must be designed and built in the context of the business value that it provides. The value connection is expressed in terms of business capabilities that will be provided or improved through intelligence. Figure 1 shows the BI value chain, which turns data into information. To make this transformation happen, BI architects need to fulfill these requirements:

• Align information with the knowledge of the individuals or work groups to whom it’s provided. The information-to-knowledge connection is one that most IT people find difficult. Knowledge is unique to an individual, the product of personal experience, recall, instincts, and beliefs. When information consumers are at the executive level, it is important to align one-to-one information links. When providing information to larger groups, profile the knowledge of the target groups relative to the business, the information subjects, and skill level. This profiling is the basis for customized actionable information products and services.
• Combine knowledge and information used to take action. The term “actionable information” is pervasive throughout BI literature. But what companies really need is not actionable information, but actionable insight. Action is a process of doing something. All too often, BI architects look only at the event and not the activities and behaviors that lead to the event. Any combination of insight, resolve, decision, and innovation may drive a person to act. Information is actionable and promotes insight when it supports the entire process of taking action. It’s the essential bridge from integrated data to positive business outcomes — the promise of BI.
• Enable informed actions that lead to positive outcomes. Favorable business outcomes are generally those that reduce cost, save time, optimize resources, increase revenue, satisfy customers, or otherwise help to fulfill business missions and goals.

How actionable your information is depends on the form in which it’s provided and the kinds of information services or business information capabilities that are offered. It’s critical to match the information services with the needs, knowledge, and abilities of information consumers.

Getting business value from BI requires a view of business domains that are within the scope of the BI effort. Value-creation opportunities may arise from many business domains, including strategy and planning, financial management, research and development, marketing, sales customer support, operations, human resources, information systems, and corporate governance.

The Art of Decision-Making

When most companies think about using BI to support better business decisions, they’re usually considering it from the perspective of strategic decision-making. However, as the BI space matures in technique and technology (and user demands grow), BI continues to evolve. Today, there is significant attention and interest in supporting tactical decision-making as well. But strategic and tactical aren’t the only types of decisions made in an organization. Many argue that there’s a third type: operational decision-making. Table 1 shows definitions and examples for the three categories.

The end game for BI isn’t simply exposing actionable information and insight. It’s also ensuring that action is taken to improve business performance. The challenge is not only what information to combine with what knowledge, but also how to ensure action.

For strategic and tactical decisions, any action taken requires human intervention. Curiously, there may be considerably less effort on the BI team to service these types of decisions. The BI team may need to build a data store and install tools that allow users to perform their own research for insight (an OLAP cube implemented for a subject matter expert, for example). The BI team often focuses only on providing the cube and tools and leaves the user to find any actionable insight.

Operational decisions can be, and often are, automated. Figure 2 shows the direct relationship between the decision category and the amount of human intervention required. Because these decisions are often automated, more research and implementation work rests on the shoulders of the BI team.

Strategic decisions (such as those regarding expansion) have broad implications for the direction of the organization as a whole. Answers to these types of questions are rarely derived from a purely automated environment. Even when building simulation models, subject matter experts must still evaluate the results and formulate actions to be taken. Tactical decisions are focused on managing processes, such as evaluating and establishing the level of risk the organization is willing to assume for specific loan products.

Operational decisions, however, are the most fundamental. They address individual transactions (such as whether a loan is approved or not). And, they likely represent the highest number of decisions made on a day-to-day basis. It’s precisely for that reason that operational decision-making can and should be targeted for automation.

Valuable Insight

In order to provide BI value, business architects must understand the kinds of decisions made in organizations, including strategic, tactical, and operational.

Each category provides clues as to the type of action process that’s feasible. Strategic and tactical decisions are often best suited with some human intervention. Once a decision has been made, it’s possible that the action process is a composite of several disparate adjustments to operations. On the other hand, operational decisions can often be fully automated and the subsequent actions made part of an inline process.

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Content for this article was adapted from BI Strategy: How to Create and Document , by Michael Gonzales and David Wells, HandsOn-Press, 2006.

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Michael L. Gonzales has been a BI data architecture and solutions strategist for more than a decade. He teaches a series of courses internationally through HandsOn-BI LLC and has written books on data warehousing and business intelligence.