Just as military intelligence works to give armies and generals an upper hand on the battlefield, business intelligence (BI) seeks to give CEOs and CIOs a tactical advantage in the business arena. Business intelligence is fundamentally concerned with transforming your organization's operational data into an accessible store of high-value information (called a data warehouse) and distributing the right information in the right way to the right people at the right time.
In both business and military operations, it's easy to see the correlation between the quality of intelligence and the success of operations: Those who comprehend and act quickly upon relevant facts have advantages over those who do not.
For this reason, intelligence has value to the business organization. Naturally, tools and technologies to collect and distribute of information – or to improve its quality — will be embroidered and employed quickly.
In this article, we'll take a look at some questions that BI can help answer, and we'll offer a few examples of how business intelligence is used.
Two examples of business intelligence
Some believe BI to be the magic differentiator between great and mediocre companies. Consider this example.
The Big Bank had a target of acquiring 200,000 new accounts, a number that would require mailing offers to 10 million prospects using a 2 percent return rate, an expected rate for direct mail. Instead, the Big Bank used BI techniques to mail to a "refined" subset of all prospects yielding a response rate of 12 percent.
Instead of mailing to the 10 million prospects, BI required the bank to send mail to about 2 million, which generated the required new accounts. In addition to reducing cost, the average profitability of an agreed customer was three times higher than usual because data mining had targeted the customers who needs best matched The Big Bank's services.
Here's another scenario.
A quick-change oil company takes information from 2,500 stores and has information uploaded each night to servers at its headquarters. The chain's main office immediately analyzes key operational measures: cars serviced, costs, revenues, profits, and trends.
By 5:30 AM, performance data is available to the company's managers who can check current revenue, average ticket price, time required to do each job, and other performance measures. Franchisees with multiple locations can see consolidated views, as can the company's regional managers.
Now that you've read these two examples, try to answer the following questions to see whether your information systems allow you to accomplish the following tasks quickly, easily, and directly. Answer "No" if you depend on others to procure information or if your business and performance measurements lag after the fact.
Revenues and profitability
1. I can identify the products, services, and channels driving my revenue and profit.
2. I can rank customers and customer locations by profitability.
3. I am automatically alerted when critical costs, such as non-billable overtime rates, fall out of control.
4. I know when my sales reps / managers are on target, and I can intervene …