So your organization has a big vision and uses that vision as the North Star for guiding strategic decisions. But when you're only deploying against vision with no data to back it up, you're flying blind.
This is where business intelligence (BI) comes in.
There are many definitions for BI, but in a nutshell it's an architecture and set of integrated technologies, methodologies and processes that translate raw data into meaningful, useful information. And this output is used to enable more effective strategic decision making and planning to guide the organization.
BI is not new. In fact, it dates back to 1865 when the phrase was first introduced in the "Cyclopedia of Commercial and Business Anecdotes" in an article about a banker who gathered information and acted on it before his competition could and realized a profit. And in 1958, IBM computer scientist Hans Peter wrote a revolutionary article "A Business Intelligence System" that described an automatic system for disseminating information to the various sections of an organization.
Today, organizations are using it for the same purposes: forecasting, predicting future customer behavior, improving strategies, identifying new opportunities, searching for hidden patterns, etc. What's changed is we have tools that now provide deeper data insights.
Why do you need BI?
With BI you're able to see what happened, what is currently happening in real time, why, predict what will happen in the future, and better identify how to direct or reshape the outcome (what you want to have happen). In essence, BI empowers fact-based decision making.
It also helps ensure everyone on your team --from the C-suite to the sales team and operations to finance --is operating from a single source of truth. That is, rather than having sales using one system, set of tools and rules, and marketing having a completely different set, everyone has insight into the same data sets and information. It aligns decision making across the entire organization.
Most businesses are sitting on a mountain of data already, and BI bridges the gap between data and actionable strategies. For example, BI might enable your sales and marketing team to answer things like:
- Which customer should we target, when, where and why?
- What caused the dip in our lead generation last month?
- What is the most profitable source of sales leads and what elements have impacted that source traditionally?
- Where does our efficiency ratio drop and how is it impacting our operations?
You'll also be able to more accurately identify whether that new product or service is worth the risk of launching, when is the best time to launch it and into which market, what the cost should be, etc. BI can, and should, be used across the entire business to make more informed decisions.
Stages of Business Intelligence
Traditionally, there have been five stages of BI: Data sourcing, data analysis, situation awareness, risk analysis, and decision support.
Data sources -- gathering information from multiple data sources such as relational databases, analytic databases, and business applications like customer relationship management (CRM) platforms or enterprise resource planning (ERP) software, to name a few.
Data analysis -- the data collected from these sources is only useful if you can synthesize it from the various sources and derive meaning from it. This is where you take the information and turn it into knowledge.
Situation awareness -- how you put context around the data. It's observing and understanding the implications of what's going on around you and forces that may be at play.
Risk analysis -- this is where you take what you know (the data - information - knowledge) and utilize it to assess current and future risk, costs and benefits of taking one action versus another. It's assessing risk versus reward.
Decision support -- identify and select intelligent decisions and strategies. Some also refer to this as the presentation layer, which are the dashboards, reports and alerts used to present the findings from the analysis.
At our agency, we've further distilled this down to four. We like to think of business intelligence as a systematic combination of reporting, analytics, intelligence, and strategy.
- Reporting -- what do we see?
- Analytics --what does it mean to us? It's translating what you see into terms that relate to your business.
- Intelligence -- what do we do? In other words, what do we do about what we've uncovered? How do we put the data into action?
- Strategy -- what is the outcome we want to achieve? Strategy acts as a filter to ensure you're not just seeing what you want to see, but what's actually there and use that to guide next steps.
BI gives organizations the ability to gain access to focused analysis at a scale, complexity and speed not easily achievable with traditional operational reporting or spreadsheet analysis. It allows you to go layers deeper, to look at what could be influencing the changes in your business, and even stay one step ahead of those potential changes to mitigate risk.
According to Cindi Howson, research vice president at Gartner, "There is a need for reporting, but reporting alone is not enough. If you're only doing reporting you're behind already. Unless your reporting is smart and agile, you're behind. You're a laggard."