Business Intelligence (BI) Concepts and Components
In increasingly complex data systems, ensuring that data is accurate, consistent, and timely can be a daunting task. Fortunately, by understanding the four elements of a business intelligence (BI) environment, companies can develop a BI strategy that effectively meets their needs.
But why utilize business intelligence in the first place?
In a nutshell, business intelligence allows organizations to make data-driven decisions. This process begins with data gathering, followed by data cleaning and standardization, analysis, and reporting.
All four of these steps are essential to creating an effective BI strategy. By learning more about each element, companies can create a BI plan that improves their bottom line.
In this article, we will discuss the four elements of a business intelligence environment: data, people, processes, and technology, and how they impact business intelligence strategy.
What is business intelligence?
Business intelligence is a set of strategies and technologies that gather data, interpret it, and transform it into actionable insights. BI uses a variety of tools, such as data mining, charts and visualizations, business analytics, and performance benchmarking, to help executives make better business decisions.
What are the four main components of BI?
Because BI is a series of strategies, BI implementation is always ongoing. It touches many areas of a business. In order to understand the BI cyclical process, you need to understand the four main components: data gathering, data standardization, data analysis, and reporting.
- Data gathering
The first step in business intelligence is to gather data. This includes collecting data from all your sources as well as collecting historical data to inform strategic decisions. This first step of gathering data will give you a baseline to which you can compare future metrics.
- Data standardization
Data standardization is likely the most difficult component of BI. It involves cleaning the data, which means you filter data and get rid of any information that is incorrect, incomplete, duplicated, or irrelevant. Then, once you’ve verified the quality of your data, you have to find a way to store it. Storage involves data automation, permissions, security protocols, and many other implementational steps. On top of that, data has to be correctly identified and organized within the storage solution so it can be found quickly. Standardization also includes converting data to similar or compatible formats so it’s always readable and able to be processed the same way.
- Data analysis
Now that you have your data gathered and standardized, you can begin the analysis component. This is the stage where you start getting insights and building strategy. Identify trends, compare data sets, observe correlations, visualize data into charts and graphs, and make predictions based on real-time updates. The more you analyze the data, the more actionable insights you’ll find to help improve your business processes.
- Reporting
A data report is a BI tool that combines certain data sets. Think of reporting like taking a picture of someone jumping off a diving board and into a pool. It’s static—the numbers haven’t changed since the report was created or exported—but still, you can look at it and gain hints from past data (you can infer that the person jumped off the diving board) and from what the future may hold (you can infer that the person will hit the water, and you can probably make a pretty good guess when that will happen).
What are the four environmental factors that can impact a business intelligence strategy?
In order to understand how a holistic business intelligence strategy is possible, it’s first necessary to understand the four environmental factors that can impact such a strategy.
The four areas can be broken down into two main categories: internal and external. Internal factors are those that the company has direct control over, while external factors are out of the company’s control but can still impact the business intelligence strategy.
The four environmental factors are:
- Data: This is the most important factor in business intelligence, as without data there is nothing to analyze or report on. Data can come from a variety of sources, both internal and external to the organization.
- People: The people involved in business intelligence play a critical role in its success. From the data analysts who gather and clean the data, to the business users who interpret and use the data to make decisions, each person involved must have a clear understanding of their role in the process.
- Processes: The processes used to gather, clean, and analyze data must be well-designed and efficient in order to produce accurate and timely results.
- Technology: The technology used to support business intelligence must be up to date and able to handle the volume and complexity of data.
Now that we’ve broken down the four environmental factors, let’s take a closer look at how each of these factors can influence business intelligence strategy.
How do each of these four factors influence data gathering, data standardization, analysis, and reporting?
- Data
Business intelligence thrives on data. Without data, there is nothing to analyze or report on. Data can come from a variety of sources, both internal and external to the organization.
Internal data sources can include things like transaction data, customer data, financial data, and operational data. External data sources can include public records, social media data, market research data, and competitor data.
The data-gathering process must be designed to collect the right data from the right sources. Once the data is gathered, it must then be cleaned and standardized so that it can be properly analyzed.
In the BI environment, data is king. All other factors must be aligned in order to support the data and help it reach its full potential.
- People
The people involved in business intelligence play a critical role in its success. From the data analysts who gather and clean the data, to the business users who interpret and use the data to make decisions, each person involved must have a clear understanding of their role in the process.
The data analysts need to be able to collect data from all relevant sources, clean and standardize the data, and then load it into the BI system. Business users need to be able to access the data, understand what it means, and use it to make decisions.
This can take many forms, but a key component is data literacy: the ability to read, work with, analyze, and argue with data. Data literacy is essential for business users to be able to make decisions based on data.
In a successful business intelligence environment, people are trained and empowered to use data to make decisions.
- Processes
The processes used to gather, clean, and analyze data must be well-designed and efficient in order to produce accurate and timely results.
The data-gathering process must be designed to collect the right data from the right sources. Once the data is gathered, it must then be cleaned and standardized so that it can be properly analyzed.
The data analysis process must be designed to answer the right questions. The results of the data analysis must be presented in a way that is easy to understand and use.
- Technologies
The technology used to support business intelligence must be up to date and able to handle the volume and complexity of data.
The BI system must be able to collect data from all relevant sources, clean and standardize the data, and then load it into the system. The system must be able to support the data analysis process and provide easy-to-use tools for business users to access and analyze the data.
You want your BI technology to offer features such as self-service analytics, predictive analytics, and social media integration. However, the technology must be easy enough to use that business users don’t need a Ph.D. to use it.
In a successful business intelligence environment, the technology is easy to use and provides the features and functionality needed to support the data gathering, analysis, and reporting process.
How can companies ensure that their business intelligence environment is effective and efficient?
Without the proper attention, a business intelligence environment can quickly become ineffective and inefficient. The best way to avoid this is to have a clear understanding of the four environmental factors that impact business intelligence.
For companies to be successful with business intelligence, they must understand how to gather data from all relevant sources, how to clean and standardize the data, how to load it into the BI system, and how to use it to make decisions.
In addition, companies need to ensure that their people are trained and empowered to use data to make decisions. And finally, companies need to have the right technology in place to support their business intelligence efforts.
For example, a company may have the best data gathering and analysis processes in place, but if the business users don’t understand how to use the data, then the efforts will be for naught.
Or a company may have the right technology in place, but if the data isn’t being collected properly, then the technology won’t be able to do its job.
It is only by taking into account all four of these environmental factors that companies can ensure that their business intelligence environment is effective and efficient. Then, and only then, can they reap the benefits of business intelligence.
What are some common mistakes that companies make when it comes to their business intelligence environment?
While business intelligence can be extremely beneficial to companies, there are some common mistakes that companies make when it comes to their business intelligence environment.
- Not understanding the different types of data
There are three different types of data that need to be considered when gathering data for business intelligence:
- Structured data is data that is organized in a predefined format. This type of data is typically stored in a database and can be easily accessed and analyzed.
- Unstructured data is data that is not organized in a predefined format. This type of data includes things like emails, social media posts, and images.
- Semi-structured data is data that is partially structured and partially unstructured. This type of data includes things like XML files and JSON files.
Companies need to understand the different types of data and how to best gather and analyze each type.
- Not gathering data from all relevant sources
In order to make accurate decisions, companies need to gather data from all relevant sources. This includes internal data sources like financial reports and customer databases as well as external data sources like news articles and social media posts.
- Not cleaning or standardizing the data
Once the data has been gathered, it needs to be cleaned and standardized. This includes things like removing duplicates, standardizing formats, and filling in missing values.
- Not loading the data into the BI system effectively
Once the data has been cleaned and standardized, it needs to be loaded into the BI system. This can be done manually or through an automated process.
- Not analyzing the data properly
Once the data is in the BI system, it needs to be analyzed. This includes things like creating reports, running queries, and building dashboards.
- Not making decisions related to the data
Once the data has been analyzed, it needs to be used to make decisions. This includes things like setting prices, launching new products, and hiring new employees.
- Not empowering people to use data
In order for business intelligence to be successful, people need to be empowered to use data to make decisions. This includes training people on how to use the BI system, giving them access to the data, and encouraging them to use data when making decisions.
Fortunately, you can avoid many of these mistakes by taking the time to develop a strategic business intelligence environment.
Business intelligence can be extremely beneficial to companies, but only if it is done correctly. In order to make sure that your business intelligence environment is effective, you need to take into account the four environmental factors: data, people, processes, and technology.
By understanding these four environmental factors and taking steps to ensure that they are all being considered, you can avoid many of the common mistakes that companies make when it comes to business intelligence.
When you exist in the right data environment for business intelligence, you set your company up for success.