Management information is essential
Organizations, from small business to multinationals, as well as foundations, governments and NPOs need reliable and relevant management information in order to perform well. Without this information, organizations lose track of both the internal course of events and external developments. They lose direction (or become unbalanced) and waste time and money either because they do the wrong things or because they fail to do what is right.
Making information more accessible
Business Intelligence can prevent this: by making existing information more accessible, by creating new information and through offering this information – preferably personalized – to users in order for it to be actually used. The ultimate goal is to transform the organization into an Intelligent organization: an organization that is open to relevant internal and external signals and which cleverly translates these signals into information and knowledge that encourages action.
This can lead to more effective behavior, to though-out practices and to a very different method of organizing: from functional to both customer and process-oriented and eventually with an emphasis on the organization of the chain. Successful Business Intelligence (BI) leaves organizations with lots more time to focus on decision-making, organizing and innovating. Business processes and activities will run much more smoothly, mainly because they can be aligned better. This book provides you with the most salient backgrounds, definitions, methods, concepts, structures and tools for creating a more intelligent organization.
The essence of Business Intelligence
When defining Business Intelligence, we distinguish three different aspects:
1. Definition of Business Intelligence as a process
“Business Intelligence is the continuing process in which organizations collect, store and analyze data in a specific way in order to apply the resulting information and knowledge in decision making processes to improve the performance of the organization.”
2. Definition of Business Intelligence as a technology
“Business Intelligence is the collection of tools that supports BI (e.g.testing tools or natural analytics) as a process within organizations, gives it a face and makes it efficient.”
3. Definition of Business Intelligence as a phenomenon or discipline
“Business Intelligence is the complete set of concepts, processes, strategies, culture, structure, methods and IT tools necessary to ensure organizations to behave and develop intelligently.”
In order to interpret the essence of Business Intelligence and to understand its principle, we here provide a simple example of a retail chain that allowed us to have a peek into their business a few years ago:
The retailer had to keep an eye on the costs
Although, at the time, the economy was seemingly recovering, the retailer had to keep an eye on the costs. Recent price wars with competitors had put quite some pressure on the margins and an accounting scandal had done some harm to the reputation of the business. As one of its strategies, the retail chain decided to minimize stock in order to drastically reduce capital demands. Within a year, this measure should generate sufficient funding for the purchasing of an advanced new logistics system and for possible mergers.
Performing various analysis
In order to realize this, staff members count all items in stock on a daily basis and keep a close eye on the inventory levels by performing various analysis. The standard for items in stock is set to a maximum of five days. After two measurements, this standard is far from within reach. Based on this knowledge, the retail chain decides to purchase items at suppliers even more efficiently and to optimize the process of stacking the incoming goods so that these can be made available in stores faster. By the end of the third week, items remain in stock for seven days on average. The organization puts in some hard work and as a result, in week four, this average figure has dropped to six days.
Evaluating norms and targets
However, by this time, supermarkets started complaining about empty shelves due to short supplies. The retailer performs a detailed analysis and finds out that the ‘five-day standard’ should not apply to all products. Instead, a distinction should be made between items with a high stock turnover rate and items with a low turnover rate. A few weeks later, a standard of five and a half days is achieved.
Keep the margins up to the mark
The retailer cannot think of any other ways to reduce this number and therefore decides to employ additional tools and strategies in order to achieve the objective – a new logistics system and possible mergers – after all. The organization decides to withdraw items that do not sell well from the market sooner and to introduce some products that do sell well. As a result, the supermarket chain is able to realize the desired cost reduction and to keep the margins up to the mark, both of which are necessary to get through the new economic period.
This is all but far from a matter of course
Although this example may not look very exciting, further on in this book we will prove that it is all but far from a matter of course. This simple example shows what Business Intelligence is all about: defining measuring points, registering and collecting data, calculating differences, ‘creating’ information, setting standards, analyzing information, indicating or proposing different strategies, making decisions and taking appropriate action. Based on reliable information, we develop a collective intelligence and continuously ensure effective change. That is – in our opinion and vision – an Intelligent organization in a nutshell.