Peer Reviewed Article

Vol.9(2) June 2007

Conceptual analysis of business intelligence
V.H. Pirttimäki Tampere University of Technology Tampere, Finland virpi.pirttimaki@metso.com

The literature review shows that business intelligence (BI) has a long history even though its systematic use in the business context is more recent. Despite the importance of systematic BI, the concept is still trying to find a footing in both academia and the business world. From the literature review, one sees that there are numerous intelligence concepts and that their categorization is ambiguous. The BI concept is also multidimensional as there is no precise or universal conception of what BI is. The article aims to provide an analysis of BI definitions and related intelligence concepts, such as the content of each key concept, what it describes and how intelligence concepts relate to each other. Another objective of the article is to increase the academic understanding and status of this recent field of research on intelligence activities.

Key words: Business intelligence, conceptual analysis, definition, intelligence concepts

Received 10 April 2007; accepted 20 May 2007

Contents 1. Introduction 1.1 Identification of the research issue 1.2 Research objectives 1.3 Research method 2. Different views on business intelligence 2.1 Basis for a multidimensional concept 2.2 How to define business intelligence 2.3 Levels of business intelligence 3. Concepts related to business intelligence 3.1 Business intelligence, competitive intelligence, or competitive intelligence? 3.2 More intelligence concepts 4. Conclusion 5. References

Up-to-date information is a strategic resource for companies' and the basis for competitiveness in today's ever-changing business climate. have had a hand in the movement of society from a capitalist-driven to a knowledge-driven economy. how it should be gathered. for example the market situation. the objective of this research was to increase the academic understanding and status this recent field of research. new economy. management. Information management consists of identifying what information is needed. advancing technologies and applications have wreaked remarkable change on traditional business models and operations. for example. Prescott 1995) and there is a need to adopt more systematic methodologies before intelligence theories can begin to attain an established position and professional status. business. The main objective of this research was to provide an analysis of BI definitions and the related intelligence concepts. Also. and this is not possible without systematic information management. The goal of information management is to maximize the usefulness of a company's information resources and to assess their value when making business decisions. In addition to the changes in society. Mendell 1997:115–118.g. customers and competitors (Collins 1997:14. Among these are complexity. running a business is now harder than ever because of the new rules of competition and the greater complexity and accelerated rate of change in the new economy. Companies are forced to utilize information more effectively than before. Choo 1998. A literature review and conceptual analyses are needed to understand the basis of BI and to place BI in the right context. how it should be organized.1 Introduction 1. for example. On the other hand. Some scholars think of BI as being more like market intelligence (MI) or competitor intelligence that aim to gather and analyse useful information concerning the external business environment of a company only. globalization. BI is an approach for processing and enriching the essential information in the managerial context. some ICT-focused actors in the information system market have used a BI-related concept in naming. According to Pietersen (2002:9). where it should be stored and who in the company should have access to it (e.2 Research objectives There is no common conception of the content of BI (Gilad 1996:4). Fleisher and Blenkhorn 2001. Overall. Fleisher and Blenkhorn (2005:281) state that intelligence research and education have been dwarfed by older and more established approaches in. Tiwana 2002). their data warehouse products (Kalakota and Robinson 2001. 1. Sawka 1996:47–52). networking and proactivity. Because a good portion of economic theory dates from the time of industrialization. the academic research field of intelligence activities seems still to be very much in an emergent state (Badr and Madden 2006. . Because several intelligence concepts are often used to describe the same phenomenon. and the new ways of thinking and acting that may be associated with them.1 Identification of the research issue Business terminology has been conversant with numerous business intelligence (BI) concepts since the late 1990s. both the business and academic world are seeking new ways of increasing their business awareness and know-how in the information society. the content of each key concept was examined. These terms. including what it described and how intelligence concepts related to each other. Moss and Atre 2003). references to the accelerating pace of change. information flow. marketing and strategy studies.

After all. the describing or classifying is difficult because it is not easy to develop concepts that are accessible to others. suggestions and recommendations (i. customers. a company itself.3 Research method The general aim of conceptual research is to construct and develop conceptual frameworks or systems that have no significance in themselves. Some even see the technological approach as being just about all there is to BI (Kalakota and Robinson 2001:349–350. In addition. criteria for the definition of concepts in terms of their form and presentation are not as exacting as they are in science (Näsi 1980:5–7). competitors and economic issues. A theoretical framework is provided in the article by analysing key definitions of BI and how BI relates to other intelligence concepts.e. Typically.2 How to define business intelligence Although the BI concept has related to some kind of trend-like phenomenon since the 1990s. various definitions are discussed below. are needed for describing new phenomena or categorizing and organizing information. the methods used in conceptual research are thinking and analytical comparisons with existing literature and knowledge. Näsi (1980:17.1 Basis for a multidimensional concept Typically. In addition to the differences regarding the content. the definition of BI varies if the concept is defined from the perspective of an end-user or a BI supplier. Gilad and Gilad 1986). It is. in everyday life. top 2 Different views on business intelligence 2. 33) and Lukka (1991:167) state that a conceptual–analytical part is included in all research projects but that conceptual analysis can also be used as an independent research approach. and process that produces insights.1. Hence. Raisinghani 2004:x–xv). BI is defined as a managerial concept or a tool that is used to manage and enrich information and to produce up-to-date knowledge and intelligence for operative and strategic decision making (Ghoshal and Kim 1986. Because almost every author promotes his own idea of the content and meaning of BI. for example. there is no generally accepted conception regarding what BI is. the refined information and knowledge described above) for the management and decision makers. however. but that serve a specific purpose. the information technology based systems used in analysing raw data and information and in storing and sharing valuable information and knowledge are considered an important part of BI (Moss and Atre 2003). the main idea behind BI . exactly defined concepts are a necessary starting point for successful scientific research. Mendell (1997:115−118) remarks that BI has always been an important part of the competing business world and therefore the core activities of BI are far from new. Precise analysis and definition are required before a phenomenon can be quantified or measured. for example. and its state in relation to its markets. The concept is not unambiguous but is at least dualistic. 2. noteworthy that. referring to the: z z refined information and knowledge that describe the business environment. Literature and conceptual research was done for this study to find theoretical foundations related to the research issue. Conceptual frameworks. According to Emory (1985:24).

stored and shared. Herring (1992:54–60) stresses that BI yields information for both internal and external information needs. Besides screening the external environment. actors and forces in other fields. According to Brackett (1999:1). among other areas. suppliers. scouting and analyses (Prescott 1995. competitors. in his opinion. information and knowledge concerning a company's operational environment that leads to decisions creating competitive advantage for the company. while Sawka (1996:47–52) states that BI specially focuses on the gathering of external information and the prediction of changes in the markets. and finally to . takes action. markets. BI is a combination of any data. decision making is based mainly on a company's strategy. methods and processes that enable. The genesis of BI is. for example the monitoring of economic trends and effective utilization of information in strategic and tactical decision making. Barndt (1994:22) emphasizes the role of internal information in BI. into useful and valuable managerial knowledge and intelligence. Ghoshal and Kim (1986:49) considered BI an activity within which information about competitors. The required information is gathered from both internal and external information sources.addresses very old managerial problems and the activities include nothing new: it is one of the basic. BI comprises a variety of types of intelligence: z z z z z z Customer intelligence Competitor intelligence Market intelligence Technological intelligence Product intelligence Environmental intelligence. In summary. According to him. The definition of Hackney (2000:39−42) focuses solely on internal information. analyses development. resources and operational opportunities. gains insight. Intelligence has been a significant factor in military success for thousands of years (McCandless 2003:46) and military plans and strategies have typically been based on monitoring. customers and markets is systematically gathered by legal means and analysed to support decision making. customers. Collins (1997:4) recognizes BI as a process by which information about competitors. They define a BI cycle as a progression from analysis to insight to action. more recent in the context of commerce and business (Fleisher 2001:4). BI involves the information inside a company. BI is more than a management philosophy or an enabling technology. He states that BI includes all activities through which internal information is analysed. Miller (2000:13) defines BI as including the monitoring of developments in the external business environment. new technologies and broad social trends is gathered and analysed. Tyson emphasizes the need for the continuous monitoring of customers. The raw data gathered are converted into accurate and focused analyses. According to Vitt. BI is a series of concepts. measures success and begins all over again. They consider BI an ongoing cycle. In the 1980s. Tyson (1986:9) identified the BI concept as an analytical process by which raw data are converted into relevant. Around the same time. most self-evident tasks of most management tools. The aforementioned definitions neglect the importance of internal information. however. because. the main idea in BI lies in identifying information needs and processing the data and information gathered. Bavendamm 1998). and Brackett issues a reminder of the value of information concerning the experiences and hypotheses of employees. Luckevich and Misner (2002:13–22). In his definition. usable and strategic knowledge and intelligence. According to Prior (2004:4). military planning and thinkers (Sun Tzu 1988). it is a performance management framework via which a company sets goals. The roots of BI lie in.

above all. In other words. Kalakota and Robinson argue that the growth of BI stems mainly from the demand for more competitive business knowledge and growth in electronic data capturing and storage. he states that the development of information and communication technology has increased the value of BI in decision-making processes but that BI as a way of action was found much earlier. Their view is supported by Thierauf (2001:xi–xii). (2002:14–16) state that BI is an attitude toward problem solving and rational management and. Also. The perspective applied in Raisinghani's (2004:x) definition is also technology oriented.measurement. tactical intelligence and operational intelligence. Vitt et al. Buskard et al. Thomas (2001:48–49) defines BI as. in addition. analyses and classifies the flow of significant information. They define BI as a group of applications that enable both the active and passive delivery of information. The perspective of Kalakota and Robinson (2001:161) differs from the former definitions. information and knowledge into valuable intelligence. software and tools that enable the more effective processing of information. McGonagle and Vella (1996:18) illustrate the different roles of BI by dividing BI into three levels: strategic intelligence. Thierauf 2001:66) . the objective of a BI system is to turn raw data into actionable intelligence. Thierauf (2001:66–67) categorizes BI into three groups: strategic intelligence. A BI system is an effective aid to decision makers for getting the full picture of a company's capabilities and external operating environment. Also. 2. BI is becoming a necessity in forming a holistic picture of the business environment. While Waters (1996). He emphasizes that a BI cycle is a process wherein sources of information. Gilad and Gilad (1986:53) and Buskard. Data and information are collected from large databases. Mollot Richards (2000:46–47) emphasize the strategic role of BI. Figure 1 Levels of BI (McGonagle and Vella 1996:18. as illustrated in Figure 1. According to him.3 Levels of business intelligence Waters (1996:41) defines BI as a legal and ethical tool in examining strategic changes and options. (2000:46–47) remark that BI is not a separate technology or application but a series of productions that includes both analytic tools and the information required. including published information and information from human sources. Glassey. who points out that a BI system converts captured data. The role of human-source intelligence should not be dismissed. In addition. Thierauf considers BI systems to be the latest thrust in information systems. a systematic process that gathers. He defines BI as a common noun for technical applications. CI and MI. although rationality is emphasized in their definition. play a central role. providing an enterprise and its managers with timely answers to mission-critical questions. they emphasize the relationship between BI and strategy.

for example. most of them focus mainly on the external environment and gather information from external sources (Cottrill 1998. customer intelligence. almost all of those intelligence concepts share the same purpose as BI (Weiss 2003:49. the information needed varies with the BI level but financial intelligence is required at every level. or competitive intelligence? Related intelligence concepts include. At the operative level. Thierauf states that strategic decision makers most need extensive and enriched information to manage upcoming operations and steer the course of a company. Casado 2004:127) and aim to turn raw data and information into valuable knowledge and intelligence (McGonagle and Vella 1996:202. where the data are gathered and enriched. markets. CI. Tyson 1986:9). the counterintelligence and technology intelligence concepts have appeared more and more often in the context of BI. whereas the focus of the operational level is on internal sources. the marketing and research and development departments need information from external – not just internal – sources on. for example. On the other hand. competitor intelligence. The content of BI is generally defined as more extensive. Between the strategic and operative level is the tactical level. Thierauf defines the character of the information needed more exactly than McGonagle and Vella (1996:18) in their illustration. strategic intelligence. information from internal sources is also needed in strategic decision making and external information sources at the operative level. Kahaner 1996. The difference between BI and related intelligence concepts often vacillates because the way intelligence is managed and enriched stays mainly the same . Lately. trends and customers.According to Thierauf (2001:66). However. Thierauf uses the grouping of internal and external information in his framework: information from external sources is emphasized in strategic decision making. competitor intelligence. more detailed. Vibert 2004). Several of these intelligence concepts are sometimes used in a context similar to BI. strategic decision makers have to perceive resource sharing and management in the context of long-term strategic planning. For example. Fuld 1995. At the operative level. On the other hand. top 3 Concepts related to business intelligence 3. history-specific information is required to implement daily activities. which necessitates that they have enough information from internal as well as external sources. McGonagle and Vella 1996. Tyson 1986). with other intelligence concepts considered to be subgroups of BI (Fleisher 2001.1 Business intelligence. product intelligence and environmental intelligence. MI.

a company needs market and industry information rather than just competitor information. CI mainly helps a company to assess the competition and market conditions. 20–21. uses the concept of competitor intelligence as a synonym for CI. industry and market. McGonagle and Vella (1996:40) present CI as having been known as BI earlier. In Figure 2.and the term applied refers to the specific type of intelligence required in a particular company or situation. Hence. CI and competitor intelligence is illustrated. Bernhardt (1994:13) states that CI is strategic information about the competitors' plans and that. BI has the broadest scope among intelligence concepts. They define CI as a process by which external information is gathered from external sources and that CI includes information concerning a competitive situation. Choo (2002:86– 87) and Weiss (2003:49) consider CI a part of BI because the scope of BI is broader than CI's. Typically. Weiss 2003:49) According to Choo (2002:86–88). market and strategy. Combs and Moorhead (1992:3) and Gilad (1996:4) define CI as an alternate concept for BI. Because the information gathered is narrowly focused. the relationship between BI. competitors. covering several elements of the external environment. but they emphasize the role of competitor information in CI. In the literature. strategic. 186). narrow internal information includes company-specific information such as key figures and financial accounting information. whereas Mintzberg (1994). Mintzberg (1994). Pirttilä (2000:13. therefore. This description is very similar to the definition of BI in that it also involves the perspective of internal information. in turn. In the left top corner of Figure 2. Fleisher 2001:4–7. BI covers the whole relevant environment of a company. In addition. while the scope of CI is narrower. however. Miller (2005) states that CI includes competitor and market information but also information concerning a company itself and its possibilities and weakness. competitor intelligence aims to facilitate decision making . longterm decisions are based on information produced by BI. CI and competitor intelligence (based on Choo 2002:88. such as competitor. Choo (2002:86–88) states that competitor intelligence literally focuses just on competitors. not just the company itself. Fleisher 2003:62. competitor intelligence is discussed as a sub-activity of CI because CI is considered to involve competitive and market information in addition to competitor information (Choo 2002:86). activities in managing and enriching information and knowledge remain essentially the same regardless of the designation. Figure 2 Relationship between BI. It needs information from several sources and its uses are various. The definition put forth by Cook and Cook (2000:5) is similar. Hence.

varying from days to months. a company has to notice that there may be some intelligence work acting against its interests. the view of customer intelligence is not as broad because it includes information about individuals. the results of MI and market research are not distributed as widely as BI and CI products. SI especially addresses the intelligence needs of high-level strategic decision makers and the focus is mainly on proactive activities. Miller (2005:3) states that an intelligence activity is a failure if there is any sign of industrial espionage. how it can retain its competitiveness in view of future challenges and changes in the long term (Thierauf 2001:191. It aims to understand where a company is going. However. product and promotion and thereby aims to find more profitable market segments. Nolan 1997:58). Competitor intelligence is typically something that interests the sales and marketing functions. Hamilton and Fleisher 2001. It is noteworthy that a company can . Hence. The concept of counterintelligence has become more general in recent years. In simple terms. services and advertisements. a company can realize which information is most valuable and critical for its business and protect it against attacks by competitors (Barrett 2001:29. Miller 2005).especially at tactical level. counterintelligence activities are partly contrary to BI activities. In addition. Hence. price. MI is industry-target intelligence that mainly focuses on the dynamic developments related to place. whereas BI aims to find out what kinds of changes may occur in the various aspects of a company itself and its business environment and how they will affect the company's business in the long term. Although there are several intelligence concepts. products. 3. typically they are used by marketing and sales managers (Fleisher 2003). customer intelligence aims to measure the profitability of customers. Fleisher 2001:4–5. 195) and how it can make the best strategic decisions for maximizing its success (Liebowitz 2006:14.' According to Davis (2003:147). According to Miller (1996:200) and Liebowitz (2006:14). The content of the customer intelligence concept does not differ notably from that of market research and MI. The concepts of environmental. Waters (1996) states that BI is not equivalent to market research because market research primarily estimates what customers might buy on the basis of past habits. product and technology intelligence are not yet in wide use but intelligence related to these concepts is valuable nonetheless in decision making and the creation of successful strategies. Hence. The basic principle of intelligence activities is to gather information only from open and ethical sources. McGonagle and Vella 2002:35. Fleisher (2003:62) and Weiss (2003:49) also position CI somewhere between BI and competitor intelligence because the focus of CI is especially on the competitive environment and the improvement of a company's competitiveness.2 More intelligence concepts The most popular term worldwide for systematic activities to collect and analyse information related to the external environment is 'market research' (Global Intelligence Alliance 2005). According to Fleisher and Bensoussan (2003:181). all of the terms emphasize the role of ethics and the legality of intelligence activities (Cook and Cook 2000:7–8. Even if industrial espionage is generally considered unethical. It refers to activities protecting against the loss of critical information (Dutka 1999:295. strategies and plans as it relates to the products or services offered by a company and to particular purchase decisions. Collins (1997:95) defines customer intelligence as 'knowledge of customers' organisation. requirements. the focus of MI and market research is on a specific information need and the time horizon is typically short. with the focus being on protection of information assets. 22). 'strategic intelligence' (SI) is a term used in strategic planning and strategic management. purchasing activities. Pattakos 1997:72–73). all examine the buying behaviour and profitability of customers and products. but it can be used in strategic decision making also. With counterintelligence.

timely and relevant information has to be gathered and processed for business decisions and for business evaluation and strategy in a systematic way instead of in random and haphazard ways. In this article BI is defined as an intelligence process that includes a series of systematic activities. involves counterintelligence activities and thus a company must be critical enough as well as ethical. From the literature review. although the possibilities provided by information technology have developed a great deal. one sees that there are numerous intelligence concepts and that their categorization is ambiguous. It is important to note that the role of BI is not only to provide a solution when a specific decision has to be made but also to help decision makers find the right questions to ask and to aid them in questioning prevailing assumptions and opinions. BI has much to do with a company's ability to refine raw data and information efficiently into relevant and valuable knowledge and intelligence. Other intelligence concepts are considered as components of BI. top 4 Conclusion Amid today's rapid change. The need to continue the study of BI seems to be obvious from both the academic and business perspective. too. since each company is unique and BI is highly situational and company specific. the concept of BI is multidimensional. being driven by the specific information needs of decision makers and the objective of achieving competitive advantage. Technological advances add considerable value to information management and thus their significance is certain. the most typical viewpoints of BI are illustrated. There is especially a strong need to confirm the . Figure 3 Main areas of BI (Pirttimäki 2007) The conceptual analysis shows that the content of BI definitions has not varied much from the 1980s to the present. although there is no established or widespread definition and the choice of content is writer-specific as authors tend to promote their own emphases. each author has promoted his own idea of its connotations. it is important to view BI within its own setting. they are still trying to find a footing in both academia and the business world. Despite the importance of systematic intelligence activities. In Figure 3.spread disinformation. It is also noteworthy that. Newer definitions are in line with the old. There is no precise or universal conception of what BI is. but BI cannot be utilized effectively through the application of technical solutions alone. on the contrary. This may be a sign that BI is more like management philosophy or a managerial tool and that technology is indeed an enabler of BI. Also. This.

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