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Revista Informatica Economică, nr.

4(48)/2008 5

Business Intelligence & Knowledge Management – Technological Support


for Strategic Management in the Knowledge Based Economy
Felicia ALBESCU, Irina PUGNA, Dorel PARASCHIV
Academy of Economic Studies, Bucharest, România

The viability and success of modern enterprises are subject to the increasing dynamic
of the economic environment, so they need to adjust rapidly their policies and strategies in
order to respond to sophistication of competitors, customers and suppliers, globalization of
business, international competition. Perhaps the most critical component for success of the
modern enterprise is its ability to take advantage of all available information - both internal
and external. Making sense of all this information, gaining value and competitive advantage
through represents real challenges for the enterprise. The IT solutions designed to address
these challenges have been developed in two different approaches: structured data manage-
ment (Business Intelligence) and unstructured content management (Knowledge Manage-
ment). Integrating Business Intelligence and Knowledge Management in new software appli-
cations designated not only to store highly structured data and exploit it in real time but also
to interpret the results and communicate them to decision factors provides real technological
support for Strategic Management. Integrating Business Intelligence and Knowledge Man-
agement in order to respond to the challenges the modern enterprise has to deal with
represents not only a „new trend” in IT, but a necessity in the emerging knowledge based
economy. These hybrid technologies are already widely known in both scientific and practice
communities as Competitive Intelligence. In the end of paper, a competitive datawarehouse
design is proposed, in an attempt to apply business intelligence technologies to economic en-
vironment analysis making use of Romanian public data sources.
Keywords: business intelligence, knowledge management, competitive intelligence, public da-
ta-sources, strategic management

I ntroduction
Nowdays, economic organizations are
subject to external forces that they must live
contained within the huge volumes of infor-
mation and leveraging this value is increa-
singly important in the competitive market.
with and react to: increasing sophistication of Making sense of all this information, gaining
competitors, customers and suppliers, globa- value and competitive advantage through
lization of business, international competi- represents real challenges for the enterprise.
tion. Perhaps the most critical component for The IT solutions designed to address these
success of the modern enterprise is its ability challenges have been developed in two dif-
to take advantage of all available information ferent approaches: structured data manage-
- both internal and external. It’s a real chal- ment and unstructured content management.
lenge, due to the tremendous flow of infor- We can even think at these approaches in a
mation it’s facing every day. Also, the nature more general perspective as being informa-
of information itself has changed, in terms of tion management technologies and know-
volume, availability and importance. The da- ledge management technologies – being
ta to be considered becomes more and more aware in the same time that information
complex in both structure and semantics. management it’s a part of knowledge man-
With the Internet, Intranets, Groupware sys- agement, as information can be considered a
tems the volume of available data increases type of knowledge (explicit knowledge).
each day – customer communications, inter- Knowledge management technologies, while
nal research reports or competitors web sites less mature than information management
are just some sources of electronic data. In- technologies, are more and more capable of
tellectual property and assets, knowledge are combining content management systems and
6 Revista Informatica Economică, nr. 4(48)/2008

the Web with vastly improved searching and that Competitive Intelligence deals with the
text mining capabilities to derive more value collection, selection and interpretation of
from the explosion of textual information. publicly-held information that emphasize
Integrating Business Intelligence and Know- competitors position, performance, capabili-
ledge Management in order to respond to the ties and intentions.
challenges the modern enterprise has to deal Competitive intelligence is the analytical
with represents not only a „new trend” in IT, process that transforms scattered information
but a necessity. Over time, techniques from about competitors and customers into rele-
both technologies blended, Competitive In- vant, accurate and usable strategic know-
telligence Systems are a direct result of such ledge on market evolution, business oppor-
integration. tunities and threats. It is focused on environ-
ment and uses public sources to locate and
Business Competitive Intelligence develop information on competition and
Competitive intelligence has undergone a competitors, information later used as refer-
raising interest in recent years as a result of ences, benchmarks or any other basis for
the information explosion and the sharpness strategic analysis. Competitive Intelligence is
of information technologies. Trying to define the natural exploit of the increasing availabil-
the scope of competitive intelligence, a lot of ity of commercial databases world-wide, the
definitions proposed by business intelligence on-line mass-media and the development of
professionals and strategic analysts were cutting edge information technologies: busi-
summed up in the Competitive Intelligence ness intelligence and knowledge manage-
Handbook [4]. The general opinion of all ment.
these business information professionals is

Information Systems
ERP
ERP
Archives
synthesis
synthesis
Current performance
indicators
References synthesis Public data bases
ANALYSIS

Domain
Business case knowledge synthesis Business
environment
INTERPRETATION

Problem / opportunity

Problem / Opportunity
Solution ….

Fig.1. Competitive Intelligence framework

By its very nature, no business is isolated. In future and also organizations that could re-
doing its activity, the business will need to move the need for a product or service by of-
deal with customers, suppliers, employees, fering substitutes or changing habits. Moni-
and others. In almost all cases there will also toring competitors worth a lot because it pro-
be other organizations offering similar prod- vides necessary knowledge to be able to pre-
ucts to similar customers and seeking similar dict their next moves, exploit their weak-
objectives: growth, profit and fame. These nesses and undermine their strengths. Ac-
other organizations are known as competi- cording to Arthur Weiss, founder managing
tors. partner of AWARE company which has an
Competitiveness is a natural relationship be- international reputation within the Society of
tween businesses. Business competitors are Competitive Intelligence Professionals
other organizations offering the same product (SCIP), there are four stages in monitoring
or service in the present time but also in the competitors - the four "C"s:
Revista Informatica Economică, nr. 4(48)/2008 7

F in a n c ia l m a rk e t

H um a n R e s ou r c e s m a r k e t

C L I E N TS
CO M PA N Y En erg y m ark et

CO NCU RE NT S

Lo cal R a w m a te ria ls m a r k e t
e n v iro n m e n t

N a tio n a l
e nv ir on m e n t

G lo b a l
e n v iro n m e n t

Fig.2. Business environment

1. Collecting the information market. And like in war, it is necessary to


2. Converting information into intelligence understand the enemy: his vision, his
3. Communicating the intelligence strengths, where he is vulnerable; where he
4. Countering any adverse competitor ac- can be attacked; where the risk of attack is
tions (making use of gathered intelligence) too great and so on. The war-like approach
This approach is war-like, with terminology of the business relationship with the competi-
taken from the military field (intelligence, tors led to a new branch of IT applications
counterintelligence and techniques as well). designated to support competitive intelli-
All businesses are fighting to gain the same gence - CI information systems.
resource and occupy the same territory: the

Fig.3. The 4C approach of competitive intelligence


A.Weiss Business Information Review 19(2) – 2002 [5]

1. Collecting competitor information or making use of an entirely new technology


Preliminary decision on what business envi- up to looking at a potential merger, acquisi-
ronmental information must focus on is made tion or business partnership. The information
roughly on business strategic plans ranging requirements for different business decisions
from planning a new product, developing a will be completely different and so the in-
new business line to follow the industry trend formation that should be seek will also be
8 Revista Informatica Economică, nr. 4(48)/2008

different. There is no value in information sion makers and the requested information.
that cannot be used to inform the business's Thus, rather than collecting information at
strategic or tactical decisions and the time, random, the search needs to be focused and
money, and effort spent collecting it is planned, and aimed at answering the various
wasted. intelligence requirements of the business –
At this stage the objective is to identify the often termed key intelligence topics.
key areas of concern for the business deci-

FINANCES
MINISTRY
NATIONAL
INSTITUTE
OF
TRADE STATISTICS
R EGISTRY

M ASS
MEDIA
P ROFESS IONAL
OR GANIZATIONS

OTHER
OTHER
SOURCES
GOVERNM ENTAL
INSTITUTIONS

COMPETITIVE
DATAWAREHOUSE

Product/service market analysis Resources market analysi s

Main Main supplier s


competitors evolution
evolution Ma in
customer s F inanc ial
evolution m arket
e volution

Fig.4. Competitive Datawarehouse – Inputs&Outputs

In the Internet era there are a lot of public some pieces are missing or damaged, one
electronic primary information sources most can often get a good idea of what the real
companies are advertising their services, picture actually is.
there are numerous other web-sources - dis- We can regard it as being a process of know-
cussion forums, web-logs, customer and go- ledge creation. As we know, most of the
vernmental sites and so on. One can also find knowledge creation activities are products of
information at trade shows and conferences, people interacting with people, people inte-
and by interviewing industry experts, your racting with data and information, people in-
competitors' customers and suppliers, ex- teracting with systems and people interacting
competitor employees - or even the competi- with the environment in which they operate.
tor although there are ethical issues involved In fact, there are two basic approaches in
when obtaining information from some of knowledge creation:
these sources. • DATA → INFORMATION →
2. Converting information into intelligence KNOWLEDGE - the structured linear view,
Unfortunately much of collected data will be based on information processing which ex-
redundant, out of date, inaccurate or incom- tracts knowledge from information and in-
plete, even wrong. Like a puzzle, each piece formation from data. It’s a process of both
can help build up the compete picture even if creating and adding value to data, process
Revista Informatica Economică, nr. 4(48)/2008 9

strongly sustained by information technolo- tices and furthermore that knowledge should
gies. Business intelligence technology plays be understood as inseparable from its broader
the central role in that context. Basically, it context. Knowledge application – or know-
has applied the functionality, scalability and ing- is an effect of a heterogeneous network
reliability of modern database management having both material and social components.
systems to built data warehouses (informa- Knowledge integration is perceived as being
tion bases) and to utilize data mining tech- a synthesis of best available evidence with
niques to extract business advantage from the expertise of individuals and customer values.
vast amount of available data. Data ware- 3. Communicating the intelligence
housing and knowledge discovery has been Competitor intelligence needs to be evaluated
widely accepted as a key technology for or- and selectively communicated to all who
ganizations to improve their abilities in data need to make decisions based on what cus-
analysis, decision support and the automatic tomers, suppliers, or other companies in the
extraction of knowledge from data. However, market are doing or are likely to do.
there is a long way from information to intel- Even if this stage seems well understood and
ligence. Converting information into intelli- well supported by communication technolo-
gence (in a particular context) is a process gies, Knowledge Management technologies
consisting of three steps: collate and cata- are widely used in order to fully achieve this
logue information, integrate it with other goal.
pieces of information, analyze and interpret 4. Countering (making use of gathered intel-
it. ligence in decision process)
• INTEGRATION - interaction and com- Business intelligence is scanning internal en-
munication of tacit (expertise, insight in hu- vironment for summary information that is
man mind) and explicit knowledge (docu- relevant for the decision-making. Current in-
ments, databases, data warehouses, etc). formation about the environment is needed in
Knowledge integration, in relation to use of the analysis process to make reference to as
IT systems is the end product of a lot of work industry benchmarks or just as direct compet-
involving a range of different sense-making itors performance levels to compare against.
processes and information technologies. The This reference information is provided by
concept of knowing itself underscores that competitive intelligence which monitors the
knowledge is inherently constituted in prac- company environment.

IN T E R N A L EX TERN AL
E N V IR O N M E N T E N V IR O N M E N T

B U S IN E S S C O M P E T IT IV E
IN T E L L IG E N C E IN T E L L IG E N C E

STRENG TH O P P O R T U N IT IE S
& &
W EA K N ESSES THREATS

Fig.5. Business and competitive intelligence outputs

The cross-analysis of information provided proach in analysing industry and competitors


by both technologies may be syntetised in a largely known as Five’s Forces Model is en-
SWOT matrix, BCG matrix or any other ba- tirely based on such cross information with
sis for strategic analysis. Michel Porter’s ap- great added value. The strategic business
10 Revista Informatica Economică, nr. 4(48)/2008

managers seeking to develop an edge over ri- used knowledge repositories and artificial
val firms often use this model to better un- reasoning. The artificial intelligence (AI)
derstand the industry context in which the technologies can play an important role in
firm operates. analyzing and interpreting all the gathered in-
formation, providing solutions, interpreta-
Strategic analysis of gathered information tions, in other words, actionable intelligence.
The core of competitive intelligence is analy- Integrating Business Competitive Intelli-
sis. Professionals must be experts in the use gence in Strategic Management process
of various analytical models, such as SWOT The last phase of Competitive Intelligence
Analysis, Porter's Five Forces, PEST, Market process refers to the use of intelligence in the
Segmentation and special analytical models decision making process and is focused on
such as Psychological Profiling, Shadowing, evaluation of decisions' impact over the
Reverse Engineering. When applied correct- competitive position and performances in the
ly, these analytical models can convert dispa- own company. The CI process can restart to
rate pieces of information into actionable in- collect new information as a consequence of
telligence. new demand of intelligence. In the CI
CI uses different methods and types of analy- process, there is a continuous interaction be-
sis to transform the obtained information into tween producers and end-users of intelli-
acting intelligence. A research study made by gence, both in the beginning phase to clarify
SCIP (Society of Competitive Intelligence the demands as well as in the feedback phase
Professionals) in 2006 shows the most fre- to establish the quality and utility for the re-
quently used analysis methods: Competitor sulted products.
Analysis (known as Competitive Analysis), This last phase will assure the informational
SWOT analysis and Industry Analysis based and decisional superiority with results in ob-
on Porter’s Five Forces Model. taining competitive advantages.
For this type of analysis can be successfully

BUSINESS
INTELLIGENCE
COMPETITIVE
APPLICATIONS Mission
INTELLIGENCE formulation Objectives
APPLICATIONS Strategies
Policies

choice

STRATEGY

implementation

Programs
Budgets
Finance
Procedures

evaluation
contro l

Performances
Results

Fig.6. Business&Competitive Intelligence Integration in Management Process

As presented in the picture above, the inte- company; in designing strategies from which
grated technologies of Business and Compet- the company will make a choice. These are
itive Intelligence are useful in formulating obviously features of strategic management
mission and long term objectives for the level, the technological support is known as
Revista Informatica Economică, nr. 4(48)/2008 11

Strategic Management Support System. Romanian environment


The implementation of the strategy could al- The proposed Competitive Intelligence ap-
so be assisted by Business Intelligence, most- plication is based on a central datawarehouse
ly on operational side – in the planning phase build mainly on Financial statements of en-
when programs, budgets, procedures, financ- terprises published by the Finances ministry.
ing plans are to be established and optimized. The financial data are collected for compa-
At this stage, one can rely on Operational nies along 5 years and completed with CAEN
Management software support. Once the code of the main activity and Product code
implementation plan approved and the associated with CAEN classification taken
project start up, Performance Management from the PRODROM master file. There are
Systems must enter the scene, in order to also added data on company location and
evaluate the evolution of the project and keep other data provided by a specialized compa-
it under control. ny Listafirme that exploit data from Trade
Register and some data from financial state-
Competitive Intelligence application for ments

F in a n c ia l
statem en ts

P R O D R O M .t x t C A E N .t x t

L I S T A F I R M E .p d f

P R O D R O M .d b f
C A E N .d b f

c o m p a n i e s .d b f

C O M P E T IT IV E E N V IR O N M E N T
D A TA W A RE H O U SE

Fig.7. Competitive environment datawarehouse

Romanian economy. Future developments


aims to insert statistical references provided
by National Institute of Statistics and could
be expanded to accommodate data from other
countries economies. The utmost use of such
Fig.8. CAEN database competitive intelligence application could be
done if implemented inside a governmental
organization like Finances Ministry. The ex-
ploiting possibilities vary from market seg-
mentation and benchmarking to estimated
value chains and trophic chains. The applica-
Fig 9. Prodrom database tion is an attempt to apply business intelli-
gence technologies to economic environment
Even if classification information on many analysis making use of Romanian public data
companies regarding activity object and deli- sources.
vered products are not always accurate, many
cross analysis could give some insights on
12 Revista Informatica Economică, nr. 4(48)/2008

Fig. 10. Competitive intelligence application datawarehouse

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