UNIT -1 BUSINESS INTELLIGENCE

 What is Business Intelligence?

Business Intelligence is the talk of a new changing and growing world that can be defined as
a set of concepts and methodologies to improve decision-making in business through the use
of facts and fact-based systems. The Goal of Business Intelligence is to improve decision-
making in business ideas and analysis. Business Intelligence is not just a concept it’s a group
of concepts and methodologies. Business Intelligence uses analytics and gut feelings for
making decisions.

What Is Business Intelligence?

Business intelligence refers to a collection of mathematical models and analysis methods that
utilize data to produce valuable information and insight for making important decisions.

Definition and Scope of Business Intelligence

Business Intelligence (BI) refers to the technologies, applications, strategies, and practices
used to collect, analyze, integrate, and present business information. The primary goal of BI
is to support better decision-making by providing actionable insights derived from data. BI
transforms raw data into meaningful and useful information that can be used to drive
strategic, tactical, and operational decisions.
The scope of BI encompasses a broad range of activities and technologies, including data
analysis, data visualization, performance management, predictive analytics, and reporting. It
is widely applicable across industries and business functions, empowering organizations to:
 Monitor key performance indicators (KPIs)
 Identify trends and patterns
 Optimize business processes
 Enhance customer experiences
 Improve operational efficiency
Importance of BI in Decision-Making In today’s data-driven world, effective decision-
making requires access to accurate and timely information. BI plays a critical role in:
 Data-Driven Decisions: Ensuring decisions are based on factual data rather than
intuition or guesswork.
 Improved Efficiency: Automating data collection and analysis processes to save time
and resources.
 Competitive Advantage: Providing insights into market trends, customer behaviour,
and competitor strategies.

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  Risk Management: Identifying potential risks and opportunities through advanced
analytics.
 Personalized Customer Experience: Enabling businesses to tailor their offerings
based on customer preferences and needs.

Main Components of Business Intelligence System:

1. ETL
2. Data Source
2. Data Mart / Data Warehouse
3. Data Exploration
4. Data Mining
5. Optimization
6. Decisions

1.ETL stands for Extract, Transform, Load and it is a process used in data warehousing to
extract data from various sources, transform it into a format suitable for loading into a data
warehouse, and then load it into the warehouse. The process of ETL can be broken down into
the following three stages:
 Extract: The first stage in the ETL process is to extract data from various sources
such as transactional systems, spreadsheets, and flat files. This step involves
reading data from the source systems and storing it in a staging area.
 Transform: In this stage, the extracted data is transformed into a format that is
suitable for loading into the data warehouse. This may involve cleaning and
validating the data, converting data types, combining data from multiple sources,
and creating new data fields.
 Load: After the data is transformed, it is loaded into the data warehouse. This step
involves creating the physical data structures and loading the data into the
warehouse.

2.Data Source:
To begin, the first step is gathering and consolidating data from an array of primary and
secondary sources. These sources vary in origin and format, consisting mainly of operational
system data but also potentially containing unstructured documents like emails and data from
external providers.
3.Data Mart / Data Warehouse:

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Through the utilization of extraction and transformation tools, also known as extract,
transform, load (ETL), data is acquired from various sources and saved in databases designed
specifically for business intelligence analysis. These databases, commonly known as data
warehouses and data marts, serve as a centralized location for the gathered data.
4.Data Exploration:
The third level of the pyramid offers essential resources for conducting a passive analysis in
business intelligence. These resources include query and reporting systems, along with
statistical methods. These techniques are referred to as passive because decision makers must
first develop ideas or establish criteria for data extraction before utilizing analysis tools to
uncover answers and confirm their initial theories. For example, a sales manager might
observe a decrease in revenues in a particular geographic region for a specific demographic
of customers. In response, she could utilize extraction and visualization tools to confirm her
hypothesis and then use statistical testing to validate her findings based on the data.
5.Data Mining:
The fourth level, known as active business intelligence methodologies, focuses on extracting
valuable information and knowledge from data. Part II of this book will delve into various
techniques such as mathematical models, pattern recognition, machine learning, and data
mining. Unlike the tools discussed in the previous level, active models do not rely on
decision makers to come up with hypothesis but instead aim to enhance their understanding.
6.Optimization:
As you ascend the pyramid, you’ll encounter optimization models that empower you to
choose the most optimal course of action among various alternatives, which can often be
quite extensive or even endless. These models have also been effectively incorporated in
marketing and logistics.
7.Decisions:
At last, the pinnacle of the pyramid reflects the ultimate decision made and put into action,
serving as the logical end to the decision-making process. Despite the availability and
effective utilization of business intelligence methodologies, the decision still lies in the hands
of the decision makers, who can incorporate informal and unstructured information to fine-
tune and revise the suggestions and outcomes generated by mathematical models.

Process Used in Business Intelligence:

BI(Business Intelligence) uses a set of processes, technologies, and tools (such as
Informatica/IBM) to transform raw data into meaningful information and then transform
information to provide knowledge. Then afterward some beneficial insights can be extracted
manually and by some software then the decision-makers can make an impactful decision on
the basis of insights.

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Types of Decisions Supported by Business Intelligence:
 Strategic Level: The strategic level is the level where the Heads of the company
decide the strategies of any business.
 Tactical Level: Once the strategy is made though for handling all the details and
matters have a tactical level where all the technologies and methodologies come under
one umbrella. This level is further responsible for continuously updating the data.
 Operational Level: Operation decisions are made at this level. Operational decisions
help in operating the system.

Applications of Business Intelligence:

 In Decision Making of the company by decision-makers of the organizations.
 In Data Mining while extracting knowledge.
 In Operational Analytics and operational management.
 In Predictive Analytics.
 In Prescriptive Analytics.
 Making Structured data from unstructured data.
 In Decision Support System.
 In Executive Information System (EIS).

Business Intelligence Tools and Software

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 1. Tableau: A business intelligence and data visualization application that enables users
to connect to different data sources, build interactive dashboards, and share findings
with others.
2. Microsoft Power BI: A cloud-based business intelligence program that enables users
to connect to a variety of data sources, produce visualizations, and communicate
findings.
3. QlikView is a business intelligence and data visualization platform that enables users
to build interactive dashboards and examine data in novel ways.
4. Data visualization, reporting, and analytics tools are all included in SAP
BusinessObjects, a complete business intelligence suite.
5. IBM Cognos: A tool for performance management and corporate intelligence that
enables users to build reports, scorecards, and dashboards.
6. Data visualization, reporting, and analytics technologies are all part of the full
business intelligence suite known as Oracle Business Intelligence.
7. Create dynamic dashboards and reports with MicroStrategy, a business intelligence
and data visualization tool.
8. Data visualization, reporting, and analytics tools are all part of the full business
intelligence suite known as SAS Business Intelligence.
9. TIBCO Spotfire is a business intelligence and data visualization platform that enables
users to build interactive dashboards and investigate data in novel ways.
10. Looker: A tool for business intelligence and data visualization that enables users to
build interactive dashboards and investigate data in novel ways.

Advantages of Business Intelligence

1. Decision-making is improved because users have access to real-time data and insights
through business intelligence tools. This enables users to base their decisions on
correct and current information.
2. Efficiency gain: Many manual data analysis operations are automated by business
intelligence systems, freeing up time and resources for other tasks.
3. Better data management: Business intelligence technologies aid in the
administration and organization of data, making it simpler to locate the facts required
for decision-making.
4. Greater visibility: Business intelligence solutions give users a comprehensive picture
of the functioning of the firm, enabling them to spot areas that could use
improvement.

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 5. A better understanding of customers: Business intelligence technologies helps
firms understand their customers better, enabling them to customize products and
services to suit their needs.
6. Cost savings: Business intelligence technologies assist firms in locating inefficiencies
and cost savings, which boosts revenue.
7. Better forecasting: Organizations may evaluate past data and predict future patterns
using business intelligence technologies, which enables them to plan more
successfully for the future.
8. Competitive advantage: By granting access to important data and insights that can
guide them in making better decisions, business intelligence technologies provide
firms a leg up on their rivals.
9. Collaboration is improved as a result of using business intelligence technologies to
disseminate information between teams and departments. This promotes better
decision-making and collaboration.
10. Better Monitoring: Business intelligence technologies assist firms in tracking
important metrics like revenue, customer happiness, and staff performance and in
monitoring performance.

Disadvantages of Business Intelligence

1. Complexity: The implementation and upkeep of business intelligence systems can be
extremely difficult and complicated. This may be a drawback for companies with
constrained IT resources.
2. High costs: Some businesses find it prohibitively expensive to implement and
purchase business intelligence technologies.
3. Business intelligence strongly depends on accurate and current data. The insights
produced by business intelligence technologies could not be accurate if the data is
inconsistent, erroneous, or incomplete.
4. Data Security: Business intelligence systems handle and store a lot of sensitive data,
which, if not adequately protected, is susceptible to security breaches.
5. Dependence on IT: Because business intelligence solutions frequently rely largely on
IT assistance, it may be challenging for enterprises to quickly get the data they
require.
6. Limited scalability: For firms with huge data volumes, business intelligence
solutions may not be able to handle enormous amounts of data.

Types of Business Intelligence (BI) Tools

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Business Intelligence tools are technological solutions that help organizations collect,
process, and analyze data to support decision-making. These tools play a critical role in
transforming raw data into meaningful insights, enabling businesses to make data-driven
decisions.
1. Reporting Tools
Definition:
Reporting tools focus on organizing and presenting data in a structured format, usually
through static or dynamic reports. They are primarily designed to summarize past and current
data to provide a clear picture of business performance.
Key Features:
 Data Integration: Pulls data from multiple sources like databases, spreadsheets, or
cloud systems.
 Customizable Reports: Offers flexibility to design reports tailored to business needs.
 Scheduling and Automation: Automates the generation and distribution of reports at
predefined intervals.
 Static vs. Interactive Reports: While static reports provide a snapshot of data,
interactive ones allow users to drill down into specific details.
Use Cases:
 Monthly sales summaries.
 Financial statements for stakeholders.
 Operational reports like inventory levels or customer service response times.
Benefits:
 Enhances transparency by providing clear data visualization.
 Saves time by automating repetitive reporting tasks.
 Facilitates informed decision-making.

2. Analysis Tools
Definition:
Analysis tools focus on exploring data to uncover patterns, trends, and insights. They are
used for both diagnostic and descriptive analytics.
Key Features:
 Ad-Hoc Analysis: Allows users to query and analyze data on demand.
 Data Mining: Identifies correlations, anomalies, and hidden patterns.

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  OLAP (Online Analytical Processing): Enables multidimensional data analysis for
complex queries.
 What-If Analysis: Models scenarios to predict the impact of changes in variables.
Use Cases:
 Understanding customer churn rates.
 Analyzing market trends and competitor performance.
 Identifying bottlenecks in supply chains.
Benefits:
 Provides deeper insights into business operations.
 Helps organizations stay competitive by identifying trends early.
 Enhances strategic planning through scenario modeling.

3. Dashboards
Definition:
Dashboards are visual interfaces that display key performance indicators (KPIs), metrics, and
data points in an interactive, real-time format.
Key Features:
 Data Visualization: Uses charts, graphs, heatmaps, and gauges for intuitive data
representation.
 Interactivity: Allows users to filter, drill down, and customize views.
 Real-Time Data: Continuously updates to reflect the most current data.
 KPI Tracking: Focuses on metrics critical to business success.
Use Cases:
 Monitoring sales performance across regions.
 Tracking website traffic and conversion rates.
 Real-time monitoring of manufacturing operations.
Benefits:
 Provides a holistic view of business performance at a glance.
 Enhances decision-making through quick access to relevant metrics.
 Encourages accountability by making KPIs visible to teams.

4. Predictive Analytics Tools

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Definition:
Predictive analytics tools use statistical models, machine learning, and data mining to forecast
future trends and behaviors.
Key Features:
 Machine Learning Algorithms: Includes regression, classification, clustering, and
neural networks.
 Scenario Modeling: Allows businesses to test the potential outcomes of various
strategies.
 Prescriptive Insights: Provides recommendations based on predictions.
 Time-Series Analysis: Analyzes sequential data to predict trends over time.
Use Cases:
 Forecasting sales and demand.
 Predicting customer behavior and lifetime value.
 Identifying risks, such as fraud or equipment failure.
Benefits:
 Enhances strategic planning by anticipating future opportunities and risks.
 Increases efficiency by optimizing resource allocation.
 Reduces costs by identifying potential issues before they occur.

Comparison of BI Tools
Type Focus Strengths Weaknesses

Historical data Easy to use, automates

Reporting Limited interactivity
summaries tasks

Deep data Requires technical

Analysis Uncovers hidden insights
exploration expertise

Real-time Limited scope in

Dashboards Intuitive visualization
monitoring predictive tasks

Predictive Future trend Enables proactive Dependent on data

Analytics forecasting decision-making quality

Overview of BI Applications Across Industries

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Business Intelligence (BI) applications vary significantly across industries, helping
organizations extract insights, streamline operations, and drive informed decision-making.
Below is a brief overview of how BI is used in various sectors.

1. Retail and E-Commerce

 Applications:
o Customer behavior analysis and personalized marketing.
o Inventory management and demand forecasting.
o Sales performance monitoring across regions and channels.
 Benefits:
Improved customer retention, optimized supply chains, and enhanced revenue growth.

2. Healthcare
 Applications:
o Patient care analytics, including outcomes tracking and readmission rates.
o Resource optimization for staff and equipment.
o Revenue cycle management and fraud detection.
 Benefits:
Better patient outcomes, cost efficiency, and compliance with regulatory standards.

3. Financial Services
 Applications:
o Fraud detection and risk assessment.
o Customer segmentation for targeted services.
o Performance tracking for portfolios and investments.
 Benefits:
Enhanced security, personalized customer experiences, and improved financial
planning.

4. Manufacturing
 Applications:
o Production performance monitoring and downtime analysis.
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 o Supply chain optimization and vendor performance assessment.
o Quality control and defect tracking.
 Benefits:
Increased operational efficiency, reduced waste, and higher product quality.

5. Education
 Applications:
o Student performance tracking and dropout prediction.
o Resource allocation for staff, classrooms, and budgets.
o Institutional performance benchmarking.
 Benefits:
Enhanced educational outcomes, efficient resource use, and informed decision-
making.

6. Telecommunications
 Applications:
o Network performance monitoring and outage prediction.
o Customer retention through churn analysis.
o Revenue analysis for pricing and service plans.
 Benefits:
Reduced downtime, improved customer satisfaction, and optimized pricing strategies.

7. Logistics and Transportation

 Applications:
o Route optimization and fleet management.
o Warehouse inventory and order tracking.
o Delivery performance analysis.
 Benefits:
Lower transportation costs, faster deliveries, and better customer experiences.

8. Energy and Utilities

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  Applications:
o Energy consumption monitoring and forecasting.
o Equipment maintenance predictions.
o Regulatory compliance reporting.
 Benefits:
Optimized energy usage, reduced outages, and regulatory adherence.

9. Hospitality
 Applications:
o Customer preference analysis for personalized services.
o Revenue management through dynamic pricing.
o Employee performance and resource utilization tracking.
 Benefits:
Enhanced guest satisfaction, increased revenue, and operational efficiency.

10. Government and Public Sector

 Applications:
o Budget planning and resource allocation.
o Citizen service performance tracking.
o Fraud detection and compliance monitoring.
 Benefits:
Better public services, transparency, and efficient governance.

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