Business Intelligence

Business intelligence is the process of gathering information in the field of business. Information is typically obtained about customer needs, customer decision making processes, the competition and competitive pressures, conditions in the industry, and general economic, technological, and cultural trends. Business intelligence is carried out to gain sustainable competitive advantage, and is a valuable core competence in some instances. Every business intelligence system has a specific goal, which is derived from an organisational goal or from the Vision statement. Goals could be short term (e.g.: quarterly numbers to Wall Street) or long term (shareholder value, target industry share / size etc).
The term was first used by Gartner and popularized by analyst Howard Dresner. It describes the process of turning data into information and then into knowledge. The intelligence is claimed to be more useful to the user as it passes through each step.
Industrial espionage is a type of business intelligence that uses covert techniques. There is a gray area between "normal" business intelligence and industrial espionage.
Business performance management is a software oriented business intelligence system that some see as the new generation of business intelligence though the terms are used interchangeably by most in the industry.
The first probable reference to Business intelligence is made in Sun Tzu's "Art of War" where he claims that to succeed in war, you should have full knowledge of your strengths/weaknesses and full knowledge of your enemy's strengths/weaknesses. Lack of either one might result in defeat. BI is the art of wading through tons of data overload, sieving through data and presenting information - both internal (from operational systems) and external (market intelligence) - on which management can act or build strategies.

Some of the Definitions of this Field

• Systems that provide directed background data and reporting tools to support and improve the decision-making process.
• Business Intelligence provides business roadmaps to deliver solutions for business analysis which includes data models, meta-data and analytical applications. By having these roadmaps, we deliver superior business value through improved return on investment, time value by enabling fast solution delivery, and technical value through open database enablement.
• A term which represents those systems that help companies understand what makes the wheels of the corporation turn and to help predict the future impact of current decisions. These systems play a key role in strategic planning process of the corporation. Systems that exemplify business intelligence include medical research, customer profiling, market basket analysis, customer contact analysis, market segmentation, scoring, product profitability, and inventory movement.
• An interactive process of analyzing and exploring structured, domain-specific information (often stored in a data warehouse) to discern trends or patterns, thereby deriving insights and drawing conclusions. The BI process includes communicating findings and effecting change. BI domains include customers, products, services or competitors.
• Business intelligence (BI) is a broad category of applications and technologies for gathering, storing, analyzing, and providing access to data to help enterprise users make better business decisions.
• Usage of timely and accurate information to base decisions upon. Typically, includes a broad category of applications and technologies for gathering, storing, analyzing, and providing access to data. Activities include decision support, query and reporting, online analytical processing, statistical analysis, forecasting, and data mining.

Metrics /Key Performance Indicators

Most of the time, BI simply means use of several Financial/Nonfinancial Metrics/Key Performance Indicators to assess the present state of business and to prescribe course of action. The key aspects of this are:

1. Having a Process
2. Having clear goals / performance requirements of the process
3. Having a quantitative / qualitative measurement of the results and comparison with set goals
4. Investigating variances and tweaking processes or resources to achieve long-term goals

-Some of the areas which Top management Analyst could be...

1. Customer Related Numbers
2. Turnover generated by segments of the Customers - these could be demographic filters.
3. Outstanding balances held by segments of customers and terms of payment - these could be demographic filters.
4. Collection of bad debts within Customer relationships.
5. Demographic analysis of Individuals (potential customers) applying to become customers, and the levels of approval, rejections and pending numbers.
6. Delinquency analysis of customers behind on payments.
7. Profitability of customers by demographic segments and segmentation of customers by profitability.

This is more an inclusive list than an exclusive one. The above more or less describes what a bank would do, but could also refer to a Telephone company or similar service sector company.

What is important is:

1. KPI-related data which is consistent and correct.
2. Timely availability of KPI related Data.

So what are Metrics / KPIs anyways? How do I get started?

To verify the design of the initial system, we could ask the following questions of every strategic initiative:

Goal Alignment queries:

• What is the strategic goal of the organization that is being addressed by this particular activity?
• What organizational mission/vision does it relate to?
• Do we have a hypothesis as to how this initiative will eventually improve results / performance (i.e. a strategy map)?

Baseline Queries:

• What is the existing level of performance? Do we know or have the capability to know (monitoring capability)?
• Are we collecting this data and storing it somewhere?
• What are the statistical parameters of this data, e.g. how much random variation does it contain? Are we measuring this?

Cost and risk queries:

• What is the existing cost of present operations?
• How much will that increase when we go ahead with the initiative?
• What is the risk that this cost will be exceeded or achieved? Have we performed a similar sensitivity analysit on this?
• Is the money being spent on this presebt initiative the best use of the funds, or is there a better alternative usage?
• What is the risk that the initiative will fail? Has this assessment been included in the planning?

Customer and Stakeholder queries:

• Have you listed all the communities of interest that have a stake in this present initiative?
• Who are the kinds of customers/stakeholders who will benefit directly from this initiative? Who will benefit indirectly? What are the quantitative / qualitative benefits?
• Is the specified initiative the best way to increase satisfaction for all kinds of customers, or is there a better way?
• How will we know that the initiative benefits these customers?

Metrics Related Queries:

• What metrics will be used to define the benefit?
• Are these the best metrics? How do we know that?
• How many metrics need to be tracked? If this is a large number (it usually is), what kind of system are you planning to use to track them?
• Are the metrics standardized, so they can be benchmarked against performance in other organizations? What are the industry standard metrics available?

Measurement Methodology Related Queries:

• How will the metrics be measured? What methods will be used, and how frequently will data be collected? Are there any industry standards for this?
• Is this the best way to do the measurements? How do we know that?

Results related queries:

• How can we demonstrate that this strategic initiative, and not something else, contributed to a change in results?
• How much of the change was probably random?

Typical Issues in Business Ethics

• accounting and financial standards, and "creative accounting"
• advertising deception
• black market sales
• bribery and kickbacks
• business intelligence and industrial espionage
• political contributions
• competition versus cooperation
• corporate governance, including hostile take-overs, fiduciary responsibility, and shareholder rights issues
• corporate crime, including insider trading, price fixing, and price discrimination
• competitive disinformation
• discrimination, affirmative action, and sexual harassment
• employee issues, such as rights, duties, illicit drug testing, key employee raiding, and professional conduct
• environmental issues, animal rights (e.g., in agriculture), and related social concerns
• Labor issues such as union strikes and union busting
• Marketing, sales, and negotiation techniques
• Product issues such as patent and copyright enfringement, planned obsolescence, product liability and product defects

Conflicting Interests

Business ethics can be examined from various perspectives, including the perspective of the employee, the commercial enterprise, and society as a whole. Very often, situations arise in which there is conflict between one or more of the parties, such that serving the interest of one party is a detriment to the other(s). For example, a particular outcome might be good for the employee, whereas, it would be bad for the company, society, or vice versa. Some ethicists (e.g., Henry Sidgwick) see the principal role of ethics as the harmonization and reconciliation of conflicting interests.

Some Ethical Issues and Approaches

Philosophers and others disagree about the purpose of a business in society. For example, some suggest that the principal purpose of a business is to maximize returns to its owners, or in the case of a publicly-traded concern, its shareholders. Thus, under this view, only those activities that increase profitability and shareholder value should be encouraged. Some believe that the only companies that are likely to survive in a competitive marketplace are those that place profit maximization above everything else. However, some point out that self interest would still require a business to obey the law and adhere to basic moral rules, because the consequences of failing to do so could be very costly in fines, loss of licensure, or company reputation. The economist Milton Friedman is a leading proponent of this view.
Other theorists contend that a business has moral duties that extend well beyond serving the interests of its owners or stockholderes, and that these duties consist of more than simply obeying the law. They believe a business has moral responsibilities to so-called stakeholders, people who have an interest in the conduct of the business, which might include employees, customers, vendors, the local community, or even society as a whole. They would say that stakeholders have certain rights with regard to how the business operates, and some would even suggest that this even includes rights of governance.
Some theorists have adapted social contract theory to business, whereby companies become quasi-democratic associations, and employees and other stakeholders are given voice over a company's operations. This approach has become especially popular subsequent to the revival of contract theory in political philosophy, which is largely due to John Rawls' A Theory of Justice, and the advent of the consensus-oriented approach to solving business problems, an aspect of the "quality movement" that emerged in the 1980s. Philosophers Thomas Donaldson and Thomas Dunfee proposed a version of contract theory for business, which they call Integrative Social Contracts Theory. They posit that conflicting interests are best resolved by formulating a "fair agreement" between the parties, using a combination of i) macro-principles that all rational people would agree upon as universal principles, and, ii) micro-princples formulated by actual agreements among the interested parties. Critics say the proponents of contract theories miss a central point, namely, that a business is someone's property and not a mini-state or a means of distributing social justice.
Ethical issues can arise when companies must comply with multiple and sometimes conflicting legal or cultural standards, as in the case of multinational companies that operate in countries with varying practices. The question arises, for example, ought a company to obey the laws of its home country, or should it follow the less stringent laws of the developing country in which it does business? To illustrate, United States law forbids companies from paying bribes either domestically or overseas; however, in other parts of the world, bribery is a customary, accepted way of doing business. Similar problems can occur with regard to child labor, employee safety, work hours, wages, discrimination, and environmental protection laws.
It is sometimes claimed that a Gresham's law of ethics applies in which bad ethical practices drive out good ethical practices. It is claimed that in a competitive business environment, those companies that survive are the ones that recognize that their only role is to maximize profits. On this view, the competitive system fosters a downward ethical spiral.

Corporate Ethics Policies

Many companies have formulated internal policies pertaining to the ethical conduct of employees. These policies can be simple exhortations in broad, highly-generalized language (typically called a corporate ethics statement), or they can be more detailed policies, containing specific behavioral requirements (typically called corporate ethics codes). They are generally meant to identify the company's expectations of workers and to offer guidance on handling some of the more common ethical problems that might arise in the course of doing business. It is hoped that having such a policy will lead to greater ethical awareness, consistency in application, and the avoidance of ethical disasters. An increasing number of companies also requires employees to attend seminars regarding business conduct, which often include discussion of the company's policies, specific case studies, and legal requirements. Some companies even require their employees to sign agreements stating that they will abide by the company's rules of conduct. Not everyone supports corporate policies that govern ethical conduct. Some claim that ethical problems are better dealt with by depending upon employees to use their own judgment. Others believe that corporate ethics policies are primarily rooted in utilitarian concerns, and that they are mainly to limit the company's legal liability, or to curry public favor by giving the appearance of being a good corporate citizen. Ideally, the company will avoid a lawsuit because its employees will follow the rules. Should a lawsuit occur, the company can claim that the problem would not have arisen if the employee had only followed the code properly. Sometimes there is disconnection between the company's code of ethics and the company's actual practices. Thus, whether or not such conduct is explicitly sanctioned by management, at worst, this makes the policy duplicitous, and, at best, it is merely a marketing tool. To be successful, most ethicists would suggest that an ethics policy should be:

• Given the unequivocal support of top management, by both word and by example.
• Explained in writing and orally, with periodic reinforcement.
• Doable....something empoloyees can both understand and perform.
• Monitored by top management, with routine inspections for compliance and improvement.
• Backed up by clearly stated consequences in the case of disobedience.

Ethics Officers

Since 2002, many companies have appointed ethics officers. They often report to the Chief Executive Officer and are responsible for assessing the ethical implications of the company's activities, making recommendations regarding the company's ethical policies, and dissiminating information to employees. They are particularly interested in uncovering or preventing unethical and illegal actions. This trend is partly due to the Sarbanes-Oxley Act in the United States, which was enacted in reaction to a number of well-publicized corporate scandals. A related trend is the introduction of risk assessment officers that monitor how shareholders' investments might be affected by the company's decisions. The effectiveness of ethics officers in the marketplace is not clear. If the appointment is made primarily as a reaction to legislative requirements, one might expect the efficacy to be minimal, at least, over the short term. In part, this is because ethical business practices result from a corporate culture that consistently places value on ethical behavior, a culture and climate that usually eminates from the top of the organization. The mere establishment of a position to oversee ethics will most likely be insufficient to inculcate ethical behaviour: a more systemic programme with consistent support from general management will be necessary. Obviously, the foundation for ethical behavior goes well beyond corporate culture and the policies of any given company, for it also depends greatly upon an individual's early moral training, the other institutions that affect an individual, the competitive business environment the company is in and, indeed, society as a whole.

• Accounting - Accountancy (British English) or accounting (American English) is the process of maintaining, auditing, and processing financial information for business purposes.
• Advertise - Generally speaking, advertising is the paid promotion of goods, services, companies and ideas by an identified sponsor. Marketers see advertising as part of an overall promotional strategy.
• Banking - The essential function of a bank is to provide services related to the storing of value and the extending of credit.
• Capitalism - Capitalism generally refers to a combination of economic practices that became institutionalized in Europe between the 16th and 19th centuries.
• Economics - Economics is the social science studying production and consumption through measureable variables.
• Electronic Commerce - Electronic commerce or e-commerce consists of the buying, selling, marketing, and servicing of products or services over computer networks.
• Entrepreneurship - Many "high-profile" entrepreneurial ventures seek venture capital or angel funding in order to raise capital to build the business.
• Finance - Finance addresses the ways in which individuals, business entities and other organizations allocate and use monetary resources over time.
• Insurance - Insurance is the business of providing protection against financial aspects of risk, such as those to property, life, health and legal liability.
• Investment - Investment is a term with several closely related meanings in finance and economics.
• Real Estate - Real estate is a legal term that encompasses land along with anything permanently affixed to the land, such as buildings.
• Small Businesses - A small business may be defined as a business with a small number of employees. The legal definition of "small" often varies by country and industry, but is generally under 100 employees.