Get Smart: What is Business Intelligence and Why Do You Need It?

Business intelligence allows small, medium and large businesses to make better decisions by accessing big data.

Even small companies that don’t accumulate a large volume of data can derive considerable benefits from better analytics.

Initially only large businesses could afford the cost of using Business Intelligence software because of the cost of the software itself and the infrastructure to run it on.

However, recent technological innovations like Software as a Service (SaaS) on a cloud computing platform have leveled the playing field.

Today, even small firms with sales under $100,000 a year, can use and benefit from BI. In addition, software comparison between top business intelligence applications offers competitive pricing.

Related Article: Is Silicon Valley Still the World's Top Technology Hub?

What Is Business Intelligence?

Business Intelligence (BI) is not a single piece of software or even a suite of software to crunch big data. Instead, it is an umbrella term that includes best business practices, software, infrastructure, and any other tools to optimize decision making and enhance performance.

In essence, BI is about information analysis. A database pulls together information from the different parts of your business, then applications convert that raw data into reports, charts, and other analytical tools to provide insight. BI can be used in any number of different ways:

1. It can be used to look at any aspect of your business.
2. It can be used to see how well your sales efforts are going.
3. It can be used to assess the efficiency of your manufacturing processes.
4. It can be used to measure staff performance.

Common Misunderstandings

Business intelligence is often considered synonymous with competitive intelligence. It’s easy to understand the confusion because business intelligence and competitive intelligence both require decision making. In addition, BI does increase your competitive advantage.

However, there are some important distinctions: business intelligence uses a wide range of technologies to review internal data and analyze business processes. 

However, competitive intelligence uses data for a different purpose. It focuses on the marketplace, Data is gathered, analyzed, and disseminated to understand how to get an edge over competitors. BI is also often confused with business analytics. Again, these two terms are used interchangeably.

This, too, is a mistake. For one thing, business analytics is related to competitive intelligence, and can be considered a subset of it. For another, BI collects data by asking questions, reporting, and online analytical processing (OLAP) while business analytics is all about predictive modeling, and its tools are statistics and quantitative measurements.

How Does Business Intelligence Work?

Business intelligence provides a spectrum of broad range analytical applications, including collaborative BI, mobile BI, open source BI, SaaS BI, operational BI and real-time BI. The technology is not just about gathering intelligence but about making sense of data in a way that can be quickly grasped.

This is accomplished through visualization applications for creating infographics and designing charts. BI also offers dashboards, as well as performance scorecards. In essence, key performance indicators and business metrics are much easier to understand when displayed as visualized data.

How Can BI Benefit a Small Business?

Many small businesses are reluctant to put BI into practice. Not only because it can be expensive and time consuming to set up, but because they are not clear about the benefits of using it. Here are some reasons why it can pay for itself:

• It’s much easier to make informed decisions.
• It’s a structured way for growing revenue.
• It increases the competitive advantage over other players in the industry, including larger businesses.
• It improves the efficiency of their business operations.
• It enhances the quality of their customer service.

These are not small achievements. They are the key factors to business success and prosperity. Attempts to analyze data without BI are clumsy. For instance, information is often tabulated on Microsoft Excel spreadsheets. It is time-consuming collecting the data and tedious putting it together in a way that’s easy to grasp.

What’s more, the results are not always accurate or insightful. While Microsoft Excel has many excellent uses, it’s like using a hammer when you need a jack hammer. For bigger tasks, like taking a company to the next level, you need bigger, better, faster, and more efficient tools.

When you think about it, failure to analyze data can result in the difference between profit and loss or between a modest profit and outrageous success. Here, for example, are two big things that can happen when analytics are done properly:

1. You get insights into industry trends and can spot marketing opportunities that you would have otherwise missed.
2. You learn what customers want and need from your company, and this information can help you redesign your business to acquire more customers.

Related Article: Beacons are Beckoning: How Mobile Technology is Changing Retail

Data Literacy in the Information Age

It’s difficult to find a business that isn’t data driven. In fact, information is growing at a dizzy rate. Unfortunately, smart CEOs don’t always have enough knowledge workers to make sense of the continuously growing data, nor do they have the software tools they need to efficiently collect this data and mine it for insights.

Effective data-driven processes that run across an organization can provide a differentiating factor. While intuitive organizations are the norm, these aren’t very effective. It’s difficult to understand risk quickly because the available data is often inaccurate. As a result, a company often fails to make smarter choices and boost its bottom line. While it’s theoretically possible to have a company that has high data literacy without BI, the task is much harder.

Moreover, BI is not a passing tech fad. Its impact on the business environment is growing. According to CIO, interest in BI attained significant momentum last year: “Interest in business intelligence (BI) is surging, as big data is expected to explode into a $50 billion market in 2015, nearly doubling its current size. Why not, when BI supports so many business-critical functions, such as analytics, business performance management, text mining and predictive analytics."

With BI you can take digital literacy to a whole new level. Specifically, BI can be applied for measurements, analytics, enterprise reporting, collaboration, and knowledge management.