What is business intelligence?
Business intelligence (BI) leverages software and services to transform data into actionable insights that inform an organization’s strategic and tactical business decisions. BI tools access and analyze data sets and present analytical findings in reports, summaries, dashboards, graphs, charts and maps to provide users with detailed intelligence about the state of the business.
The term business intelligence often also refers to a range of tools that provide quick, easy-to-digest access to insights about an organization’s current state, based on available data.
Reporting is a central facet of business intelligence and the dashboard is perhaps the archetypical BI tool. Dashboards are hosted software applications that automatically pull together available data into charts and graphs that give a sense of the immediate state of the company.
Although business intelligence does not tell business users what to do or what will happen if they take a certain course, neither is BI solely about generating reports. Rather, BI offers a way for people to examine data to understand trends and derive insights by streamlining the effort needed to search for, merge and query the data necessary to make sound business decisions.
For example, a company that wants to better manage its supply chain needs BI capabilities to determine where delays are happening and where variabilities exist within the shipping process, says Chris Hagans, vice president of operations for WCI Consulting, a consultancy focused on BI. That company could also use its BI capabilities to discover which products are most commonly delayed or which modes of transportation are most often involved in delays.
The potential use cases for BI extend beyond the typical business performance metrics of improved sales and reduced costs, says Cindi Howson, research vice president at Gartner, an IT research and advisory firm. She points to the Columbus, Ohio, school system and its success using BI tools to examine numerous data points — from attendance rates to student performance — to improve student learning and high school graduate rates.
- A co-op organization could use BI to keep track of member acquisition and retention.
- BI tools could automatically generate sales and delivery reports from CRM data.
- A sales team could use BI to create a dashboard showing where each rep’s prospects are on the sales pipeline.
Business intelligence vs. business analytics
One thing you will have noticed from those examples is that they provide insights into the current state of the business or organization: where are sales prospects in the pipeline today? How many members have we lost or gained this month? This gets to the key distinction between business intelligence and another, related term, business analytics.
Business intelligence is descriptive, telling you what’s happening now and what happened in the past to get us to that state. Business analytics, on the other hand, is an umbrella term for data analysis techniques that are predictive — that is, they can tell you what’s going to happen in the future — and prescriptive — that is, they can tell you what you should be doing to create better outcomes. (Business analytics are usually thought of as that subset of the larger category of data analytics that’s specifically focused on business.)
The distinction between the descriptive powers of BI and the predictive or descriptive powers of business analytics goes a bit beyond just the timeframe we’re talking about. It also gets to the heart of the question of who business intelligence is for. BI aims to deliver straightforward snapshots of the current state of affairs to business managers. While the predictions and advice derived from business analytics requires data science professionals to analyze and interpret, one of the goals of BI is that it should be easy for relatively non-technical end users to understand, and even to dive into the data and create new reports.