TABLE OF CONTENTS 1 Introduction to Decision Making and Business Intelligence (1-1) tg (1. Chapter 1,1 > Changing Business Environments. Decision Making and Simon’s Decision - Making Process... | 12 1.3 Managerial Roles in Decision Making.« 1.4 Information Systems Support for Decision Making .... | 1.5. Framework for Computerized Decision Suppo! 1.5.1. The Gorry and Scott~Morton Classical Framework...., 1.5.2 Advantages of Computerized DSS... 1 & Decision Support Systems 1.6.1 Characteristics and Capabilities of DSS... 1.6.2 Advantages and Disadvantages of DSS. 1.6.3 Application of DSS... 1.6.4 Development of a Decision Support System... 1.6.5 Common Strategies and Approaches of Decision Makers 1.7 Business intelligence... : 17.1 Components of Bl 17.2. Architecture of Bl. 17.3 Cycle of a Business intelligence Analysis 17.4 Enabling Factors in Business Intelligence Projects. | 175 Development of a Business Intelligence System. 1.7.6 Benefit of Business Intelligence | 18 Dss-B) Connection... 19 Goals of Business Intelligence 1.10 Business Intelligence ; Tasks and Analysis Formats ! 1.10.1 Data Task. (wi1.11 BI Use Cases : Application in Patient Treatment... 1.12 University Questions with Answers. 1.10.2 Business and Data Understanding Task... 1.10.3 Modeling Task... 1.10.4 Analysis Task 1.10.5 Evaluation and Reporting Task. 1.10.6 Analysis Formats.. 1.11.1 Application in Higher Education... 1.11.2 Application in Logistics Unit I Chapter-2 Modeling in BI (2 - 1) to (2 - 14) 21 2.2 2. wo 24 25 26 Models and Modeling in Bl... 2-2 2.1.1 Model Presentation. .2-3 2.4.2 Model Building 12-3 2.1.3 Model Assessment and Quality of Models... Modeling using Logical Structures 2.2.1 Logical Structures 2.2.2 Ontologies and Frames... Modeling using Graph Structures... 2.3.1 Business Process Model and Notation... 2.3.2 Petri Nets... Modeling using Probabilistic Structures... Modeling using Analytical Structures Models and Data ... 2.6.1 Data Generation... 2.6.2. The Role of Time... 2.6.3 Data Quality... (vil)Introduction to Decision Making and Business Intelligence Syllabus Changing Business Environment Managerial roles in Decision Maki Decision Making & Simon's Decision-Making Process, 1g, Information Systems Support for Decision Making, framework for Computerized Decision Support : The Gorry and Scott-Morton Classical Framework, Decision ‘support systems (DSS). Capabilities of DSS, DSS Classification, DSS Components. Business Intelligence (BI), Framework for BI, BI architecture, DSS - BI Connection, Goals of Business Intelligence, Business Intelligence : Tasks and Analysis Formats, BI use cases : Application in Patient Treatment, Application in Higher Education, Application in Logistics, Contents 1.1 Changing Business Environments 4.2 Decision Making and Simon's Decision - Making Process : .Aug-18, Dec.-18, June-19, 1.3 Managerial Roles in Decision Making. Aug.-18, Dec.-18, ... 1.4 Information Systems Support for Decision Making 1.5 Framework for Computerized Decision Support .Aug.-18, Oct-19, Dec.-19, .....Marks 10 4.6 Decision Support Systems... .Dec.-18, June-19, Marks 6 4.7 Business Intelligence : Aug.-18, June-19, . Marks 6 1.8 DSS - BI Connection 1.9 Goals of Business Intelligence. _June-19, Marks 8 1.10 Business Intelligence : Tasks and Analysis Formats 1.11 BI Use Cases : Application in Patient Treatment .June-19, 1.12 University Questions with Answers (1-4)ll Business Analytics and Intelligence 1-2 Introduction to Decision Making and Business Jatelligene, EE] Changing Business Environments Business and information technology : The last decade has shown rapid development in the information technology ang its application. This has helped changed the way [Link] at the world as well asi, way business is conducted. Both business and trade have gained under the wave information technology with improvement in efficiency, productivity and bottn, line, : 1 Eee Productivity improvement has facilitated speedy and accurate production in large volumes. Indian financial ‘sector has also\ benefited from advancement in information technology. : i In the business environment, the process of organizational change is the need of time, then this need is the result of dynamic and continuous development that have business environment in the domestic economy as well as the modem global economy, Managing the organizational changés'is very important process foi organizational leadership. On one hand, the leadership constanily’ aims that the process of planning and implementing changes in the buisiness environment have to-be more effective _in_ organization ‘While ‘on the other ‘side, "employee resistance during organizational change and ‘the’ cost: of change inthe “organization: have-been 25 minimal. : Current global, and , competitive business environment constantly asks for innovation, existing knowledge base is getting obsolete, continuously thriving for advancement in process improvement. The learning curve is always put to test and " every company is striving to remain ahead of the curve. Due to this shift in the way business is getting conducted has thrown out new reality of ever shortening product and service life cycle. More and more companies are coming out with customized products and finding ways to differentiate from competition. ‘ : A recent survey conducted has highlighted that the change ‘in the’ business environment can be summarized with following : : 7 2) Globalization and opening up of markets has not only increased competition but also has allowed companies to oper: ‘ate in markets previously considered forbidden, TECHNICAL PUBLICATIONS® «on upthrust {for knowledgeBusiness Analytics and Intelligence 1-3 b) Introduction to Decision Making and Business Intelligence Inclusion of information. technology is integral part of business environment has ensured that companies are able to process, store and retrieve the huge amount of data at ever dwindling costs. Globalization has encouraged free movement of capital, goods and service across countri * Characteristics of business environment a) Business environments aré complex in nature as well as dynamic because they are dependent upon factors like political, economic, legal, technological, social, etc. for sustenance. b) Business environment affects companies in different’industries in its own unique way. For example, importers may favor lower exchange rate while exporters may favor higher exchange rate, c) With change in the business environment, some fundamental effects are short term in nature while some are felt over a period of time. * Besides the growth in hardware, software and network capacities, some developments have clearly contributed to facilitating growth of decision support and analytics in a number of ways, including following : NOOR eV Group communication and collaboration. Improved data management Analytical support Managing giant data warehouses and big data. Overcoming cognitive limits in processing and storing information. Knowledge management Anywhere, anytime support EA Decision Making and Simon's Decision - Making Process D Simon’s model defines four phases of decision-making procéss : Intelligence Phase, Design Phase, Choice Phase and Implementation Phase. Fig. 1.2.1 shows four stages of Simon’s decision-making process There are four different stages in decision making : Intelligence : Consists of identifying and understanding a problem: Business Intelligence implementations are considered successful only if you have clear business needs and see real benefits from it. Business Intelligence is not just about data, It should be connected with organizational goals and objectives, TECHNICAL PUBLICATIONS® « an up-thrust for knowledgoBusiness Analytics and Intelligence 1-4 Introduction to Decision Making and Business Inteligenc, f ‘ i as | Real word / organization | —+1 inetigence phase | Design phase ~ ‘Success| Failure Fig. 1.2.1 Four stages of Simon's decision-making process * Scan the environment, either intermittently or continuously * Identify problem situations or opportunities * Monitor the results of the implementation * Problem is the difference between what people desire (or expect) and what is actually occurring : * Timely identification of opportunities is as-important as ‘identification of problems 2) Design : Involves exploring various solutions."The main goal of the design phase is, to define and construct a model which represent a system, by defining relationships between collected variables. : ‘« Finding/developing and analyzing possible courses of actions. «A model of the decision-making problem is constructed, tested and validated © Modeling : Conceptualizing a problem and abstracting it into a quantitative and/or qualitative form (ie., using symbols/variables) a. Abstraction : Making assumptions for simplification b. Tradeoff (cost/benefit) : More or less abstraction cc. Modeling : Both an art and a science 3) Choice : Consists of choosing among available solutions. In this phase we are actually making decisions. The end product of this phase is a decision, Decision is made by selecting and evaluating alternatives defined in previous step. TECHNICAL PUBLICATIONS® - an up-thrust for knowledgeBusiness Analytics and Intelligence 1-5 Introduction to Decision Making and Business Intelligence + The actual decision and the commitment to follow a certain course of action are made here * The boundary between the design and choice is often unclear (partially overlapping phases) * Includes the search, evaluation and recommendation of an appropriate solution to the model * Solving the model versus solving the problem 4) Implementation phase : All the previous steps we have made (intelligence, design and choice) are now implemented. Implementation can be either successful or not. Successful implementation results with a solution to the defined problem. On the other hand, failure brings us back to the earlier phase. Managerial Roles in Decision Maki ith eee cee) «In every function performed, role taken on and set of skills applied, a manager is a decision maker. Decision-making means choosing among alternatives. Decision-making occurs in response to the identification of a problem or an opportunity. * The decisions managers make fall into two basic categories : Programmed. and non-programmed. « Programmed decisions are made in response to routine situations that occur frequently in a variety of settings throughout an organization. For example, the need to hire new personnel is a common situation for most organizations. Therefore, standard procedures for recruitment and selection aré developed and followed in most companies. * Very unusual problems and opportunities require non-programmed decisions by managers. Because these situations are uriique and complex, the manager rarely has a precedent to follow. Seeks out and gathers information relevant to the organization TECHNICAL PUBLICATIONS® - an up-thrust for knowlodgoll Business Analytics and Intelligence __1-6 ___Introduction to Decision Making and Business Rigen, a | * Whether a decision is programmed or non-programmed, managers typically follov five steps in the decision-making process : aH 1, Recognize or define the problem or opportunity. Although it is more commo? to focus on problems because of their obvious negative effects, managers Wh? TECHNICAL PUBLICATIONS® . an up-thrust for knowedge 7 . aBusiness Analytics and Intelligence 1-7 Introduction to Decision Making and Business Intelligence do not take advantage of new opportunities may lose competitive advantage to other firms, 2. Gather information so as to identify alternative solutions or actions. Select one or more alternatives after evaluating the strengths and weaknesses of each possibility. Put the chosen alternative into action. Gather information to obtain feedback on the effectiveness of the chosen plan. EZ] Information Systems Support for Decision Making Making decision is central to managing organizations, Organizations today can no longer use a ‘cook book’ approach to decision making. In order to succeed in a business today, companies need information system that support the diverse information and decision-making needs for their operations. he rapid development of the internet and other information technologies has further strengthened the role of information systems for decision making support. Fig. 1:4.1 shows support for various decision-making levels. High Low Fig. 1.4.1 Support for various decision-making levels Decisions occur at three levels in organizations. These levels are : 1. Strategic decisions are long-term in their impact. They affect and shape the direction of the whole business. They are generally made by senior managers. The managers of the bakery need to take a strategic decision about whether to remain in the café business. Long-term forecasts of business turnover set against likely market conditions will help to determine if it should close the café business, 2. Tactical decisions (managerial) help to’ implement the strategy. They are usually made by middle management. For the café, a tactical decision would be whether to open earlier in the morning or on Saturday to attract new customers, Managers would want research data on likely customer numbers to help them decide if opening hours should be extended. TECHNICEL PUBLIGATIONS® « en upstnst for knowladgai Business Analytics and intelligence ___1-8 __Introduction to Decision Making and Business inteligenc. 3. Operational decisions relate to the day-to-day running of the business, They are mainly routine “and may be taken by. middle or junior managers. Fo, example, a simple operational decision for the café would be whether to order more coffee for next week. Stock and-sales data will show when it needs ty order more supplies. * Decisions are divided into two types: Nature and scope. 1. Type of decision by nature : ¢ Structured, unstructured or semi - structured are types of decision as per nature. a) A structured decision is one for which there is an understood and accepted method for making the decision. A formula for computing the reorder quantity of an item in inventory is an example of a structured decision process. b) An unstructured decision process is one for which there is no agreed - upon decision making process. Predicting the future direction of the economy or the stock market is a common example. ©) Semi-structured decisions : A decision is semi - structured when some phases are structured and others are not. Semi-structured decisions are those in which only part of the problem has a clear-cut answer provided by an accepted procedure. In general, structured decisions are more prevalent at lower organizational levels and unstructured decision making is more common at higher levels. * Senior executives face many unstructured decision situations, stich as establishing the firm's five or ten-year goals. Middle management faces more structured decision scenarios but their decisions may include unstructured components. Operational management and rank-and-file employees tend to make more structured decisions. Ed Framework for Computerized Decision Support ‘SPI ie Why use computerized decision support systems ? * Speedy computations : Enables decision makers to perform quick computations, low cost, timely and thousands of alternatives can be evaluated fast «Improved communication and collaboration : Groups in different locations can us the web-based tools to communicate « Increased productivity of group members : Using web-based tools saves money and time, since group gathering in one place is no more needed. Also software help decision makers to determine the best way to run a business in a short time. TECHNICAL PUBLICATIONS® - an up-thrust for knowledgeBusiness Analytics and Intelligence 1-9 Introduction to Decision Making and Business Intelligence * Improved data management : Data stored inside and outside the organization (web). Computers transmit, search and store needed data quickly, economically, securely and transparently. * Managing giant data warehouses : Computers can deal (store, access) with huge digital data of any type quickly. * Quality support : Quality of decisions can be improved since more data can be accessed, more alternatives can be evaluated, view of experts can be collected guickly, AI methods can be used to derive expertise and complex simulations can be performed. * Agility support : DS technologies (intelligent systems) can empower people by allowing them to make good decisions quickly, even if they lack knowledge. * Overcoming cognitive limits in processing and storing information : The man mind has limited ability to process and store information The Gorry and Scott - Morton Classical Framework ¢ Fig. 1.5.1 shows Gorry and Scott-Morton classical framework. This framework will assist in discussing the relationship among the technologies and the evolution of computerized systems. Ze ae 7 |e) Sttateaie | [atte | Financial management [3 | eee L] Budget analysis Accounts receivable Short-term forecasting | Investment portfolio ‘Accounts payable Personnel reporis Warehouse location Order entry Make-or-buy Distribution systems Production scheduling L4| credit evaluation Building a new plant LE Inventory contol Budget preparation Mergers and acquistions Plant layout ‘New product planning Project scheduling Compensation planning Revrard system design | ually assurance Inventory categorization | HR policies Inventory planning Buying software 7] Negotiating 2} Rand D planning Approving loans Recruiting an executive | New tech. development | Operating a help desk Buying hardware Social responsibility Selecting a cover fora Lobbying planning. magazine Fig. 1.5.4 * The left-hand side of the table is based on Simon’s notion that decision-making processes fall along a continuum that ranges from highly structured to highly TEGHNIGAL PUBLIGATIONS® = an up-tivuat for knowledgoBusiness Analytics and Intelligence __1-10 Introduction to Decision Making and Business Inteligeneg unstructured decisions. Structured processes refer. to routine: and repetitive problems for which standard solutions already exist, © Unstructured processes are “fuzzy” for which no cut and dried solutions exist Decisions where some of the -phases are structured are referred to as semi-structured by Gorry and Scott Morton. EEG] Advantages of Computerized DSS 1. Decision makers can perform large number of computations in short time. 2. Decentralized data of different types with complex relationships, may be searched, transmitted and processed quickly. Decreased risk of human errors and improved reliability of results. Computerized system can improve the quality of decision by. obtaining and evaluating more alternatives. BY EEG Decision Support Systems 'A Decision Support System (DSS) is an interactive computer-based application that combines data and mathematical models to help’decision makers solve complex problems faced in managing the public and private enterprises and organizations. « A decision support system may present information graphically and may include an expert system or Artificial Intelligence (Al). It may be aimed at business executives or some other group of knowledge workers. DSS is an interactive computer system helping decision makers to combine data and models to solve semi-structured and unstructured problems. Fig. 1.6.1 shows structure of a decision support system. Graphical user interface Fig. 1.6.1 Structure of a decision support system TECHNICAL PUBLICATIONS® - an up-thrust ir knowledgeBusiness Analytics and Intelligence 1-11 __Introduction to Decision Making and Business Intelligence. + A good DSS helps decision-makers with compiling various types of data gathered from several different sources, including documents, raw data, management, business models and personal knowledge from employees. * Decision makers perform quantitative analysis on data. Model base contains a list of models for mathematical computations. ¢ Itis a component of a business intelligence system and usually includes a database of information related to the specific industry. Decision support systems can also include “files, company models, health information, sales data, projections, marketing numbers and personal knowledge. Industries like healthcare, agriculture and marketing frequently take advantage of decision support systems. « Every decision support system has a database. The database is usually the primary aspect of the decision support system that makes it’useful for an organization, as the program can examine large stores of data when supporting decisions much faster than a single person or team could. The database's information depends on the category of system and industry the system is for. Some databases may contain statistics, while others may be more document-focused. * Models : Decision support systems also create models to support professionals in taking action that positively affects their situation. The models within the decision support system’ are the predictions or trajectories the program determines are plausible * DSS is a generic concept that describes information systems that provide analytical modelling and information to support semi-structured and unstructured organizational decision making. * DSS software system : It consists of various mathematical and analytical models that are used to analyze the complex data, thereby producing the required information, A model predicts the outputs in the basis of different input or different conditions, or finds out the combination of conditions and input that is required to produce the desired output. A decision support system may compromise different models where each model performs a specific function, * User interface : It is an interactive graphical interface which makes the interaction easier bétween the DSS and its users. It displays the results of the analysis in various forms, such as text table, charts or graphics, The user can select appropriate option to view output according to his requirement. * Fig. 1.6.2 shows extended DSS. TECHNICAL PUBLICATIONS® - an up-thrust for knowiodgeBusiness Analytics and Intelligence __1- 12 1 “ll «Introduction to Decision Making and Business inteligene, Knowledge management Decision support system “Interface © User Operational systems Fig, 1.6.2 Extended DSS Data warehouse : Database generally provides current information about the organization relating to the underlying transactional processes, but it fails to_ provide historical, contend rich information that are often more important to the decision making process than standalone islands of information. The data warehouse fills this gap by capturing operational data and presenting it in a more meaningful format, using a relational database and ultimately complimenting the functions of the DB used in the DSS. Thus the data warehouse: and the DB coexists to provide synergistic outcomes, which supports information requirement of the DSS superimposed on the systems platform. Data mart is a subset of the data warehouse. Data mart is usually assigned to a specific business unit within the enterprise. Data mart is used to slice data warehouse into a different business unit. Typically, ownership of the data mart is given to that particular business unit or department. The Decision Support Systems can be divided into following categories : Model - driven DSS : A model - driven DSS was based on simple quantitative models, It used limited data and emphasized manipulation of financial models. A model-drive DSS was used in production planning, scheduling and management. It provided the most elementary functionality to manufacturing concerns. Data - driven DSS : Data - driven DSS emphasized the access and manipulation of data tailored to specific tasks using general tools. While it also provided elementary functionality to businesses, it relied heavily on time-series data. It was able t support decision making in a range of situations. TECHNICAL PUBLICATIONS® - an up-thrust for knowledgeBusiness Analytics and Intelligence 1-13 _ introduction to Decision Making and Business Intelligence 3. Communication - driven DSS : As the name suggests, communication-driven DSS uses communication and network technologies to facilitate decision making. The major difference between this and the previous classes of DSS was that it supported. collaboration and communication. It made use of a variety of tools including computer-based bulletin boards, audio and video conferencing. 4, Document - driven DSS : A document-driven DSS uses large document databases that stores documents, images, sounds, videos and hypertext docs. It has a primary search engine tool associated for searching the data when required. The information stored can be facts and figures, historical data, minutes of meetings, catalogs, business correspondences, product specifications, etc. . Knowledge - driven DSS : Knowledge-based DSS are human-computer systems that come with a problem-solving expertise. These combine artificial intelligence with human cognitive capacities and can suggest actions to users. The notable point is that these systems have expertise in a particular domain. 6. Web - based DSS : Web-based DSS is considered most sophisticated decision support system that extends its capabilities by making use of worldwide web and internet. The evolution continues with advancement in internet technology. a Characteristics and Capabilities of DSS * Common characteristics of DSS Uses underlying data and model Handles large amounts of data from different sources Provides report and presentation flexibility Offers both textual and graphical orientation Problem structure, used in semi-structured and unstructured decision context. ao Fe yp Uses underlying data and model. * Capabilities of DSS 1. Provide support in semi-structured and unstructured situations, includes human judgment and computerized information Support for various managerial levels Support to individuals and groups Support to interdependent and/or sequential decisions Support all phases of the decision-making process aa FPN Support a variety of decision-making processes and styles. TECHNICAL PUBLICATIONS® - an up-thrust for knowledgeBusiness Analytics and Intoligence __1- 14 Introduction to Decision Making and Business Inteliger,, . Have user friendly interfaces 8. Goal : Improve effectiveness of decision making 9. The decision maker controls the decision-making process 10. End-users can build simple systems 11. Utilizes models for analysis 12, Provides access to a variety of data sources, formats and types. Advantages and Disadvantages of DSS _ Advantages : Increase organizational control. Increase decision maker satisfaction. © Improve interpersonal’ communication. DSS can’ improve communication and collaboration among decision makers. «Increasing productivity. Disadvantages : * Information overload ; A computerized decision making aes may result in information overload. + Overemphasis on decision making. * Cost of development. Application of DSS 1, Agriculture : Farmers use DSS tools for crop planning to help determine the best planting time, as well as when to fertilize and when to harvest. 2. Medicine : When a DSS is used in medicine, it is known as a clinical DSS. The technology can be used in a variety of ways, such as maintaining research information about chemotherapy protocols, preventive and follow-up care and monitoring medication orders. DSSs are also used with medical diagnosis software, 3. Weather forecasting : Some states have used DSSs to provide information about potential hazards, such as floods. The system includes real-time weather conditions and may include information, both current and historical, about floodplain boundaries and county flood data. 4, Real estate : Real estate companies often use DSSs to manage data of comparable home prices. TECHNICAL PUBLICATIONS® - an up-trust for knowiedgeBusiness Analytics and Intelligence 1-16 Introduction to Decision Making and Business Intelligence 5, Education : [Link] colleges rely on DSSs to know how many students are currently enrolled. This helps them predict how many students will register for particular courses or whether the student population is sufficient to meet the university’s costs. EEGZ] Development of a Decision Support System Fig. 1.6.3 shows the major steps in the development of a DSS. Planning : This phase understand user requirement and opportunities. Planning usually involves a feasibility study to address the question : Why-do we wish to develop a DSS? During the feasibility analysis, general and specific objectives of the system, recipients, possible benefits, execution times and costs are laid down. Analysis : In the analysis phase, it is necessary to define in detail the functions of the DSS to be developed, by further developing and elaborating the preliminary conclusions achieved during the feasibility study. Design : The entire architecture of the system is defined, through the identification of the hardware technology platforms, the network structure, the-software tools to develop the applications and the specific database to be used. Implementation : It relates to the overall impact on the organization determined by the new system. Implementation} Fig. 1.6.3 Phases of DSS TECHNICAL PUBLICATIONS® « an upstrust for knowledgeBusiness Analytics and Intelligence __ 1-16 Introduction to Decision Making and Business Intelligence Ks Common Strategies and Approaches of Decision Makers * Leadership responsibility is to take great decisions. If we select the wrong decision making style, we could face a disaster. So choose the right style and make decision faster and more effectively. 1. Autocratic decision - making : For situations where we have low impact and they’re reasonably small decisions, but they get larger as urgency goes up, an Autocratic decision-making style is the most appropriate. In Autocratic decision- making, decisions are made at the top. Actually, it may be counterproductive to involve a lot of people in making the call. «Typically, in an environment where we are making Autocratic decisions, work activities and roles are very tightly structured, they're monitored and we controlled. Command and control is very important in these situations. ~ 2. Participatory decision - making : For larger decisions where there's higher urgency and we need to make a call soon, but the impact is going to be big, we are looking at ! a situation where we need to use a Participatory decision-making style. This is where we are going to make a decision with input from the people who are going to be impacted in that final call. Participatory decisions are made when the decision is much bigger and there's a lot more risk involved. 3, Consensus based decision - making : For situations where it's a large decision but | there’s no urgency around it and we have got plenty of time, we can be using @ i Consensus-based decision-making style. This is where decisions are reached witha ij| cross-functional team. | + People from different departments have input, and buy-inis essential } 4, Democratic decision - making : For mid-sized decisions where there's not a lot of urgency but we do need to make a decision and move on, a Democratic style is the most appropriate. This is where a decision is reached by a majority vote. Buy-in is desirable but it's not essential. Business Intelligence Efe i | | + Business Intelligence (Bl) is a business management term which refers ' | | applications and technologies which are used to gather, provide access to and analyze data and information about company operations. * Business intelligence systems can help companies have a more comprehensiv? knowledge of the factors affecting their business, such as metrics on sal TECHNICAL PUBLICATIONS® - an up-hrust for knowiedgoBusiness Analytics and Intelligence 1-17 __ Introduction to Decision Making and Business Intelligence production, intemal operations and they can help companies to make better business decisions. + Business intelligence may be defined as a set of mathematical models and analysis methodologies that exploit the available data to generate information and knowledge useful for complex decision-making processes. + Business intelligence combines business analytics, data mining, data visualization, data tools and infrastructure and best practices to help organizations make more data-driven decisions. + Business intelligence includes data analytics and business analytics but uses them only as parts of the whole process. BI helps users draw conclusions from data analysis. Data scientists dig into the specifics of data, using advanced statistics and predictive analytics to discover patterns and forecast future patterns. Components of BI * Fig. 1.7.1 shows components of a business intelligence system. The main components of a business intelligence system decisions, optimization, data mining, data exploration, Data warehouse/Data mart and data source. Fig, 1.7.1 Main components of a business intelligence system * Data sources : This component of BI involves various forms of stored data. It's about taking the raw data and using software applications to create meaningful data sources that each division can use to positively impact business, * Bl analysts using this strategy may create data tools that allow data to be put into a large cache of spreadsheets, pie charts, tables or graphs that can be used for a variety of business purposes. TECHNICAL. PUBLICATIONS® » an up-thust for knowledgeBusiness Analytics and intelligence 1-18 Introduction to Decision Making and Business intelligenc Data warehousing : Data warehousing lets business leaders sift through subsets of data and examine interrelated components that can help drive business. Looking at sales data over several years can help improve product development or tailor seasonal offerings. Data warehousing can also be used to look at the statistics of business processes including how they relate to one another. For instance, business owners can compare shipping times in different facilites to look at which processes and teams work most efficiently. se that are ae Data warehousing also, involves storing huge amounts of data in way beneficial to different divisions within the company. Data exploration : It uses tools for performing a passive business intelligence analysis, which consist of query and xeporting systems, as well as statistical methods. Data mining : It is active business intelligence methodologies, whose purpose is the extraction of information and knowledge from data. These include mathematical models for pattern recognition, machine learning and data mining techniques. Optimization : It allows to determine. the best solution out of a set of alternative actions, which is usually fairly extensive and sometimes even. infinite. Decisions : It corresponds to the clioice and the actual adoption of a specific decision, and in some way represents the natural conclusion of the decision-making, process, Online Analytical Processing (OLAP) : This component of BI allows executives to sort and select aggregates of data for strategic monitoring, With the help of specific software products, a certification in business intelligence helps business owners can use data to make adjustments to overall business processes. Corporate Performance Management (CPM) : This set of tools allows business leaders to look at the statistics of certain products or services. For instance, a fast food chain may analyze the sale of certain items and make local, regional and national modifications on menu board offerings as a result. The data could also be used to predict in which markets a new product may have the best success. Real - time BI : Using software applications, a business can respond to real-tim? trends in email, messaging systems or even digital displays. Because it's all in real time, an entrepreneur can announce special offers that take advantage of whet going on in the immediate. TECHNICAL PUBLICATIONS® - an up-thrst for knowledgeBusiness Analytics and Intelligence 1-19 Introduction to Decision Making and Business Intelligence Architecture of BI + Fig. 1.7.2 shows architecture of BI. Architecture consists of five layers. These layers are data source, ETL (Extract-Transform-Load), data warehouse, end user and metadata layers. as Penere Multidimensional cubes aa "Data Exploratory data analysis warehouse Time series analysis Data mining Optimization eS Extemal data ET Fig. 1.7.2 Typical business intelligence architecture «The five layers are data source, ETL (Extract-Transform-Load), data warehouse, end user, and metadata layers. 4. Data source layer : * All data can be acquired from two types of sources : Internal and external. * Internal data source refers to data that is captured and maintained by operational systems inside an organization such as Customer Relationship Management and Enterprise Resource Planning systems. * Internal data sources include the data related to business operations. « External data source refers to those that originate outside an organization. This type of data can be collected from external sources such as business partners, syndicate data suppliers, the Internet, governments and market research organizations . 2, ETL layer: * This layer focuses on three main processes : extraction, transformation and loading * Extraction is the process of identifying and collecting relevant data from different sources. ° 7 © The data collected from internal and external sources are not integrated, incomplete, and may be duplicated. Therefore, the extraction process is needed to select data that are significant in supporting organizational decision making. * Transformation is the process of converting data using a set of business rules into consistent formats for reporting and analysis. TECHNICAL PUBLICATIONS® - an up-hrust for knowlodgoBusiness Analytics and Intelligence 1-20 __Introduction to Decision Making and Business Intelligence Loading is the last phase of the ETL process. The data in staging area are loaded into target repository. Data warehouse layer : There are three components in the data warehouse layer: operational data store, data warehouse and data marts. Data flows from operational data store to data warehouse and subsequently to data mart. Operational Data Store (ODS) : ODS is used to integrate all data from the ETL layer and load them into data warehouses. 3. Data warehouse : * Data warehouse is one of the most important components in BI architecture. It is defines data warehouse as “a subject-oriented, integrated, time-variant, and non-volatile collection of data in support of management's decision making process”. 4. Metadata layer : « Metadata refers to data about data, It describes where data are being used and stored, the source:of data, what changes have been made to the data, and how one piece of data relates to other information. ; ‘Metadata repository is used to store technical and business information about data as well as business rules and data definitions. «Good management and use of metadata can reduce development time, simplify on- going maintenance, and provide users with information about data source. 5, End user layer: «The end user layer consists of tools that display information in different formats '° different users. «These tools can be grouped hierarchically in a pyramid shape. FJ Cycle of a Business Intelligence Analysis «Each business intelligence analysis follows its own path according to the applicat® domain, the personal attitude of the decision makers and the available analytic! methodologies. J «Fig, 1.73 shows cycle of a business intelligence analysis, TECHNICAL PUBLICATIONS® - an up-thrus for knowledge ”. Analysis ness Analytics and Intelligence___ 4-21 __ Introduction to Decision Making and Business Intelligence Fig. 1.7.3 Cycle of a business intelligence analysis When we gather data about our business we select only what we consider that is important. For example, we collect information to determine which factors affect our costs, [Link] or data that is important to our customers, to our partners or to our employees. We do this because we have a mental model of what our business is and how to influence in the results of our business. This mental model simplifies reality so. we can make decisions easier and faster, not considering all the complexities that the real world has. Our mental model however, can also block us from seeing what might be obvious to others. 3 Insight : There are different types of insights. There are operational insights, like the cause of a decrease in sales of a certain product line. There are strategic insights, for example, the best strategy to penetrate into a new market category is through educating your target audience about your new product. Insight is the product of broad, “out of the box” thinking and analysis that only we can recognize as useful. If an individual has an important insight, it generally becomes useful when shared with others. Insights that bring change to mental models are usually resisted and sometimes unwelcome. but it also provides us with the data, Business intelligence leads us to the insights, patterns and logic to support our insights. It also helps us present the justification of our insights. Decision : Business intelligence allows you to make better and faster decisions. ‘Actions always follow these decisions, Decisions backed by good analysis and insights give courage to the action maker. To implement these decisions you will always need some strong organizational support. When actions are backed by strong analysis and business intelligence, the purpose of these actions is usually clearer and easily justified, hence making it easier to gain the support that you need. TECHNICAL PUBLICATIONS® - nn up-thrust for knowiodgoBusiness Analytics and Intelligence __ 1-22 _Introduction fo Decision Making and Business Intelligence 4, Evaluation : Last phase of the business intelligence cycle involves performance measurement and evaluation. Extensive metrics should then be devised that are not exclusively limited to the financial aspects but also take into account the major performance indicators defined for the different company departments. Enabling Factors in Business Intelligence Projects «Enabling factors in business intelligence projects are technologies, analytics and human resources © Technologies : Hardware and software technologies are significant enabling factors that have facilitated the development of business intelligence systems within enterprises and complex organizations. «Analytics : Mathematical models and analytical methodologies play a key role in information enhancement and knowledge extraction from the data available inside most organizations. The human assets of an organization are built up, by the erate within its boundaries, whether as individuals or « Human resources : competencies of those who op: collectively. Development of a Business Intelligence System «Fig. 1.7.4 shows phases of business intelligence system development. + Analysis : In this phase, requirement of the organization relative to the development of a business intelligence system should be carefully identified. Interview of knowledge workers is conducted who performing different roles in organizations. + Design : It is necessary to make an assessment of the existing information infrastructures. The main decision-making processes that are to be supported by the business intelligence system should be examined, in order to adequately determine the information requirements. Later on, using classical project management methodologies, the project plan will be laid down, identifying development phases priorities, expected execution times and costs, together with the required roles and resources, « Planning : Existing data as well as other data that might be retrieved externally ate assessed, It is appropriate to create a system prototype, at low cost and with limited capabilities. TECHNICAL PUBLICATIONS® - an up-thrust for knowledge iBusiness Analytics and Intelligence cieiaieten 1-23 Introduction to Decision Making and Business Intelligence Analysis phase Identification of business needs Design phase Infrastructure recognition Project macro plannin Planning phase _ Detailed project Definition of the mathematical requirements. : z Geese ae Shes) Data Identification Data warehouses. <9 and data mars. i - definition Development: ofa prototype Development of data Development of ETL | “warehouses. [and data marts | “Development of applications Ga | Release ani Fig. 1.7.4 Phases of business intelligence system development © Implementation and control ; It consists of five main sub-phases. These are as follows : a. Development of data warehouses and data marts b. Development of metadata ¢. Development of ETL tools d. Development of applications Release and testing, TECHNICAL. PUBLICA TIONS® « an up-t, sust for knowlodaaBusiness Analytics and Intelligence 1-24 Introduction to Decision Making and Business Inteligence «The data warehouse and each specific data mart are developed. These represent the information infrastructures that will feed the business intelligence system. Benefit of Business Intelligence Business intelligence is faster more accurate process of reporting critical information. * Bl facili « Itprovides timely information for better customer relationship management. tates better and efficient decision-making process. «Profitability of the company is improved. « It provides a facility of assessing organization's readiness in meeting new business challenges. + Business intelligence supports usage of best practices and identifies every hidden cost. = Ess - BI Connection Both architectures are very similar because BI evolved from DSS DSS directly support specific decision making, while BI provides accurate and timely information and indirectly support decision making BI has an executive and strategy orientation, especially in its BPM and dashboard _ components, while DSS, in contrast, is oriented toward analysts ‘Most BI systems are constructed with commercially available tools and components, while DSS is often built from scratch « "DSS methodologies and even some tools were developed mostly in the academic world, while BI methodologies and tools were developed mostly by software companies + Many of the tools that BI uses are also considered DSS tools (e.g., data mining and predictive analysis are core tools in both) EJ Goals of Business Intelligence * Business Intelligence goals are classified as key performance indicators and typology of analytical goals. 4. Key Performance Indicators « Key Performance Indicators (KPIs) represents the result of a business measur? (for example, Product Sales or Operational Costs) evaluated against a target for that TECHNICAL PUBLICATIONS® - an up-thrust for knowledge >Business Analytics and inteligence 1-25 introduction to Decision Making and Business Intaligence measure. We can use KPIs to assess the progress of the objectives and initiatives that form levels of organizational strategy, K?ls are performance measurement tools that enable entrepreneurs to gain better insight into the workings of their business. By tracking the right KPls businesses can improve their decision-making, set more strategic goals and review their business operations in real-time. 2. typology of analytical goals + These goals are of three types : Descriptive goals, Predictive goals and Understanding goals. Descriptive goals generate a summary description for the instances of the business Process from the different BI perspectives, Three main goals can be summarized under this heading : a) Reporting : Summarize the instances in such a way that one can use the information for decisions. b) Segmentation : Group the instances according to a similarity measure and find representative instances for these groups. ©) Detect interesting behavior : Identify events during business process execution that allow the identification of important aspects of the process. * Predictive goals predict the behavior of instances of the business process. Two different kinds of prediction may be distinguished : a) Regression : Find a function that allows the prediction of the output from a number of input variables. b) Classification : Given a partition for observed instances into disjoint classes, assign a new instance to one of the classes. 3. Understanding goals support stakeholders in understanding their business processes. Two main goals can be formulated : a) Process identification : Identify the rules that determine the relationships between the events of the process. b) Process analysis : Investigate the performance of the instances with respect to their conformance with a defined business process. TECHNICAL PUBLICATIONS® - an up-thrust for knowledgeBusiness Analytics and Inteligence 1-26 Introduction to Decision Making and Business inteligencs Business Intelligence : Tasks and Analysis Formats EERQMD Data Task Data task is a prerequisite for all Business Intelligence activities. Organization of available information is main goal for business. The information is data about the structural properties of the enterprise. a These data are collected under different data, - capturing rules and stored in different data sources using multifarious structures ranging from data with diverse temporal and spatial granularity up to semi - structured text data. The major challenge is organizing the data in such a way that they can be utilized in various Bl activities. f Due to the changes of the business and its’ environment over time, even a well-designed data wareliouse cannot answer all questions. Decision support for new challenges may require a reorganization of the. data or collecting additional data for special purposes. Consequently, it is necessary to have knowledge about the methods for data collection and for the augmentation of existing data with new data. The data task. relies on data modeling. techniques ‘encompassing different data models like ER models, UML or semi - structured data models. Business and Data Understanding Task The business and data understanding task considers the business regarding planned goal and develops first ideas about what part of the business is of interest in connection with the goal and what data from the repository can be used. The results of the task are a formulation of analytical goals, an excerpt of the over business relevant for the analytical goal and data needed for achieving th? analytical goal. In BI, data traces of past instances of the business process are the main source O! knowledge used for analyzing the business with respect to the goals. Issues in Business and Data Understanding : 1. Application environment Business perspective Bl views Analytical goals yee DN Assessment of data. TECHNICAL PUBLICATIONS® . an up-thrust for knowledgeBusiness Analytics and intelligence 1-27 introduction to Decision Making and Business Intelligence The business and data understanding task uses business understanding techniques and data understanding techniques, Business understanding techniques answer the questions about the application environment and require domain knowledge about the business and experience in project management, Modeling Task + The modeling task aims-at setting up an analytical business model, ie, a formal model that allows precise answers for the analytical goals. + Depending on the BI perspectives, views and goals of interest, we use formal structures to build a model. It enables the transformation of the analytical goals into formal questions about the properties of a model. Sometimes, the model may be rather simple and is not more than a specific query on the available data. * Fig. 1.10.1 shows modeling activities overview. Te BSIeSS understanding goals Model structures =] [Model structures Graphs | [Anaiytical, Statistical Fig. 1.10.1 Modeling activities overviews * The modeling task requires specific data preparation techniques. For example, in the case of analysis goals referring to text data, different techniques can be used for transforming such unstructured data to structured data which allow the application of algorithms, Such transformations will be considered in connection with the analysis methods. iy Analysis Task * Fig, 1.10.2 shows overview on mining algorithms along the BI perspectives, Having defined a model, one needs algorithms lo compute a solution for the analytical goal within the model. TECHNICAL PUBLICATIONS® - an up-thrust for knowledge