What is Business Intelligence?

What is Business Intelligence?

Business Intelligence, or BI, is a term that is used to describe different types of software applications that are used to analyze raw data. Some common activities that make up BI include data mining, online analytical processing, querying, and reporting.

There are three main components
in the basic BI concepts:

  1. Data Warehouse

The first component is data warehouses. Data warehouses are used to store and consolidate data from several different sources. From the data warehouse, the user will be able to perform queries and analysis. The data warehouse is organized in a way that is optimized for complex analysis of data from multiple systems.

  1. ETL

The next component is extract, transform, and load (ETL). ETL tools move data from one place to another. First, data is extracted from sources, such as enterprise resource planning, supply chain management, or customer relationship management applications. The data will then be transformed into a common format that fits with other data that has been collected in the warehouse. Finally, the data will be loaded into the data warehouse for analysis.

  1. OLAP

The last component of BI is Online Analytical Processing (OLAP). OLAP tools help to support “front end” process, such as querying, analysis, and reporting. These tools can be used to create tables, charts or visualization, which will allow for businesses to have a better understanding of what data was collected.


Why do we need business intelligence?

Business intelligence allows companies to make raw data into meaningful and useful data. From this meaningful data, companies are able to make business strategies that will align with customers’ preferences. Business will be able to record and analyze the trend of consumers’ habits to help make future business decisions. BI can also help companies to cut costs, as well as identify new business opportunities. Having solid data will allow businesses to quantify the value of different aspects of their business.

Examples of Business Intelligence

An example how BI can benefit a company is in grocery stores. Fred Meyer uses real time BI to provide better customer experience. With Fred Meyer’s reward program, they are able to collect information on what members purchase. From this, Fred Meyer is able to offer coupons on products similar to their previous or current purchase.

Another example is restaurant chains, such as Wendy’s or T.G.I. Friday’s. These restaurants use BI to help decide which new products should be added to their menus, or which dishes they should remove. BI also allows these restaurants to know which stores are underperforming in certain areas. This allows for the management to better predict which areas their business would have stronger performance.

As the use of technology grows, the amount of data collected and used by companies’ BI systems grows as well. For example, in 1992 the amount of data Walmart collected was about 1 terabyte. From there, Walmart’s data increased to 2.5 petabytes as of 2008. One reason is that Walmart has been increasing the amount of data they are receiving from users. Information about how fast a product sells can help stores make decisions on how much shelf space a certain product should get, or how the manufactures can redesign its packaging to fit more product on shelves.

Business intelligence has been around for at least a couple of decades. It’s the forefather of Big Data that’s sweeping up the business world today. Yet, BI is still extremely useful to companies in many industries and has its place in businesses everywhere. Next time you find your favorite chips on the shelves at the grocery store, instead of being out of stock, you know their business intelligence is working hard for you.


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