Business intelligence. Theory and History

Article that talks about the Theory and History of Business Intelligence, its main characteristics and components. It also talks about Decision Support Systems (DSS) and some tools such as the CMI (Balanced Scorecard), EIS or Datawarehouse.

We are in a period where knowledge is the way to gain an advantage in the business world. To stay current, an organization, managers, and leaders require quick and simple entry to useful and important organization data. One approach to solve this problem is to use  Business Intelligence by its name in English.

Something scarier than not having access to data is having a large amount of data and not understanding what to do with it. Business intelligence is the answer to this problem, on the basis that through this data situations, estimates and reports can be created that help leadership and decision-making, which becomes an advantage.

All organizations in any business area carefully consider the decision-making process that they complete throughout the administrative stages practiced at all hierarchical levels. Since the benefit they achieve, generally depends on the timely and exact decision made by the objective, theme or strategy to be attended.

Organizations have a great interest in employing personnel prepared to carry out particular undertakings that incorporate decision-making in the conduct, preparation and evaluation of the activities assigned to them.

That is why organizations are now looking for tools, procedures, advances, among others that help them transform data into information, and that information helps employees make the best possible decision about the company.

Key concepts

For a better understanding of the article, some concepts that are considered key will be cited:

Intelligence.

“Faculty of the mind that allows to learn, understand, reason, make decisions and form a certain idea of ​​reality.” (Oxford, 2018)

Business.

“It is an operation of certain complexity, related to the processes of production, distribution and sale of services and goods, with the aim of satisfying the different needs of buyers and benefiting, in turn, sellers.” (Julián Pérez Porto and Ana Gardey, 2013)

Decision making.

_“ It is the process by which a choice is made between different options or possible ways to solve different situations in life in different contexts: business, work, economic, family, personal, social, among others. Decision-making basically consists of choosing an option among those available, in order to solve a current or potential problem. ” 

History of intelligence in business

Some years ago, organizations depended on the IT area to prepare different types of reports, it was at the time that mainframes were used (large central computers, with little storage and a very high price) these computers were used by organizations that needed to process a considerable amount of information, such is the case of banks, which needed it due to the amount of movements that were made every day. Minicomputers were also used (the name given to single-user computers. This term began to gain strength during the 60’s. In organizations, There was practically only 1 central computer and no collaborator had access to it (only the IT department) but it was during the 70’s that this changed and more computers began to emerge. But, although there was already more access to this type of technology, it was still very restricted, since you could only prepare the reports with which it came preloaded. The system was usually saturated when a special report was needed and you had to wait to long hours just to be able to have that report.

Years passed and executive information methods were created, traditional methods had to be changed, in order to cover the shortcomings suffered by senior managers or managers.

In more recent times with the great technological revolution, it was possible to increase the number of computers, until practically every collaborator has one and the network connections also increased, the tools of business intelligence, with this the methods to do routines easier and to be able to prepare all kinds of reports, incidentally making decision-making something easier for the organization to do.

History of Business Intelligence

History of intelligence in business, own elaboration with information from (Gallardo, 2013)

What is business intelligence?

Business intelligence is the provision of procedures, applications and advances that promote the rapid and simple accumulation of information from the management frameworks of an organization, to study and break it down, with the aim that they can be used to decide and advance towards the learning of decision makers in the organization.

This innovation is presented as a key and vital factor for the company, as it provides leaders with promising and solid data to react to circumstances that may arise in the organization, for example, entering new markets, researching costs, obtaining a product offer, among others.

The data provided by business intelligence can have different degrees of scope, Castro (2015) mentions some examples:

Operational level.

• This level is used to decide on a day-to-day basis about the decisions that are made while carrying out the tasks of the organization.

Strategic level.

• It provides data for mid-hierarchy collaborators for research and decision-making, which are valuable every month for carrying out various actions and monitoring them.

Key level.

At this level, options are of greatest effect to the organization, and the data is used by upper management.

Tools for business intelligence.

To achieve business intelligence, various tools or services can be used, which according to Sinnexus (2016) the most used are: Balanced Scorecards (CMI), Decision Support Systems (DSS) and Executive Information Systems (EIS).

Balanced Scorecard (BSC)

Also associated with its name in English Balanced Scorecard (BSC), it is a business administration instrument that helps to calculate how much the activity of an organization has progressed, its strategic objectives and its effects, with a strategic vision and with a broad focus. . Managers and collaborators with a high hierarchical level make use of this tool since it fits very well with the vision of the organization, in medium and long periods of time.

Making all employees know and work in favor of corporate strategy is not something that is achieved overnight, since everyone must go in the same direction, it is not an easy task, but a BSC is great. help to achieve this goal. There are different methodologies for the realization of the scorecard, but the most used is that of Kaplan and Norton, its main factor is the use of both financial and non-financial indicators and control, constant information is obtained to be able to give a better tracking in the realization of the objectives set by the organization.

The four areas that are used in the CDI are as follows:

Financial perspective. 

It indicates what all organizations are looking for, to obtain the best use of their investments. For shareholders, it is to quantify the value that the organization generates, therefore it is desired that the benefits are greater and reduce costs as much as possible.

Customer perspective. 

It shows how the organization is perceived in the market, or in the market fraction where it plans to compete.

Consumer satisfaction is an indicator, regardless of the organization’s turn, as it is extremely important. It will reflect for better or for worse how the organization is positioned with respect to its rivals and with this increase or decrease the appreciation that the client has over the company.

Perspective of learning and growth.

For an organization to function, it must have its most important resource: its human capital and physical resources, since without this it would have no reason to exist. But for these to work, there must be a learning process with good communication from their superiors and of course not stop investing capital in improving resources.

Internal perspective. 

It provides us with information on the internal processes that are vital for the survival of the organization and indicates that they are also being carried out. Some examples of indicators could be in quality, productivity and innovation processes.

Benefits of the Balanced Scorecard

• Making the business model understandable to all employees and interpreting it with indicators will facilitate the acceptance of the entire organization, everyone will follow the same path to achieve the established goals.
• It indicates how what is done every day will have repercussions on the organization in the short, medium and long term.
• The CMI will be a control system, since by notifying the purposes that are had in the organization, efforts will be unified along the same path and prevent their spread.
• If there are problems with the realization of the strategic plan of any kind, they can be discovered almost immediately, for their prompt solution.

Decision Support Systems (DSS).

The Decision Support system, for its acronym in English (DSS), is an instrument for business intelligence, which emphasizes the study of the data that the organization has.

The DSS is of great assistance for organizations, since it solves for the most part, the limitations that management programs have.

Examples of Decision Support Systems. 

Sinnexus (2016) mentions some examples of this system, which are described below:

Executive information systems (EIS).

This type of system is the most common in business intelligence, since it gives managers an easy input to internal and external information of the organization, but it is of the utmost importance to achieve the set goals.

Group Decision Support Systems (GDSS)

“It is a computer-based system that supports groups of collaborators who have a common obligation (or goal), and that serves as an interface with a shared environment. The assumption on which the GDSS is based is that if communications are improved, decision-making can be improved. ” (Sinnexus, 2016)

Main characteristics of the Decision Support System. 

Some advantages and characteristics that we find when using this system according to Sinnexus (2016) are the following:

Dynamic, flexible and interactive reports.

It tells us that it is not a “square” system but that the colleague who makes use of it will not limit himself to the lists that are created when it is installed, he will be able to interact with it, to be able to solve his doubts.

It does not require technical knowledge.

Any collaborator can manage the system, you do not need to be a computer expert, due to its friendly interfaces.

Each user has information based on what they do.

It is not necessary for everyone to have all the information that the organization has, only the necessary to be able to perform the task assigned to them in the most efficient way possible.

Historical information availability.

We will have the facility to compare current statistics with those of the past, to be able to make comparisons, in order to discover trends, how such a product has evolved, among other things, which facilitate decision-making.

Executive Information Systems (EIS).

The Executive Information system is a software that will give directors access to external and internal information of the organization, which is vital to achieve the goals set.

“The main purpose is for the manager to have at his disposal a complete overview of the status of the business indicators that affect him instantly, also maintaining the possibility of analyzing in detail those that are not meeting the established expectations, to determine the plan appropriate action. ” (Sinnexus, 2016)

Datawarehouse. 

The term Datawarehouse refers to a corporate database whose function is to coordinate and choose the data from at least one source, and then store it and allow its interpretation from various available points of view and giving us a response in a very short time.

We can say, from a technical point of view, that the datawarehouse is the first step that we must carry out, in order to implement reliable and quality business intelligence in our organization.

Benefits of intelligence in business. 

Some advantages that the organization has when correctly applying intelligence in business, according to Castro (2015) are the following:

• Increased efficiency: By having the data in an easy and fast way, useful information for the organization can be conceived, which will be available in one place (it can be one of the systems that was previously discussed), to obtain better profit and be able to make an adequate decision in the shortest possible time.
• Queries at the time you want, regarding the organization: In order to make the best choice at the right time, it is necessary to have the information at the necessary time, without having to spend hours looking for them, with business intelligence, it will be available at a matter of minutes.
• Control of the organization’s departments : In all the organization’s departments, useful knowledge is built practically all the time, it can be used to analyze market preferences, analyze scenarios, among others.

Improve customer service: By having first-hand information, we can know what the consumer really wants and based on this offer first-level services, not only to retain those that we already have, but to gain new ones.

• Classify the information in dashboards: By having these dashboards, you can classify the information in terms of importance or the data needed for a given situation, making decision-making easier and clearer.

Thesis proposal.

Implementation of a Decision Support System (DSS) in a SME in the Córdoba – Orizaba area.

Objective.

Improve the decision-making process of the SME, by having all its current and past information available.

Thanks.

I thank my family, for giving me all the support and encouragement to continue day by day, the Technological Institute of Orizaba for opening its doors to me and allowing me to continue my studies with the Master in Administrative Engineering and Doctor Fernando Aguirre and

Conclusion. 

As it could be interpreted in the reading, intelligence in business is something that no longer has to be considered optional for organizations, it is something necessary if they want to guarantee their survival, it is of the utmost importance when making decisions, since it will provide us all kinds of information about the organization, we describe some software that helps to correctly manage intelligence in business and, as mentioned, “you don’t have to be a computer expert” to be able to interact with them.

Perhaps after making our first decision, after applying a software or some methodology for business intelligence, we will not perceive any benefit, but this will be in the medium or long term, since the evolution of any organization is a reflection of the good decisions you make throughout your life.