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

What is business intelligence?

Business intelligence is an umbrella term that includes best practices, software, infrastructure and other tools to optimize decision-making and enhance a business’s performance.

In essence, BI is about information analysis. A database pulls together information from the different parts of your business, and then applications convert that raw data into reports, charts and other analytical tools to provide insights. 

How does business intelligence work?

The term “business intelligence” first appeared in the 1960s to describe a system for sharing information among departments. Today, BI tools enable self-service data management and digital data analysis. 

This raw data is processed and stored using physical locations and digital cloud storage methods. Once the data is stored, business leaders can easily access it and even turn it into aesthetically pleasing visuals for key presentations.

BI software efficiently collects data to help owners and managers make informed business decisions. These valuable insights can help your company adapt to industry and market fluctuations. Here are some ways data can be collected and analyzed:

• Data mining
• Data visualization
• Descriptive analytics
• Performance metrics and benchmarking
• Queries
• Reports
• Statistical analysis
• Visual analysis

You may find that the information you collect leads to more questions. Use such analytics to investigate your company’s growth potential and plan better for the future by answering questions as they arise.

BI also offers dashboards and performance scorecards. When data is visualized, key performance indicators and business metrics are much easier to understand.

How can small businesses use business intelligence?

Proper data analysis can mean the difference between a modest profit and outrageous success. Business intelligence offers insight into industry trends and helps you spot effective marketing opportunities you would have missed otherwise. Business intelligence also helps you learn what customers want and need from your company so you can redesign your business to gain more customers.

Here are some of the ways small businesses can use analytics:

• Examine any aspect of the business
• See how well sales efforts are going
• Assess the efficiency of manufacturing processes
• Measure employee performance and company goals
• Uncover and track industry trends using data from multiple departments
• Inform business leaders who make important company-wide decisions
• Track historical data
• Make custom reports based on specific queries
• Design graphs and charts based on collected data
• Stay competitive in the industry

Tools for better business intelligence

Several business intelligence tools are available to organizations of all sizes. While some focus on one aspect of data, others offer a direct solution. Here is a list of popular business intelligence tools:

• Ad hoc analytics: Tools that answer specific analysis questions instantly
• Collaborative BI: BI software that pairs with third-party tools for easy sharing
• Data visualization software: A visual representation of data patterns and correlations
• Extract, transform and load tools: A gathering place for data as it is prepared for analysis
• Location intelligence: A mix of business data and geographic context
• Mobile BI: Optimized data for mobile devices
• Online analytical processing: Computing that handles queries in a multidimensional analytical form.
• Open-source BI: BI software that is free and does not require a subscription or license purchase
• Operational BI: Integration of real-time data so it can be used immediately
• Real-time BI: Solutions that deliver data in real time to stakeholders
• Software-as-a-service BI: BI solutions that are subscription-based and cloud-hosted

Advantages of incorporating business intelligence

BI tools can help take your business to the next level. By increasing your workforce’s productivity and improving the customer experience, BI tools provide the data you need to make proactive business decisions.

Traced accountability 

BI tools can assign tasks and reporting to teams and individuals to create a traced accountability system within the business. Holding your team accountable can increase loyalty by providing each person with a clear understanding of their role and reducing confusion among departments.

Increased productivity 

BI tools boost productivity in several ways: 

• Companies of any size can create custom reports. 
• Automated data can increase cash flow by decreasing the costs of labor and resources.
• By automating busywork, BI tools help employees be more productive and efficient. 
• Frequent reporting can eliminate the need for an IT team and consultants.     

Streamlined processes 

BI gives companies access to a wide variety of data that can help streamline business processes, eliminate bottlenecks and set measurable standards. Data reporting can be used in real time, leading to better, faster business decisions. 

For example, team members can analyze detailed client information and forecasts before a sales meeting. As a result, it’s easier to connect with the client and conduct business more professionally. 

Competitive advantage 

By using BI tools to analyze customer data, you can determine how to engage customers, anticipate buying hotspots and downturns, and monitor industry and market changes. Anticipating your customers’ needs is a substantial competitive advantage.

Improved customer experience 

BI tools also help your customers. By connecting phone records, text data from live chats, and prior purchases, you can use data history to offer excellent customer service.  

Disadvantages of incorporating business intelligence

Although BI tools offer many benefits, they’re not always easy to implement, especially for small businesses. Before you dive in, consider these potential drawbacks.

Cost

BI tools can be costly, and they require a significant upfront investment. Over time, they offer a return on investment, but usually not within the first year. If cost is a concern, consider using self-service BI tools, which do not require IT support for onboarding or minor adjustments.

Complexity

Depending on your knowledge of business tools, you might have to hire a team for onboarding and initial training. Plus, if you use different BI products and try to combine them, the data could be confusing and even overlap. Look for an all-in-one BI solution that can house all of the necessary tools, or find a third-party data connector to make sense of the various information you gather from different BI tools.

Cybersecurity risk

If you invest in BI tools that house your customer and employee data, any error in your system could put that information in the wrong hands. To decrease the risk of a data breach, choose a BI company with the best security practices and thoughtfully decide which data you will allow your BI tools to access. 

Employee resistance

The implementation of new tools across all departments can come with obstacles. Although some departments might catch on quickly and find that BI tools benefit their time and knowledge, others may find it cumbersome and give up on it entirely. Look for intuitive software that solves employee complaints and has clear actions and goals. 

Business intelligence vs. competitive intelligence vs. business analytics

BI is often synonymous with competitive intelligence and is also confused with business analytics. However, there are some important distinctions. 

• Business intelligence: BI increases your competitive advantage. It uses various technologies to review internal data and analyze business processes. BI collects data through questions, reporting and online analytical processing.
• Competitive intelligence: With a marketplace focus, competitive intelligence uses data differently. Information is gathered, analyzed and disseminated to understand how to get an edge over competitors. 
• Business analytics: Business analytics is related to competitive intelligence and can be considered a subset. Business analytics is all about predictive modeling, and its tools are statistics and quantitative measurements.

Business intelligence vs. artificial intelligence

BI and AI overlap in their technological applications. BI and AI tools create valuable data from their analytics, allowing businesses to translate that data into informed business decisions.

However, their goals are significantly different. BI tools streamline data collection while automating the frequency and improving how a business utilizes the data. By using BI tools in various departments, your team can collect and aggregate that data to make informed business decisions.

By contrast, AI tools are built to model human intelligence in the form of rational decision-making. For example, in certain instances, an AI chatbot can replace customer service reps. While it doesn’t necessarily improve customer relationships, it can fill the real-time gap for simple questions or concerns.

Tom Drake contributed to this article.