Business Intelligence (BI)

Lecture 8

Prepared by: Dr. Nesma Mahmoud

Information Systems Program

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Information Systems Program

Remember (Lec-7): Performance Measurement

• Tools used for Performance Measurement are:
• KPI (Key Performance Indicator)
• Balanced Scorecard
• Six Sigma

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Balanced Scorecards

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Scorecards and Dashboards

• Learning Objectives
• Identify four balanced scorecard perspectives
• Comprehend the differences between dashboards and scorecards
• Understand benefits of using balanced scorecard

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Scorecards and Dashboards

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Dashboards and Scorecards Overview

• The most important similarity is that both contain metrics that communicate what is important, monitor what is taking place, and help people be successful in their work.
• Metrics are displayed in dashboards in both systems.
• Scorecards go beyond dashboards. They explicitly link the dashboards to business strategy.
• This linking is the most significant difference between the two.
• A dashboard is a visual display of key performance indicators (KPIs) that shows the current status and trends of a business process, project, or organization.
• A scorecard is a strategic tool that aligns the KPIs with the goals and objectives of a business strategy, and shows how well the performance is meeting the targets and benchmarks

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Dashboards and Scorecards Overview

Source: Adopted from Vasiliu, A. Dashboards and Scorecards: Linking Management Reporting to Execution, Hyperion Solutions

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Differences between dashboards and Scorecards

• Scorecards are used by executives, managers, and staff
• to monitor strategic alignment and success with strategic objectives and targets.
• (or) to monitor the progress of tactical and strategic goals.
• use graphical symbols and icons to represent the status and trends of key metrics.

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• Dashboards are mostly used at the strategic, operational and tactical levels.
• to monitor detailed operational performance on a weekly, daily, or even hourly basis.
• (or) to monitor the performance of operational processes
• tend to display charts and tables with conditional formatting

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Balanced Scorecard

BSC is designed to overcome

the limitations of systems that

are financially focused.

An organization’s vision

and strategy should recognize

the interrelation between

financial and nonfinancial

objectives, measures, targets, and initiatives.

Therefore, nonfinancial

objectives form a simple

causal chain with “Learning and

growth” driving “Internal business

processes” change, which

Produces “customer” outcomes

that are responsible for reaching

a company’s “financial” objectives.

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Information Systems Program

Balanced Scorecard (BSC)

• Four perspectives (the key areas that a balanced scorecard focuses on):
• Customer:
• To achieve our vision how we should appear to our customers?
• Financial:
• To succeed financially, how should we appear to our stakeholders?
• Internal business processes:
• To satisfy our stakeholders, and customers, what business processes must we excel at?
• Learning and growth:
• To achieve our vision, how will we sustain our ability to change and improve?

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Information Systems Program

BSC Example

Increase net income

Increase Customer Retention

Improve Call Center Performance

Reduce Employee Turnover

From SHARDA, RAMESH; DELEN, DURSUN; TURBAN, EFRAIM, BUSINESS INTELLIGENCE AND ANALYTICS: SYSTEMS FOR DECISION SUPPORT, 10th Edition, © 2015. Used by permission of Pearson Education, Inc., New York, NY. All Rights Reserved.

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Information Systems Program

Balanced Scorecard

• The critical characteristics that define a balanced scorecard are:
• its focus on the strategic agenda of the organization concerned
• the selection of a small number of data items to monitor
• a mix of financial and non-financial data items

Source: Adopted from Vasiliu, A. Dashboards and Scorecards: Linking Management Reporting to Execution, Hyperion Solutions )

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Information Systems Program

Balanced Scorecard

• Scorecards enable organizations to improve processes and reduce costs by:
• Aligning strategy, plans, targets, and forecasts by creating a consolidated, strategic view of existing data
• Communicating the strategy, improving the collaboration and management process in general, and creating a dynamic and effective environment that supports initiatives
• Driving execution through accountability and performance measurement

Source: Adopted from Vasiliu, A. Dashboards and Scorecards: Linking Management Reporting to Execution, Hyperion Solutions )

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Building Scorecard

Source: Adopted from Dashboards and Scorecards: Linking Management Reporting to Execution., Hyperion Solutions (Links to an external site.)

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The BSC benefits

• Providing executives with a consolidated and strategic view of plans, budgets, and forecasts
• Alerting executives when initial performance signs reveal problems.
• Aligning the organization towards a common strategy
• Isolating and reducing inefficiencies in customer and product strategies
• Tying performance measures and non-financial targets
• Increasing buy-in from decision makers
• In-depth insight into real-time financial and operational results

From SHARDA, RAMESH; DELEN, DURSUN; TURBAN, EFRAIM, BUSINESS INTELLIGENCE AND ANALYTICS: SYSTEMS FOR DECISION SUPPORT, 10th Edition, © 2015. Used by permission of Pearson Education, Inc., New York, NY. All Rights Reserved.

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Software tools

• Many Balanced Scorecards are reported via ad-hoc methods based around email, phone calls and office software.

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• In more complex organizations, balanced scorecard reporting software (BI tools) is used to automate the production and distribution of these reports.

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Six Sigma

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Six Sigma

• Learning Objectives
• Understand the benefits of using six sigma

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Six Sigma?

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Six Sigma

• A performance management methodology aimed at reducing the number of defects in a business process to as close to zero defects per million opportunities (DPMO) as possible.
• In numeric terms, the norm has been 6,200 to 67,000 DPMO.
• This level of variability represents a three- to four-sigma level of performance.

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• To achieve a Six Sigma level of performance, the company would have to reduce the number of defects to no more than 3.4 DPMO.

From SHARDA, RAMESH; DELEN, DURSUN; TURBAN, EFRAIM, BUSINESS INTELLIGENCE AND ANALYTICS: SYSTEMS FOR DECISION SUPPORT, 10th Edition, © 2015. Used by permission of Pearson Education, Inc., New York, NY. All Rights Reserved.

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Six Sigma Implementation

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Comparison of Balanced Scorecard and Six Sigma

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Comparison of Balanced Scorecard and Six Sigma

Source: Adopted from P. Gupta, Six Sigma Business Scorecard, 2nd ed., McGraw-Hill Professional, New York, 2006.

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Corporate Performance Measurement � Portals, Scorecards, Dashboards

• Provides a container for several pieces to plug into so that the aggregate tells a story.

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• For example, a balanced scorecard that displays portlets for financial metrics combined with organizational learning and growth metrics.

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Business Analytics

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Business Analytics

Learning objectives

• Define Visual Analytics and explain how it differs from information visualization.
• Identify major categories and applications of business analytics (BA) and explain how various form of BA are supported in practice
• Identify how the combination of BI and BA can result in competitive advantage for organizations

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Business Analytics

Visual analytics is the combination of visualization and predictive analytics.

• Information visualization is aimed at answering
• “what happened” and “what is happening” and
• is closely associated with business intelligence (routine reports, scorecards, and dashboards),

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• Predictive analytics is aimed at answering
• “why is it happening,” “what is more likely to happen,” and
• is usually associated with business analytics (forecasting, segmentation, correlation analysis).

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Information Systems Program

Business Analytics Overview

From SHARDA, RAMESH; DELEN, DURSUN; TURBAN, EFRAIM, BUSINESS INTELLIGENCE AND ANALYTICS: SYSTEMS FOR DECISION SUPPORT, 10th Edition, © 2015. Used by permission of Pearson Education, Inc., New York, NY. All Rights Reserved.

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Descriptive Analytics

• Descriptive or reporting analytics refers to
• knowing what is happening in the organization
• understanding some underlying trends and causes of such occurrences
• It involves
• consolidation of data sources and availability of all relevant data in a form that enables appropriate reporting and analysis.
• usually development of this data infrastructure is part of data warehouses

From SHARDA, RAMESH; DELEN, DURSUN; TURBAN, EFRAIM, BUSINESS INTELLIGENCE AND ANALYTICS: SYSTEMS FOR DECISION SUPPORT, 10th Edition, © 2015. Used by permission of Pearson Education, Inc., New York, NY. All Rights Reserved.

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Information Systems Program

Predictive Analytics

• Predictive analytics aims to determine what is likely to happen in the future.
• Uses statistical and data mining techniques to predict if the customer is likely to
• switch to a competitor (“churn”),
• buy next and how much,
• respond to promotion,
• worth the risk

From SHARDA, RAMESH; DELEN, DURSUN; TURBAN, EFRAIM, BUSINESS INTELLIGENCE AND ANALYTICS: SYSTEMS FOR DECISION SUPPORT, 10th Edition, © 2015. Used by permission of Pearson Education, Inc., New York, NY. All Rights Reserved.

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Information Systems Program

Bring Predictive Analysis into the Mainstream �for Business Users

DETERMINE

WHO IS

LIKELY TO …

Achieve Revenue

Stay in Budget

Respond

Purchase

Defraud

Be Profitable

Be On Time

Typical Predictive Analyses

Based on Regression Techniques

Powerful Predictive Analyses

Based on Data Mining Techniques

Linear Regression

Logistic Regression

Tree Regression

Decision Tree

Clustering

Time Series

Association Rules

Neural Network

Rule Set

Support Vector Machines

Ensembles of Models

Sales Forecast Area

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Prescriptive Analytics

Prescriptive analytics aim to recognize

• what is going on,
• the likely forecast, and
• the best performance possible using optimization techniques

From SHARDA, RAMESH; DELEN, DURSUN; TURBAN, EFRAIM, BUSINESS INTELLIGENCE AND ANALYTICS: SYSTEMS FOR DECISION SUPPORT, 10th Edition, © 2015. Used by permission of Pearson Education, Inc., New York, NY. All Rights Reserved.

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Big Data Analytics

• Big Data? It refers to data that
• cannot be stored in a single storage unit
• is arriving in many different forms, be they structured, unstructured, or in a stream
• are clickstreams from Web sites, postings on social media sites such as Facebook, or data from traffic, sensors, or weather
• Big Data analytics solution
• instead of pushing data to a computing node, solution pushes computation to the data

From SHARDA, RAMESH; DELEN, DURSUN; TURBAN, EFRAIM, BUSINESS INTELLIGENCE AND ANALYTICS: SYSTEMS FOR DECISION SUPPORT, 10th Edition, © 2015. Used by permission of Pearson Education, Inc., New York, NY. All Rights Reserved.

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Information Systems Program

Companies Are Using BI and BA based Strategies �To Achieve Business Excellence

Competitive Advantage

What’s the best that can happen?

What will happen next?

What if these trends continue?

Why is this happening?

What actions are needed?

Where exactly is the problem?

How many, how often, where?

What happened?

Sophistication of Intelligence

Optimization

Predictive Modeling

Forecasting/extrapolation

Statistical analysis

Alerts

Query/drill down

Ad hoc reports

Standard reports

Competing on Analytics: The New Science of Winning, by Thomas H. Davenport and Jeanne G. Harris (Harvard Business School Press, March 2007).

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Organizations Are Building Their Competitive Strategies Around Analytics

Competing on Analytics: The New Science of Winning, by Thomas H. Davenport and Jeanne G. Harris (Harvard Business School Press, March 2007).

Stage 5: �Analytical Competitors

eCommerce

Google, Netflix,

Yahoo!

Entertainment

New England Patriots, Harrah’s, Oakland A’s, Marriott

Retail

Amazon.com, Wal-Mart

Industrial Products

John Deere, CEMEX

Consumer Products

Anheuser-Busch, E&J Gallo Winery, P&G, Mars

Telecoms

Sprint, O2, Bouygues Telecom

Financial Services

Barclays Bank,

Capital One,

Progressive Insurance, WellPoint

Pharmaceuticals

AstraZeneca, Solvay, Vertex

Transport

FedEx, Schneider National, United Parcel Service

Analytic competitors are found in a variety of industries

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Information Systems Program

Business and Visual Analytics Platforms

• More BI and analytics vendors are becoming aware that their customers require quick and preferably interactive visualizations, not just for their normal reporting systems, but also to illustrate predictive and prescriptive decision-making information.
• A high-powered visualization environment is one in which high-performance, in-memory solutions are applied to exploring massive amounts of data instantaneously.
• Due to the increasing demand for visual analytics coupled with fast-growing data volumes, there is an ever-growing need to invest in highly efficient Visual Analytics Platforms.
• MicroStrategy Visual Insight and SAS Visual Analytics are examples of such platforms.

From SHARDA, RAMESH; DELEN, DURSUN; TURBAN, EFRAIM, BUSINESS INTELLIGENCE AND ANALYTICS: SYSTEMS FOR DECISION SUPPORT, 10th Edition, © 2015. Used by permission of Pearson Education, Inc., New York, NY. All Rights Reserved.

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Information Systems Program