What is Business Intelligence?
We delved into the exact definition and breakdown of what business intelligence is in a previous blog, but here’s a quick recap. If you’re already aware of how BI works, feel free to skip this bit.
In essence, Business Intelligence is the information upon which business leaders take decisions. Done well, it takes data from any and all relevant aspects of a business and brings it together in a way that aids that decision making process. At its most basic level,
Business Intelligence is the information one gets by standing behind the cash register in a shop. From there, the shop owner can see what stock is being sold the most, the type of customer coming in, the cash flow of the company, the performance of employees, etc. Using all this first-hand information, a good shop owner can make informed decisions on what stock to reorder, what sales tactics to implement, which incentives should be provided to employees, etc.
The reality of running a business is often a lot more complicated, especially when the business begins to grow. The shop owner must often step out from behind the till to tend to other business needs, then relying on second-hand information from employees and basic data to make the same decisions they did in the past.
The problem with this, is that the further away the owner gets from the company’s operation, the more difficult it becomes to make informed decisions based on accurate data. This is where well-designed BI software can bridge the gap that has been created between first-hand information and the business leaders making decisions.
5 ways BI aids decision-making
1. Transition from what you think you know, to what you should know
One of the first steps in implementing any business intelligence system is to help identify the real key indicators of company performance. Many-a-time, business leaders tend to focus on indicators that are revenue focused, which is completely understandable. However, there’s a long list of data-points that can provide significantly more detailed insight into how different parts of the business are performing, and how this is impacting overall success.
For example, the leadership of a retail company may focus heavily on sales numbers, while potentially ignoring performance in other departments, for example, the warehousing and logistics team might be bottlenecking performance due to an inefficient inventory management system.
By being able to track data from said inventory system, improvements can be made to this department that can build better efficiency, and relieve pressure from other departments.
2. Increasing decision-making efficiency by reducing misinterpretation
Another advantage of having identified key performance indicators thoroughly within a business is that it leaves little room for misinterpretation of the source of problems that may arise. If a group of leaders have agreed to run the business based upon certain KPIs, there is little negotiation or discussion necessary when the data is clearly pointing to the source of said problems. This reduces internal bureaucracy, and makes allocation of resources for problem solving easier, and more effective.
3. Reduction and classification of risk
With BI software feeding a steady stream of data to a business’s data dashboard, decision-makers find it easier to understand the implication of certain decisions that they may be considering.
For example, if a retail store has data from multiple outlets in multiple locations, and are considering opening another, the data available to them will give a clear indication of a number of factors, such as the increased workload on their logistics department, estimated payroll costs, and how much time will likely be required for said new outlet to begin turning a profit.
With this data in hand, risky decisions can be classified and their implications more thoroughly understood before actually being made. Then, the results can be measured – feeding into a continuous feedback loop for constant optimisation.
4. Informing sales & marketing strategies
BI can help make better sales and marketing decisions thanks to these departments having a clearer picture of the market they’re currently serving and what those markets want.
For example, if a retailer has a data collection method such as a loyalty program, customer trends based on accurate demographics can be generated through smart dashboards and monitored in real-time, creating a dynamic snapshot of consumer behaviour and market needs. This information can then be used in the generation of more accurate and effective marketing and sales campaigns that consider the current buying behaviour.
5. Preparing for the unexpected
Once enough data has been collected through BI channels, simulations of potential events can be created. Taking an example which is extremely relevant due to current global supply-chain issues – if a business loses access to a particular product, resource, or channel, how will this impact the overall operation?
Thanks to the ability to simulate such situations, business leaders can react much quicker to shifts in the business landscape than those trying to catch up once something has gone wrong. The ability to shift tacks and make very quick and decisive decisions in response to external factors can be the difference between success and insolvency, and this is what well-designed BI can provide.
6. BONUS: BI and Digital Transformation
After learning what business intelligence is and how it works, some business owners might think that it’s way too advanced for their current operational business model. That they need to digitalise their processes way before they can even think about using BI. That’s a mistake!
In reality, adopting a BI-focused approach can be extremely beneficial, no matter what state of digitalisation a business is in. Having a BI partner will significantly help with the identification of business processes that would benefit most from digital transformation, and where the most optimisation can be achieved in the long run.
Once that digital transformation has taken place, and the BI strategy implemented, KPI-focused reports can provide a clear picture of the success of the transformation, and provide insight into what more can be optimised. This entire process can be repeated for practically every other facet of the business until it’s a well-oiled machine.