Business intelligence and why it is important

Definition and overview of business intelligence

Business intelligence is the process of acquiring high quality information about a particular subject matter being researched on, to enable individuals analyze the information and draw conclusions or make assumptions.

Others define business intelligence as the use of technology to collect and effectively use the information to improve business performance.

business intelligence
relationship between business intelligence and technology

The world today is viewed by many as being in an information age. Information is important as it can be used to give leads to untapped business opportunities.

Business intelligence will take into consideration the organizations’ processes, technologies in place that can be manipulated and applications to analyze data and business processes in order to come up with value added outcomes.

The business environment today is therefore being driven by an accurate and good timing of information. Information in this era is used as a strategic asset which can assist the management change the face of an enterprise and survive the toughest economic and market conditions.

This is where sharp entrepreneurs rip the profits, as they get more information of value and invest based on the strategy driving the business at the time.

Introduction to the concept of business intelligence

The business society today is faced with lots of challenges mostly attributed to the rapid changes in the market environment. This has partly been due to the introduction and the use of more sophisticated technologies which link businesses through electronic systems.

A common example is the use of mobile phones which has gone beyond its imaginary line of communication and data transfer to other sectors like banking. With a mobile phone, one can now call, send and receive data, surf the internet, capture videos, photos, record conversations and undertake many other activities. This article discusses about business intelligence and why it is important.

With proper technology in place, we have seen changes in productivity, shifts in demand and supply, people being able to share knowledge and information, and it has made it easier for innovation and new inventions through research and analytical work.

In the face of such challenges, most organizations would put in place a team commonly known as a task force, and bestow in them the mandate to come up with a solution to the challenges facing the entity.

They can also come up with preventive measures or ideas that would generate new revenues and add value to the business, or create a healthy competition in the market place. In so doing, the entity would gather intelligence in form of data, analyze it and come up with a practical solution that would generate a competitive advantage.

Business intelligence is all about value creation in the business enterprise. It is therefore of vital importance for every organization to have a business intelligence analyst to assist the management in making decisions and strategies with regard to the competitive market.

Ways in which business intelligence can help a business unit to create value:

  1. Allocating resources well in order to achieve the maximum returns.
  2. Reducing costs to an acceptable level as portrayed by the senior management
  3. Increasing productivity.
  4. Innovation and the identification of opportunities that would put the business in a competitive edge in the market.
  5. Improving the quality of its products and services.
  6. Improving the efficiency and effectiveness of its operations.

These points are further discussed below.

Adding value through business intelligence

It is important that data is collected from within the enterprise for the purpose of internal analysis and performance measures. Data may also be collected from within the industry and competitors for the purpose of benchmarking, comparisons and performance review.

This data may be critical in providing statistical leads in business demographics, internal account performance or individual account performance, business performance, identification and management of risks. Further to this, the internally sourced data is cheap and easily accessible to the analyst and management.

Organizations may develop their own systems or purchase a customized business intelligence software application in an endeavor to generate intelligent reports. The data sourced from such software is easily transformed into a user friendly interface to be implemented by the end user in decision making.

In the process of adding value using business intelligence, the enterprise should put much emphasis on information and the customer satisfaction through the provision of better services and products that add value. The enterprises can also change focus from product to customer centric approach depending on the strategic plan of the business.

Information technology is one tool used today by the business community and governments to spur economic growth in different sectors. To do so, most Governments, in particular the government has empowered small and medium enterprises by:

  1. providing a conducive environment for conducting business
  2. providing access to information through networking
  3. extending financial resources to boost entrepreneurship
  4. spurring economic growth and creating employment opportunities to the population.

But as the SMEs grow, their businesses are affected by a number of technical and economic challenges hence the need to change the business game plan (strategic plan).

Some of the factors include:

  1. stiff competition
  2. technological innovations
  3. globalization
  4. mergers and acquisitions
  5. de-registration
  6. changes in cost of raw materials
  7. emergence of new markets.

Consumers are now educated and well informed. This therefore gives them the power of choice [a lot of substitute goods are in the market] and control in the game plan.

Through thorough business intelligence and research by analysts, the enterprises are therefore sometimes forced to study market trend and what the competitors are offering, create new revenue streams, enter new territorial markets, and reduce production and administration costs in order to realign their operations.

Elements of business intelligence

An understanding of business intelligence requires one to have an all-round knowledge ranging from the source of the information, business strategic plan in place and the entire value chain.

Business intelligence is a combination of information technology, human capital and organization processes. It should focus on the interaction between Information Technology (IT), business processes, human competencies, the current circumstances affecting the enterprise and cooperation in the entire enterprise.

Human competencies refer to the persons who have the ability to retrieve and deliver the right information. The organization needs to marshal its troops – People who are focused, self-driven and have a common purpose for the organization.

A Chinese warrior [Sun Tzu] taught us to win the battle in the mind before the fight. By winning, it means all the troops [team] should be mentally prepared, well skilled, be able to work ‘SMART’ and strategically towards archiving a common goal for the enterprise.

Information technology plays a critical role in data collection and analysis. The users should be capable of interacting with the data and storing it and manipulating it before sending it back to the intended end-user who will use it for decision making.

The business processes would depend on the nature of the organization for instance, for a manufacturing concern, the process may be optimization of its inventory system. It would require a substantial investment to set up an information system which may be in the form of human capital and a data warehouse.

Applications of business intelligence

  • As a strategic tool

Business intelligence can be applied strategically as well as tactically. Strategically, it can assist management to identify trends and opportunities for growth. It can also be applied tactically within departments to implement changes that create value to the institution.

  • Extraction of audit evidence

Information system auditors can apply computer assisted audit techniques (CAAT‘s) to obtain reliable, relevant and sufficient audit evidence required to achieve audit objectives. Audit findings should be supported by appropriate analysis and interpretation of the evidence by the information system auditor.

  • Monitoring tool:

Business intelligence can also be used to monitor an enterprise’s performance against its key performance indicators.

  • Generation of reports

It can be used to generate strategic reports to the senior management that can be used for decision making and hence give strategic direction to the enterprise.

Analysts can use business intelligence to come up with ways of improving the quality of the final product or service.

The aim of business intelligence is to come up with solutions that would add value to the final product or service or come up with remedies to the challenges being faced by the enterprise.

Implementation of business intelligence

In an endeavor to implement business intelligence successfully, the enterprise should follow the steps below:

  1. Set the goals to be achieved by the business intelligence system. The management should have a reason as to why they are setting the business intelligence unit.
  2. Conduct a strengths, weaknesses, opportunities and threats (SWOT) analysis of the enterprise.
  3. Identify opportunities in the enterprise where business intelligence will improve performance or add value.
  4. Apply the business intelligence across the enterprise. Focus should be placed on ‘who’ will benefit from the program.
  5. Gather and share information with the right people across the enterprise. Information gathering may begin by brainstorming across departments. The information should be used by business analysts to extract useful data to be used in management decision making.
  6. Evaluate the alternatives, if any, based on the cost/benefit criteria to assess ideas collected. Preference is given to those ideas with the greatest returns.

Importance of business intelligence

  • Decision making. Business environments become complex and therefore investors and other stakeholders need sufficient, reliable and accurate information before making independent decisions. Information provided by business analysts may assist the management in understanding better the value of their decisions.
  • Sharing of knowledge is improved between departments and individuals across the enterprise.
  • It also acts as a source of information to the management team. The information obtained may be used by the enterprise in managing costs and performance in an enterprise.
  • Business intelligence can also help an enterprise improve its internal processes and products
  • It unlocks information and shares it across the business enterprise hence empowering management and end-users. Business intelligence draws information from various sources in bulk, integrates them and extracts only those elements that are useful for decision making.
  • It can be used to identify those profitable units, products or individual customers in the business enterprise.
  • Quality improvement. This can be achieved through improved customer service by identifying and responding to customer needs or complaints as quickly as possible. An enterprise can do this by putting more focus on its core competencies by knowing how to handle its internal processes and anticipate the customer needs.
  • It helps in reducing risks hence minimizing losses by evaluating and understanding risk exposures associated with the enterprise.


The application of business intelligence in finding solutions for enterprises has helped most firms adapt to the changes in the market that would otherwise have adverse effects on their enterprises. For enterprises to achieve maximum outcome from the business intelligence, they must have a continuous monitoring process put in place that would trigger alerts to the management (should there be any abnormal effects) for quick decision making processes to reverse the trend or utilize the opportunity.

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