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Business Intelligence and Analytics:

Systems for Decision Support

(10th Edition)

Chapter 1:
An Overview of Business
Intelligence, Analytics, and
Decision Support
Learning Objectives
Understand todays turbulent business
environment and describe how organizations
survive and even excel in such an
environment (solving problems and
exploiting opportunities)
Understand the need for computerized
support of managerial decision making
Understand an early framework for
managerial decision making
... (Continued)
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Learning Objectives
Learn the conceptual foundations of the
DSS methodology
Describe the BI methodology and
concepts and relate them to DSS
Understand the various types of analytics
List the major tools of computerized
decision support

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Opening Vignette
Magpie Sensing Employs Analytics to
Manage a Vaccine Supply Chain
Effectively and Safely

Company background
Proposed solution and results
Answer & discuss the case questions...
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Opening Vignette
Questions for the Opening Vignette
1. What information is provided by the descriptive
analytics employed at Magpie Sensing?
2. What type of support is provided by the predictive
analytics employed at Magpie Sensing?
3. How does prescriptive analytics help in business
decision making?
4. In what ways can actionable information be reported in
real time to concerned users of the system?
5. In what other situations might real-time monitoring
applications be needed?
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Changing Business Environment
& Computerized Decision Support
Companies are moving aggressively to
computerized support of their operations
Business Intelligence
Business PressuresResponsesSupport
Business pressures result of today's
competitive business climate
Responses to counter the pressures
Support to better facilitate the process
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Business PressuresResponses
Support Model

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The Business Environment
The environment in which organizations
operate today is becoming more and more
complex, creating
opportunities, and
Example: globalization.
Business environment factors:
markets, consumer demands, technology,
and societal
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Business Environment Factors
Markets Strong competition
Expanding global markets
Blooming electronic markets on the Internet
Innovative marketing methods
Opportunities for outsourcing with IT support
Need for real-time, on-demand transactions
Consumer Desire for customization
demand Desire for quality, diversity of products, and speed of delivery
Customers getting powerful and less loyal
Technology More innovations, new products, and new services
Increasing obsolescence rate
Increasing information overload
Social networking, Web 2.0 and beyond
Societal Growing government regulations and deregulation
Workforce more diversified, older, and composed of more women
Prime concerns of homeland security and terrorist attacks
Necessity of Sarbanes-Oxley Act and other reporting-related legislation
Increasing social responsibility of companies
Greater emphasis on sustainability
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Organizational Responses
Be Reactive, Anticipative, Adaptive, and
Managers may take actions, such as
Employ strategic planning.
Use new and innovative business models.
Restructure business processes.
Participate in business alliances.
Improve corporate information systems.
more [in your book]

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Closing the Strategy Gap
One of the major objectives of
computerized decision support is to
facilitate closing the gap between the
current performance of an organization
and its desired performance, as expressed
in its mission, objectives, and goals, and
the strategy to achieve them.

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Managerial Decision Making
Management is a process by which
organizational goals are achieved by
using resources.
Inputs: resources
Output: attainment of goals
Measure of success: outputs / inputs
Management Decision Making
Decision making: selecting the best
solution from two or more alternatives
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The Nature of Managers Work
Mintzberg's 10 Managerial Roles

1. Figurehead
2. Leader Decisional
3. Liaison 7. Entrepreneur
8. Disturbance handler
Informational 9. Resource allocator
4. Monitor 10. Negotiator
5. Disseminator
6. Spokesperson

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Decision-Making Process
Managers usually make decisions by
following a four-step process (a.k.a. the
scientific approach)
1. Define the problem (or opportunity)
2. Construct a model that describes the real-
world problem.
3. Identify possible solutions to the modeled
problem and evaluate the solutions.
4. Compare, choose, and recommend a
potential solution to the problem.
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Information Systems Support
for Decision Making
Group communication and collaboration
Improved data management
Managing data warehouses and Big Data
Analytical support
Overcoming cognitive limits in
processing and storing information
Knowledge management
Anywhere, anytime support
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An Early Decision Support
Framework (by Gory and Scott-Morten, 1971)

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An Early Decision Support
Degree of Structuredness (Simon, 1977)
Decisions are classified as
Highly structured (a.k.a. programmed)
Highly unstructured (i.e., nonprogrammed)
Types of Control (Anthony, 1965)
Strategic planning (top-level, long-range)
Management control (tactical planning)
Operational control
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Explaining How Business
Intelligence tools work to support
decision making

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Intro to Databases
Because business information is valuable, it needs to be stored and used.
In this matter, the need for an intelligent solution to store and use
information has emerged.

In response to this need, the concept of databases was introduced by the

mathematician Dr Edgar Codd while working as a researcher at IBM.

Dr Codd realized that the discipline of mathematics could be deployed to

manage information, and based on this he developed the rational model for
data management (databases).

In the first definition of databases the normalisation process was defined as

the process of organising data into entities, each entity with its own
attributes, and then the interrelationships between those entities were

OLTP applications involve transferring the current data from business

transactions to operational databases which was used later to feed the
Data Warehouse.

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Intro Data Warehouses DWH
In the 1970s, information access was only to fragmented data that
was stored in different applications. In this matter, storing the data
outside the operational system enables the incorporation of data
from different applications.

Consequently, the need for an intelligent solution to access data

from different applications has emerged. In response to this need,
the advent of data warehouses became an important aspect for the
development of IT applications in business.

The concept of data warehouses was originated by IBM researchers

Barry Devlin and Paul Murphy in a seminar paper that was
published in 1988 in the IBM Systems Journal.

But, IT vendors built experimental data warehouses only, until 1991

when W.H. Bill Inmon made data warehouses a practical solution
by publishing the how-to guide, Building the Data Warehouse.

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Intro Data Warehouses DWH
DWHs provide the capability for storing large amounts of
information from different applications which are then used to
generate knowledge.

This knowledge is captured from different IT applications and

contained in the DWH in different dimensions (databases) for
different purposes.

Therefore, advanced data reporting and analysis tools are

necessary to establish connections between data from
different dimensions in the DWH and grasp knowledge from
this data.

In this way, different kinds of historical data from different

applications were grouped in one place, which makes it
complex and hard to understand.
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Intro Data Warehouses DWH
Therefore, business data models became more complicated
as they should be developed using dimensional data
modelling techniques.

Therefore, the concept of online analytical processing (OLAP)

was introduced by the founder of databases, Edgar Codd, in
1993 to offer a competent solution for the analysis of
dimensioned and aggregated information from the data
warehouse to support decision making.

The data warehouse involves the aggregation of historical

data from different operational databases and in different
dimensions. And OLAP applications are employed to facilitate
a multi-dimensional view of data in order to discover
knowledge from the aggregated data in the data warehouse

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Definition of DWHs
Data warehouses (DWH) are large data repositories that organize
integrated historical data in a specific logical design to support analytical

The logical design of data warehouses is known as star schema or the

multi-dimensional model, and it seeks a high performance data access and
analysis for aiding decision making.

This is where, in a DWH, the key data entities are arranged as multiple
dimensions (subject areas) rather than multiple relations as in the case of
databases. In this way, DWHs provide a multi-dimensional view of data
that enhances the decision support queries.

The most common definition of DWHs is the original definition coined by

Inmon (1990), which defines the DWH as a subject-oriented, integrated,
time-variant, and non-volatile collection of data in support of
managements decisions.

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multi-dimensional (start-schema)
view of the sales fact in a DWH.

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Differentiating between DWHs and

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Main uses of DWH
The main uses of DWHs are:

1. Cleanse and consolidate corporate data.

2. Report on the data.

3. Enhance data analysis.

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1) Cleanse and consolidate
corporate data
DWHs replicate data from operational databases and external
sources (e.g. emails or news) on periodic bases, and stores the
aggregated data on a read only database that is used to discover
patterns of behaviour to support decision making.

Accordingly, DWHs require a large amount of memory, thus, DWHs

are typically maintained separately from the operational applications
to prevent slowing or negatively impacting other operational

And to consolidate corporate data, DWHs model the data in a way

(dimensional data modelling) that makes querying and reporting
easier. This is where DWHs contain summary and detailed data; the
detailed data is obtained from the operational databases and kept
for analysis purposes, the summary data is generated to describe
the detailed data, and it is used for reporting purposes.

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Dimensional Data Modeling DDM
The detailed data (e.g. customer or sales records) is categorised into
subject areas and contained within dimension tables where each dimension
represents a dimension table that contains data about a specific subject
(e.g. human resources, customers, sales, inventory or products).

The summary data represents the business performance measures (e. g.

number of customers or amount of sales); each measure represents a fact
on the business performance and all the facts are grouped in the facts

The central entity of the DWH is the facts table, and it contains summaries
of enterprise-wide data that provide an overall view of the business

Each dimension table is connected to the facts table in a one-to-many

relation, which generates the multi-dimensional view for each performance

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Dimensional Data Modeling DDM
The dimension tables are contained within the DWH in
smaller DWHs known as data marts.
Hence, data marts are also known as departmental
databases, where each data mart is meant to involve
a single subject to support a specific department.
Data marts are defined as a type of data warehouse
with data specifically designed for a defined set of
This means that each department has its own
interpretation of how the data mart should look and
what it should contain.
Thus, data marts are created according to specific
needs defined by a specific department.

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Steps of designing the DDM
1. Businesses processes: defining the business performance
measures, and it results in defining the facts table.

2. Granularity: defining the required level of detail in data.

3. Dimensions: defining the kind of data that goes into the

front end application pick lists where those dimensions are
fed directly from the operational databases.

4. Facts: creating the facts table that contains summaries of

the data from dimension tables.

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Report on Data
Another purpose of implementing DWHs is to report on data;
this purpose is considered by most companies and executives
as the primary function of DWHs. This is because business'
data flows from the DWH to various departments for
reporting purposes; each department uses specific
dimensions or data marts from the DWH.

But DWHs are huge repositories of dimensionally modelled

data, and digging into these repositories for querying and
reporting is very hard and time consuming.

Therefore, an analytical application is required to process

queries that generate views of data in order to keep the
management up-to-date about the state of their business.

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Report on Data Cont.
To access knowledge from the DWH, businesses use online
analytical processing (OLAP) applications to meet their
reporting needs which supports decision making across

This is where OLAP applications assist the decision making by

enabling managers to view appropriate groups of data from
the DWH, and define the relations between these groups.

Accordingly, OLAP applications concern the conversion of raw

data from the DWH into meaningful knowledge that reflects
the dimensionality of the enterprise, in an understandable
manner that supports effective decision making.

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OLAP applications
The main concepts that drive OLAP applications are dimensions and
measures (facts), where dimensions are used to define subject
areas of different data groups, and measures are calculated to
provide a summarised view of the detailed data.

In other words, OLAP applications facilitate a multi-dimensional

view of data for users to access the features of DWHs.

The OLAP council define OLAP as: the category of software

technology that enables analysts, managers and executives to gain
insight into data through fast, consistent, interactive access to a
wide variety of possible views of information which has been
transformed from raw data to reflect the real dimensionality of the
enterprise as understood by the user (Ma et al. 2000).

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OLAP applications Cont.
There is a common agreement on the definition of
OLAP that was introduced by the OLAP council.
Nevertheless, there is still no agreement on a
conceptual model for DW and OLAP design that offers
both a graphical representation and a formal

In this matter, the multidimensional data cube is

considered to be the logical model that drives the
development of OLAP applications, but even though,
the operations that manipulate the data cube may
vary considerably in different data models. Therefore,
the operations of OLAP applications need special and
customized support (Chow et al. 2005).

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OLAP operations
This multi-dimensional view is provided by OLAP applications
through four main operations that aim to 1) adjust the level of
detail in data, 2) select data groups, 3) define data groups, and 4)
generating summarised data (facts) from detailed data

These operations are known as: roll-up (presentation of data at a

higher level of detail), drill down (presentation of data at a lower
level of detail), slice/dice (data selection and projection), and
pivoting (re-orienting the multi-dimensional view of data).

The operations of OLAP manipulate data from the multidimensional

data cube in order to generate business reports, this is where slice
and dice operations are used to extract data from the DWH, roll-up
and drill-down operations are used to view data in different levels,
and pivot (or rotate) operations are used to view data in different
dimensions (Lee et al. 2011).

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OLAP operations Cont.
These operations translate multi-dimensional analysis into
SQL statements and queries in fact tables; after that,
managers view the results in different forms of graphical
output (e.g. bar charts, pie charts, cross-tabulation tables)
(Shi et al. 2007). An example of a multidimensional query is
one that may allow the decision maker to retrieve data from
the data cube in order to discover the sales volume and tax
amount in the years 2005 and 2006 at the south west
territory. The query used in this example was demonstrated
by Lee et al. (2011) as:

SELECT {[Measures] _ [Sales Volume], [Measures] _ [Tax

Amount]} ON COLUMNS, {[Date] _ [Fiscal Time] _ [Fiscal
Year] _ &[2005], [Date] _ [Fiscal Time] _ [Fiscal Year] _
&[2006]} ON ROWS FROM [Sales Analysis] WHERE ([Sales
Territory] _ [Southwest])

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Data Cube

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Enhance Data Analysis
Data analysis is the process of systematically collecting, transforming, and analysing data
in order to present meaningful conclusions.

Businesses from different sectors perform data analysis to support decision making, where
it is the process of gathering, modelling, and transforming data in ways that generate
decisional information.

In view of that, a general description of data analysis is to turn data into information that
answer questions, hence, identifying questions is considered to be the prerequisite for
extracting useful information. Hence, the process of data analysis involves identifying
questions and then extracting information.

In this sense, data analysis is the process of examining data files and information to detect
and highlight transactions and patterns that show possible irregularity.

But data analysis is considered to be useful only if it results in an operational action. In

view of that, the purpose of performing data analysis is described as discovering what
needs changing and how to ensure that deficiencies are reduced.

To do so, decision makers will need to look beyond the departmental reports by looking at
numbers from different dimensions. Therefore, with the increasing data volumes in
business, traditional data analysis has become insufficient and more sophisticated data
analysis methods have become necessary.

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Enhance Data Analysis Cont.
DWHs equip decision makers with effective decision support capabilities to run reports and
perform data analysis by integrating data from different sources into a single repository.
As a result, the use of DWHs eliminates the need to visit multiple locations to collect and
analyse data; thus, the features of DWHs enhance data analysis in terms of reducing the
required time and computer power to access data and perform data analysis.

A data analysis course always takes place with a predefined objective in mind, which
identifies what is important in a problem, what counts and what doesnt count. In view of
that, using DWHs enhances the orientation of data analysis towards the objective or the
problem of the analysis.

Pinet and Schneider (2010) state: By combining data from different sources, it is possible
to show the correlations between objects dealt with, for example, to show the links
between a type of industrial installation and disease.

In this way, DWHs facilitate a multi-dimensional view of data which offers the ability to
compute aggregated data with lower levels of detail (facts) from subject specific data sets
(dimensions) with higher levels of detail; this in turn facilitates a subject oriented data
analysis, otherwise, the analysis may produce biased results and therefore erroneous

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Enhance Data Analysis Cont.
The operations of OLAP applications provide decision makers with
the ability to perform multidimensional queries to view data in
different dimensions and at different detail levels.

But in terms of data analysis, OLAP operations are only capable of

exploring the problem as it occurs for the analyst. And nowadays,
identifying hidden or unknown interesting patterns by exploiting
large data volumes has become a primary task in business.

As a result and in addition to OLAP operations, businesses use

knowledge discovery techniques to redefine problems in new and
unforeseen ways.

Accordingly, data mining tools have become promising technologies

for businesses to perform data analysis and discover novel, useful
and hidden knowledge from massive data sets.

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Data Mining
Data mining techniques use the data itself to discover
interesting patterns while OLAP operations depend on
predefined patterns, whereas in using OLAP operation
the analyst defines the interesting patterns and then
uses queries to verify or disprove them. While data
mining is a very useful technology that opens new
opportunities for data analysis.

This is where, data mining techniques are capable of

identifying the combination of causes that are liable
for causing a problem, and this could be used to
discover new knowledge about the business

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Data Mining Cont.
As a result, data mining techniques have
successfully infiltrated the business world,
giving solutions to problems that were
previously solved with traditional tools.

Reviewing the literature indicates that the

term data mining began to appear in
business intelligence literature during the
1990s and research from different areas has
characterised the term according to the
thoughts and the needs of the researcher.
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Definition of Data Mining
The common definition of data mining is discovering patterns in data; the following bullets
include some of the common definitions for data mining in order for us to get closer to a
general definition.

Analyzing data to assess known relationships as well as to find interesting patterns and
unknown relationships (Murray, et al. 2009).

Finding hidden information in databases (Kokotos and Linardatos, 2011).

"The search for valuable information in large volumes of data" (Chang, et al. 2010;
Hansen and Nelson, 2002; Aggarwal et al. 20012).

Discovering patterns in data by automatic or semi-automatic means (Lin, et al. 2011;

Plessas-Leonidis et al. 2010; Druzovec et al. 2005; Xu et al. 2007; Orfila et al. 2007).

Extracting information that resides implicitly in the data (Delgado et al. 2011).

The extraction of useful information from data to 1) identify unknown and potentially
interesting patterns (or item sets) hidden within data that is stored on databases, and 2)
to identify the associations between the interesting patterns (Yun et al. 2012).

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Definition of Data Mining Cont.
According to the mentioned definitions, a general definition of data mining
could be:

The process of extracting valuable information from large databases by

automatic or semi-automatic means to identify interesting patterns and the
associations between them.

Still, this definition describes the process of data mining but doesnt
characterise the functions of data mining to identify what is interesting. In
this matter, Maimon and Rokach (2005 p. 656) claim that what is
interesting is ultimately subjective; it is thus difficult to specify a formal
definition for the characteristics of interestingness when digging in large
data sets.

Therefore, the concept of data mining encompasses a range of different

techniques that identify interestingness in data by using different methods.

Most of these methods are relatively recent developments based on the

area of artificial intelligence, so they require limited human involvement.

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Some Data Mining Techniques
As discussed in previous slides, The available definitions of data
mining are specific to the different needs of different researchers;
this is because different researchers may define different sets of
techniques for data mining according to their needs. Some of the
data mining techniques are motioned in the following bullets as
defined by different researchers.

Clustering Link analysis

Deviation detection Disproportionality
Association Analyzing changes
Classification Sequence analysis
Data summarization Decision trees
Neural networks Genetic algorithms

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Types of Data Mining
The two types of data mining tools are: 1) data discovery tools, and
2) data verification tools.

Data discovery tools are used to help businesspeople identify

patterns within a large mass of data and data discovery tools are
used to find available data resources as well as screening and
filtering tools to assist them in deciding which available data will be
useful for analyses.

Data discovery techniques may include data visualisation, neural

networks, cluster analysis and factor analysis.

Although, data discovery tools work in a similar manner to

statistical tools, the data verification tools use more familiar
statistical techniques. Data verification tools are used to detect the
potential defects in formally represented knowledge.

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Types of Data Mining Cont.
The data verification tools calculate a predicted output for
each data analysis course, and then the predicted outputs are
compared to the actual outputs on a case-by-case basis.

Data verification tools may include regression analysis, t-

tests, correlations and forecasts.

As a result, data discovery and data verification tools differ in

terms of user participation. In this way, data discovery tools
are self-managed tools with more user-friendly settings that
reduce the participation of users in the analysis process.

In other words, the user of a data discovery tool just needs

to know how to run it to obtain satisfactory answers, while
the user of data verification tools must be a statistician to use
them effectively.
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Data wheelhouses are large data repositories that
are used to cleanse and consolidate historical
corporate data from several data resources.

OLAP applications facilitate the access to data in

DWHs through offering a multi-dimensional view
of data that enhance reporting on data using four
main operations (Roll-up, Drill down, Slice & Dice,
and Pivoting).

Data mining tools enhance the analysis of data

from DWHs in automatic or semi-automatic means
to find hidden knowledge in the DWH.
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The Concept of DSS
DSS - interactive computer-based systems,
which help decision makers utilize data and
models to solve unstructured problems
(Gorry and Scott-Morton, 1971)
Decision support systems couple the intellectual
resources of individuals with the capabilities of
the computer to improve the quality of
DS as an Umbrella Term
Evolution of DS into Business Intelligence
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A Framework for
Business Intelligence (BI)
BI is an evolution of decision support
concepts over time
Then: Executive Information System
Now: Everybodys Information System (BI)

BI systems are enhanced with additional

visualizations, alerts, and performance
measurement capabilities
The term BI emerged from industry

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Definition of BI
BI is an umbrella term that combines
architectures, tools, databases, analytical tools,
applications, and methodologies
BI is a content-free expression, so it means
different things to different people
BI's major objective is to enable easy access to
data (and models) to provide business
managers with the ability to conduct analysis
BI helps transform data, to information (and
knowledge), to decisions, and finally to action
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A Brief History of BI
The term BI was coined by the Gartner
Group in the mid-1990s
However, the concept is much older
1970s - MIS reporting - static/periodic reports
1980s - Executive Information Systems (EIS)
1990s - OLAP, dynamic, multidimensional, ad-hoc
reporting -> coining of the term BI
2010s - Inclusion of AI and Data/Text Mining
capabilities; Web-based Portals/Dashboards, Big
Data, Social Media, Analytics
2020s - yet to be seen
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The Evolution of BI Capabilities

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The Architecture of BI
A BI system has four major components
a data warehouse, with its source data
business analytics, a collection of tools for
manipulating, mining, and analyzing the data
in the data warehouse
business performance management (BPM) for
monitoring and analyzing performance
a user interface (e.g., dashboard)

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A High-Level Architecture of BI

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Business Value of BI Analytical
Customer segmentation
Propensity to buy
Customer profitability
Fraud detection
Customer attrition
Channel optimization

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Application Case 1.1
Sabre Helps Its Clients Through
Dashboards and Analytics

Questions for Discussion

1. What is traditional reporting? How is it used in
the organization?
2. How can analytics be used to transform the
traditional reporting?
3. How can interactive reporting assist
organizations in decision making?

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A Multimedia Exercise
in Business Intelligence
Teradata University Network (TUN)

BSI Videos (Business Scenario


Also look for other BSI Videos at TUN

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DSS-BI Connections
Similarities and differences?
Similar architectures, data focus,
Direct vs. indirect support
Different target audiences
Commercially available systems versus in-
house development of solutions
Origination Industry vs. Academia
So, is DSS = BI ?
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Analytics Overview
Something new or just a new name for
A Simple Taxonomy of Analytics
(proposed by INFORMS)
Descriptive Analytics
Predictive Analytics
Prescriptive Analytics

Analytics or Data Science?

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Analytics Overview

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Application Case 1.2
Eliminating Inefficiencies at Seattle
Childrens Hospital
Questions for Discussion
1. Who are the users of the tool?
2. What is a dashboard?
3. How does visualization help in decision
4. What are the significant results achieved by
the use of Tableau?
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Application Case 1.3
Analysis at the Speed of Thought

Questions for Discussion

1. What are the desired functionalities of
a reporting tool?
2. What advantages were derived by
using a reporting tool in the case?

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Application Case 1.4
Moneyball: Analytics in Sports and Movies

Questions for Discussion

1. How is predictive analytics applied in
2. What is the difference between
objective and subjective approaches in
decision making?

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Application Case 1.5
Analyzing Athletic Injuries
Questions for Discussion
1. What types of analytics are applied in the
injury analysis?
2. How do visualizations aid in understanding
the data and delivering insights into the
3. What is a classification problem?

4. What can be derived by performing

sequence analysis?
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Application Case 1.6
Industrial and Commercial Bank of China
(ICBC) Employs Models to Reconfigure Its
Branch Networks
Questions for Discussion
1. How can analytical techniques help organizations to
retain competitive advantage?
2. How can descriptive and predictive analytics help in
pursuing prescriptive analytics?
3. What kind of prescriptive analytic techniques are
employed in the case study?
4. Are the prescriptive models once built good forever?

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Introduction to Big Data Analytics
Big Data?
Not just big!



More of Big Data and related

analytics tools and techniques are
covered in Chapter 13.
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Application Case 1.7
Gilt Groupes Flash Sales Streamlined by
Big Data Analytics

Questions for Discussion

1. What makes this case study an
example of Big Data analytics?
2. What types of decisions does Gilt
Groupe have to make?

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End-of-Chapter Application Case
Nationwide Insurance Used BI to
Enhance Customer Service
Questions for Discussion
1. Why did Nationwide need an enterprise-wide data
2. How did integrated data drive the business value?
3. What forms of analytics are employed at
4. With integrated data available in an enterprise
data warehouse, what other applications could
Nationwide potentially develop?
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Plan of the Book
Part I - Decision Making and Analytics: An Overview
(Chapters 1 & 2)
Part II - Descriptive Analytics
(Chapters 3 & 4)
Part III - Predictive Analytics
Chapters 5 - 8
Part IV - Prescriptive Analytics
Chapter 9 - 12
Part V - Big Data and Future Directions for Business
Chapters 13 & 14
PLUS - Online Supplements

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End of the Chapter

Questions / Comments

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