You and your organization need more than just data and information. You need business intelligence (BI) —collective, information about your customers, your competitors, your business partners, your competitive environment, and your own internal operations—that gives you the ability to make effective, important, and often strategic business decisions.
Business intelligence enables your organization to extract the true meaning of information so that you can take creative and powerful steps to ensure a competitive advantage. Many such actions by your organization support some or all of the following initiatives—customer relationship management, supply chain management, and collaboration, to name just a few.
Of course, to create business intelligence you need data and information (don’t forget the distinction but we’ll defer to the common practice of referring to both as just information). Business intelligence doesn’t just magically appear. You must first gather and organize all your data and information. Then, you have to have the right IT tools to define and analyze various relationships within the information.
In short, knowledge workers such as you use IT tools to create business intelligence from information. The technology, by itself, won’t do it for you. However, technology such as databases, database management systems, data warehouses, and data-mining tools can definitely help you build and use business intelligence.
As you begin working with these IT tools, you’ll be performing the two types of information processing: online transaction processing and online analytical processing. Online transaction processing (OLTP) is the gathering of input information, processing that information, and updating existing information to reflect the gathered and processed information.
Databases and DBMSs are the technology tools that directly support OLTP. Databases that support OLTP are most often referred to as operational databases. Inside these operational databases is valuable information that forms the basis for business intelligence.
You can also query operational databases to gather basic forms of business intelligence, such as how many products individually sold over $10,000 last month and how much money was spent last month on radio advertising.
While the results of these queries may be helpful, you really need to combine product and advertising information (with several other types of information including customer demographics) to perform online analytical processing.
Online analytical processing (OLAP)
OLAP is the manipulation of information to support decision making. OLAP within a data warehouse is a must, one that supports customer relationship management activities, cross-selling strategies, and marketing campaigns. By creating a data warehouse with customer information and marketing campaign information, agents can view all the products a given customer has purchased and more accurately determine cross-selling opportunities and what marketing campaigns a given customer is likely to respond to.
A data warehouse is, in fact, a special form of a database that contains information gathered from operational databases for the purpose of supporting decision-making tasks. When you build a data warehouse and use data-mining tools to manipulate the data warehouse’s information, your single goal is to create business intelligence. So, data warehouses support only OLAP; they do not at all support OLTP.
You can perform more in-depth queries to gather business intelligence from a data warehouse than you can with a single database. For example, “What new advertising strategies need to be undertaken to reach our customers who can afford a high-priced product?” is a query that would require information from multiple databases.
Data warehouses better support creating that type of business intelligence than do databases. Databases today are the foundation for organizing and managing information, and database management systems provide the tools you use to work with a database.
To say the least, databases are the “heart and soul” of any organization because they organize and manage all of the organization’s information resources. Data warehouses are relatively new technologies that help you organize and manage business intelligence, and data-mining tools help you extract that vitally important business intelligence.
For more information and insights, check out this article.