Internet-Enabled Business Intelligence
This chapter is from the book
This chapter is from the book
This chapter is from the book
If you're good at finding the one right answer to life's multiple-choice questions, you're smart. But there's more to being intelligent—a creative aspect, whereby you invent something new “on the fly.” Indeed, various answers occur to your brain, some better than others.
Every time we contemplate the leftovers in the refrigerator, trying to figure out what else needs to be fetched from the grocery store before fixing dinner, we're exercising an aspect of intelligence not seen in even the smartest ape. The best chefs surprise us with interesting combinations of ingredients, things that we would never think “went together.”
—William H. Calvin
How Brains Think1
In Chapter 1, we learned that Internet Enabled Business Intelligence (IEBI) is a solution. We also noted that each of the elements within a solution is changed by the other. In Chapter 2, we discussed the rise of the Internet and the environment it has created. As part of this examination, we saw how the organization has evolved to compete in this changed world. This is only part of the story, two ingredients in our solution. The third is Business Intelligence (BI).
My youngest daughter and I are part of a father and daughter program that entails monthly weekend campouts. In addition to providing some one-on-one time with my daughter, the program gives me the opportunity to spend time with other fathers of young daughters. Typically, once we get all the girls tucked away, the dads sit by the fire and solve the world's most pressing problems. In one of these discussions, one of the dads noted that intelligent people, in his experience, are not always the most successful. He described how intelligent people at his company often lacked common sense. Although they had book learning, they lacked creativity. My friend had never read William Calvin.
Many misunderstand the true nature of intelligence. It would be pointless for me to drone on about intelligence unless we first understand the nature of intelligence. We begin this chapter, therefore, by exploring intelligence and examining how intelligence relates to business.
Far too often when people hear “BI,” they think “data warehouse.” The data warehouse is just one part of the information systems that support BI. As the chapter progresses, we will find that the data warehouse and associated information systems really are implementation details of BI. They are not BI in and of themselves.
This chapter describes BI as an iterative loop composed of Extraction, Transformation, and Loading (ETL) processes, the data warehouse, decision support systems, BI applications, and decision makers. We will examine each component of this loop in detail. Some of you may recognize the discussion on data warehousing from my previous book, Object-Oriented Data Warehouse Design.
3.1 Intelligence
Let's start by talking about thinking. That's what BI is all about: thinking. In their book The Ape at the Brink of the Human Mind, Sue Savage-Rumbaugh and Roger Lewin discuss how oranisms with a complex nervous system are all faced with a common question. They describe how in each moment of life they must decide what to do in order to survive. From the lowliest earthworm to man, we are all faced with one common question: What shall I do next? We find intelligence in how an organism finds an answer to this question.
Organisms and organizations are very similar. An organism is a body that is composed of organs that work together towards a common goal: staying alive. An organization is made of people or groups of people who work together towards a common goal: staying in business. This is a common metaphor. The apostle Paul described the church as a body in which each member has its own particular function. We can conclude, therefore, that in the same way we find intelligence in how an organism decides what to do next, we find intelligence in an organization by how it defines what to do next.
In 1575 the Spanish physician Jaun Huarte defined intelligence as the ability to learn, to exercise judgment, and to be imaginative. We can extend this definition of intelligence as the ability to think abstractly, to be able to organize volumes of information, and then to reason. When we discuss BI, therefore, we are talking about thinking abstractly about the organization, reasoning about the business, and organizing large quantities of information about the business environment. The development of a strategy requires that the decision maker take a set of facts and create something new. This is the very essence of BI. The sheer size of most organizations, however, requires that there be an information infrastructure present to facilitate this level of intelligent thought.
The central nervous system of the organism facilitates intelligence. The central nervous system of an organization is the information infrastructure. Consider the similarities between the two. The central nervous system receives information from the outside world and transmits that information to the rest of the organism. The brain processes that information and directs the behavior to the rest of the organism. In the organization, the information infrastructure receives data from the outside world as transactions. Some server receives the transactions and takes appropriate action. If the transaction is a purchase, orders are filled and customers are billed. The presence of a central nervous system, however, does not create intelligence.
The human brain is composed of three distinct concentric layers. The innermost layer is the oldest; it controls the automatic biological functions. These are the things that we do not think about, such as digesting, breathing, and sleeping. Often, this innermost layer is referred to as the reptilian brain. The second layer controls the emotions; this is the limbic system. The third layer, the new brain, is where thinking is done. This is the cerebral cortex. The cerebral cortex carries out such functions as observing, organizing, and responding.
In scanning the business world, we see organizational intelligence has evolved to varying levels. Organizations that have only operational systems are at the lowest rung of the evolutionary ladder; they function with only a reptilian brain. The operational system receives a stimulus and passes that stimulus on to other parts of the organization. It signals when there is pain or pleasure. For example, when stock levels fall too low, it registers hunger, and the organization reacts by ordering more stock. When sales exceed expectations, it registers pleasure, and the payroll department issues bonus checks. Organizations with purely operational systems are unable to make meaningful information out of the volumes of data locked within the operational systems.
Some companies have evolved to the level of the limbic system. These companies are often worse off than those at the reptilian level. Limbic companies are continually buffeted by market forces, reacting and overreacting to events in the marketplace. Earnings drop a cent per share and a thousand people lose their jobs. Six months later, a new promising market opens and a hiring frenzy commences. Organizations in this mode are emotional companies. Strategy cannot exist in this environment. Rather than shaping their market, the market shapes them. They optimize the stock price often at the expense of the long-term health of the company. The information systems of these organizations provide some analytical capabilities, but it is only a snapshot of the current environment. It is not within the context of what has occurred in the past or projections of the future.
The new brain, the cerebral cortex, is the thinking brain. This is where the capacity to think abstractly exists. It is in the cerebral cortex that reasoning occurs and the vast quantities of information are organized into meaningful systems. The data warehouse is the part of the information infrastructure that transforms the volumes of information into something meaningful. Within the warehouse is a detailed history of past experiences. Decision Support System (DSS) tools allow the strategist to find patterns in these experiences for comparison to the current situation. In this way, the strategist can better predict the future.
So, why does an organization need BI? In order to survive, the organization must develop a winning strategy. In order to develop a winning strategy, one must be able to anticipate future conditions. Understanding the past is the best way to be able to predict the future. For this reason, information is the meat upon which a strategy feeds. It is only through the eyeglass of the DSS that the decision maker can look out on the organization's environment and see behaviors amidst the havoc.