**This is an updated post**
Business intelligence, or BI, is a term that is increasingly used in business. It can benefit both large and small businesses.
Generally speaking, larger business have more scope to invest in implementing effective BI solutions; however, in 2018 research revealed that small businesses with up to 100 employees had the highest rate of BI penetration.¹
In 2020, 54% of businesses now claim that BI is ‘critical or very important’ to their business.²
But what does the term “business intelligence” mean? And how can it benefit businesses and even drive them one step ahead of their competitors? Read this article to find out.
What is meant by “business intelligence”?
Business intelligence is the technology-driven process of storing, gathering and analysing vast amounts of raw data. This can be from both internal and external sources. Data is then transformed into insights and presented in a digestible format that is useful to managers, such as in a report or via online dashboards with data visualisations. This enables much more informed business decisions to be made using the data.
How do companies use business intelligence?
Businesses collect and store huge amounts of data, such as from email signup forms, via social media marketing, from sales, purchased data and much more. There are several problems, though. Data may be kept in simple spreadsheets as silos, so only certain people can benefit from it. Managers may struggle with data overload and be unsure what to do with it, resulting in data being left unused. This unprocessed data can be meaningless in its current state, whilst also being costly to store. Over time, this data will also become out-of-date and of little value to the business.
An example of business intelligence could involve the following:
Let’s say there is a successful online store that sells clothes and delivers across Australia. This company, ClickShop, is using an Excel sheet to collate data from various sources. But constantly downloading, collating and analysing this data is massively time-consuming and does not allow the ClickShop marketing team to react quickly enough to customer behaviours.
Going from a cumbersome Excel sheet to a centralised business intelligence solution makes much more sense for ClickShop. It saves the marketing team hours that would otherwise be wasted converting and analysing data, and allows them to be much more flexible and reactive with their marketing strategy.
How can business intelligence benefit businesses?
In the above example, we showed you that some businesses might use spreadsheets to manually sort through data. But this doesn’t allow them to manipulate and drill down the data in the same way business intelligence tools can. By using business intelligence tools and converting the data into a meaningful format, it can provide huge benefits for the business. Here are five important benefits to consider:
Make more informed decisions
Rather than guessing, assuming or going with your gut feeling, effective business intelligence can enable managers to make more informed, data-driven decisions. These decisions can be made with far more confidence, too, and can help reduce the level of risk. Decisions can also be made far quicker than before, which saves valuable time and money.
Understand customer needs
Businesses can collect data on their customers, such as who they are, what they like, what they don’t like, what influences their purchasing decisions, and much more. This data can enable businesses to see trends and understand customer needs more. These insights can help you provide the right services, to the right people, at the right time and in the right place. This can enable you to stay one step ahead of the competition too.
Cut costs and remove inefficient spending
Detailed reports can help you see exactly where you’re spending money and can compare this to your budgeted costs. This can enable you to decide where adjustments need to be made to help cut wasteful spending and reduce inefficient costs in the future.
Spot inefficient business processes
Business intelligence will help you to see meaningful data on business performance, productivity, projects and much more. This is a good opportunity to see the bigger picture and spot areas where things may not be performing as well as expected or hoped. You can then use these insights to make changes and improve business processes for the better.
Identify new business opportunities
Most managers may feel they know how the business is performing, but with business intelligence, you may see trends that you didn’t even realise existed. This can help you see new unidentified opportunities for the future which can help to give your business an increased competitive advantage.
What skills are needed for business intelligence?
An increasing number of businesses are investing in business intelligence. Not only do they need the systems in place to support their data and business intelligence, but they also need people to help convert the data into something meaningful. This requires skills such as analytics, data mining and reporting.
And because business intelligence deals with collecting large amounts of data, this means that companies need to protect themselves and their customers’ information from cybercriminals.
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Source: *1. Forbes. Columbus, Louis. June 8, 2018. ‘The State Of Business Intelligence, 2018‘.
Source: *2. Forbes. Columbus, Louis. April 12, 2020. ‘The State Of Business Intelligence, 2018‘.