Using business intelligence for competitive advantage
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The document discusses using business intelligence (BI) for competitive advantage. It describes BI as processed information of interest to management about the present and future business environment. The business intelligence process (BIP) consists of collecting data, setting objectives, defining functions and resources, and directing data collection. The BIP is a cyclical process that allows companies to track competitors, analyze markets, develop new products, and monitor trends to gain a competitive advantage.
Using business intelligence for competitive advantage
- 1. Using Business Intelligence for Competitive Advantage by Stefano M. de’ Ross Introduction The Japanese are masters of business intelligence, and some American companies were founded on the eyes and ear's culture. Business intelligence is rapidly becoming a major source to achieve competitive advantage. This innovation is a legitimate business function, and businesses over time have collected data about a whole range of issues - mostly about their competitors. According to Greene (1966) business intelligence is processed information of interest to management, about the present and future environment in which the business is operating. The latitude of business intelligence can be as wide or narrow as the corporation determines, with needs balanced against resources. Stoner et al (1985) suggest that corporate goals and existing strategies provide a framework for analysing its resources. This analysis is necessary to identify competitive advantages and disadvantages. Competitive advantages and disadvantages are the strengths and weaknesses of a corporation relative to its present and likely competitors . The overall business intelligence concept is dependent on a process to manage information, using a methodology that integrates with the corporation's functionality and automation. Gilad and Gilad (1988) believe that with structured Business Intelligence programs corporations are better able to: • track current and potential competitors, • analyse markets, • develop profitable new products, • determine likely candidates for acquisition or merger, • monitor technological developments, and keep abreast of a broad range of political, economic, social and legislative trends with significant impact on a company's future. The Process This Business Intelligence Process (BIP) is equally suited to any corporate application of any description. Its base function is for general and specific information handling requirements, and provides both focus and direction to support and enhance all forms of commercial processes. Businesses using a business intelligence methodology are able to develop intelligence based information systems, capable of serving the purpose of inquiry and analysis to gain a competitive advantage. The methodology consists of a number of functions performed in a logical flowing manner, and its success is dependent on each function being carried out correctly. The BIP applies techniques that allow a transition from the conventional practice of reaction to a more proactive application. The process is a cyclical pattern and works in an iterative fashion. At any time during the methodology there is scope to return to the beginning or subsequent phase, and repeat the process to identify information deficiencies. For instance, data collection will be a component that requires constant examination, therefore utilising the iterative philosophy of the model. It is difficult at the outset to identify and collect every data requirement due to: • data being such a dynamic commodity; • the information universe is a continuous flow;
- 2. • a change or progress in direction; • availability of data during the phases of a particular project. Other data requirements will become obvious as a project develops. With the iterative functionality in place, it is possible to continually return to the direction or data collection component. Therefore sourcing the data as it is identified to maintain control until the completion of the project. Data collection is a continual application and must take into consideration, what is and what is not available, and what is known at the time of the initial gathering. The overall aim is to identify and collect data requirements as the project proceeds, and comprehend all the information deficiencies before its completion. Set Objectives Fundamentally, it is important to focus attention on the activities to be undertaken, to establish guidelines for the way ahead, and to ensure that everyone concerned knows clearly what is going on within the process. Coventry (1984) states that objectives impart direction, purpose and meaning to the operation. It is necessary to ensure that people know exactly what needs to be done and how to go about it. The setting of objectives supports the BIP with a number of important functions, guidance for a coordinated effort of individuals, establishes expected performance standards, and provides the means for evaluation and control of the process. Mukhi and Potts (1984) believe that objectives are the first link in any control sequence. These objectives are a major force affecting the primary components of the system, and need to be expressed properly to achieve regulated and controlled relationships between the workers and the functions. Define Functions Activities, such as information management, must be broken down into functions. One of the most durable contributions of administrative theorists is the study of management as a set of functions. Fayol was an early advocate of this approach and believes that the best way to understand an organisation is to study its administrative apparatus - management. The following points indicate the essential elements required to define resources to benefit functions and activities: • understand the objectives of the paradigm; • plan the resource needs to carry out the process; • staffing needs; and • establish effective relationships. Define Resources As a data control process, the BIP obligates collective association of all the components in the paradigm. Definitive resource acquisition and application will maintain focus and yield a successful entry to the first of the cyclical components - direction. Cooperation and teamwork linking functions and resources are an integral part of the control mechanisms for the BIP. This control requires a number of variables and has both analytical and human behavioural dimensions, of which the behavioural usually causes the most problems. Schuler et al (1992) state that without effective planning, an organisation may find itself without the people to run it.
- 3. Organisations can no longer assume that the right number of appropriately qualified people will be available. Schuler et al (1992) also declared that companies are increasingly forced to think about using human resource planning to gain a competitive advantage. Direction With the quantity of data flowing through the information universe, it is essential that a focused direction continues throughout the business intelligence paradigm. This component is dependent on the identification of certain factors and this operating segment of the business intelligence cycle extends to and demands a rigorous collection process. This can only be achieved with properly constructed objectives dictating the relevancy of the information. Subsequently, a measurable understanding of what is relevant can be monitored by the following criteria: • defining the data required; • identifying the data type, • identifying the essential elements of the data; and • utilising the iterative process. Before proceeding to the data collection phase, adequate controls need to be in place to readily define and identify the relevant documents. Organisations need to adhere to the following control mechanisms to acquire clear goals to protect data integrity and worth: • only data falling within the scope and aims should be collected and maintained; • evaluation should be conducted at an early stage to test data for its worth; • constant re-assessment of the information path; and • sustain the iterative process to establish credible data collection processes.