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The fundamentals of business intelligence - what it does and why it's so essential
Published on January 31, 2017 52 min
Other Talks in the Series: Business Intelligence, Big Data, and Applications in Industry
Hi. I'm Dr. Michael McDonald. I'm an University Professor of Finance and President of the consulting firm Morning Investments, LLC. Today, I'd like to talk to you about "The Fundamentals of Business Intelligence". In particular, we're going to be talking about business intelligence from a high level. What is business intelligence? And why is it so essential for you in corporate America?
Module 1: What is business intelligence?
Let's start by talking about decision making in businesses. So there's two ways traditionally of making different decisions in businesses. Whenever you're faced with a tough conundrum, you have two choices. First, you're gonna rely on intuition or guessing, or gut-feeling, call it whatever you'd like. But essentially, you're relying on the native ability of an individual to figure out a situation in the absence of any external information or data. The second way to look at making a decision is through data or past experience. Now, traditionally many businesses make decisions based on a combination of these two things. But at the end of the day, it's generally going to come down either on the intuition side or the data and past experience side. Most businesses tend to lean one way or another. The problem, historically has been, for most businesses, they either don't have past experience with many of their toughest decisions or they don't have the data. And so they're forced to rely on intuition, guessing, gut-feelings, things like that. For instance, on a recent engagement I was on, I was dealing with a local brewery. And they were interested in potentially expanding through a new deal with a new distributor for their product. They would have liked to figure out what the profit impact was going to be on their business, but they lacked the data to go through and analyze that question. So as a result, they ended up having to make the decision based primarily on the intuition or the gut-feeling of the president. Better data could have helped to address this question, could have helped them to decide on what way to go with the decision in a more substantive way. Now both these methods have been around for as long as business has. Each one has its own adherents. Not everyone is going to believe in intuition or gut-feeling. They're going to tend to be a little bit more scientific. They're going to value data and past experience. Where other people are going to say that they want to trust their gut and they're not necessarily going to be interested in the data. After all, there is an old saying that if you pound the data hard enough, it will tell you whatever you want to hear. Business intelligence is an opportunity to move beyond either of these two decision making processes on their own. And instead focus on combining the two, and in particular, enhancing the data and past experience method. By using business intelligence, we're able to go through and look at data in a more meaningful way without, at the same time, forcing the data to tell us what we want. We're instead able to look at the data dispassionately, objectively, and in a scientific fashion to make better decisions for business.