UNIT 2

Business Intelligence
 Business intelligence refers to a collection
of mathematical models and analysis
methods that utilize data to produce
valuable information and insight for making
important decisions.
Business Intelligence is the talk of a new
changing and growing world that can be
defined as a set of concepts and
methodologies to improve decision-making
in business through the use of facts and
fact-based systems.
 The Goal of Business Intelligence is to

improve decision-making in business ideas

and analysis.
Components of BI
 Main Components of Business
Intelligence System:
 Data Source
 Data Mart / Data Warehouse
 Data Exploration
 Data Mining
 Optimization
 Decisions
 .Data Source:
 To begin, the first step is gathering and

consolidating data from an array of primary

and secondary sources.
 These sources vary in origin and format,

consisting mainly of operational system

data but also potentially containing
unstructured documents like emails and
data from external providers.
 Data Mart / Data Warehouse:
 Through the utilization of extraction and

transformation tools, also known as extract,

transform, load (ETL), data is acquired from
various sources and saved in databases
designed specifically for business
intelligence analysis.
 These databases, commonly known as data

warehouses and data marts, serve as a

centralized location for the gathered data.
 Data exploration:

 The third level of the pyramid offers essential resources for

conducting a passive analysis in business intelligence.
 These resources include query and reporting systems,
along with statistical methods.

 For example, a sales manager might observe a decrease in

revenues in a particular geographic region for a specific
demographic of customers.

 In response, she could utilize extraction and visualization

tools to confirm her hypothesis and then use statistical
testing to validate her findings based on the data.
 Data Mining:
 The fourth level, known as active business

intelligence methodologies, focuses on

extracting valuable information and
knowledge from data.
 Optimization:
 As you ascend the pyramid, you’ll

encounter optimization models that

empower you to choose the most optimal
course of action among various alternatives,
which can often be quite extensive or even
endless.
 These models have also been effectively

incorporated in marketing and logistics.

 Decisions:
 At last, the pinnacle of the pyramid reflects

the ultimate decision made and put into

action, serving as the logical end to the
decision-making process
BI Dimensions
 In BI, dimensions are the descriptive
attributes or characteristics of business
data, which help in organizing, segmenting,
and analyzing data across multiple
perspectives.
 They are used to categorize facts (which

are the numerical data) in ways that make it

easier to understand and draw insights.
 Dimensions are typically part of a data

warehouse schema, often in a star

schema or snowflake schema.
 Dimensions are often linked to facts
(measurable data points) in a star schema
or snowflake schema:
 Fact Table: Contains numerical data (e.g.,

sales revenue, number of products sold)

and references to dimension tables.
 Dimension Table: Contains descriptive

attributes that are linked to the facts. Each

dimension has a key that corresponds to a
foreign key in the fact table.
Information Hirearchy
The Information Hierarchy graph below
organizes data, information, knowledge,
and wisdom in layers, with an increasing
level of abstraction and addition of
knowledge, starting from the bottom-most
data layer.
 Various analytical systems help to

transform content from one layer to a

higher one so as to be better
comprehended by analysts.
 Data Layer
 Data are transactional, physical, and isolated records of activity (e.g., business
transactions, customer interactions, facts or figures obtained from experiments or
surveys).
 Data are, for example, numbers, texts, images, videos, and sounds, in a form that is
suitable for storage or processing by a computer. Data are the most basic level and
by themselves have little purpose and meaning.

 Information Layer
 Information is the semantic interpretation of data, and may represent relationships
among data with meaning and purpose (e.g., a customer called for a specific type of
support). Information therefore has been organized and presented in a systematic
fashion to clarify the underlying meaning.

 Knowledge Layer
 Knowledge is the general awareness or possession of information, facts, ideas, truths,
or principles. Knowledge is generally personal and subjective. Knowledge can also be
extracted from underlying information by applying some form of induction.

 Wisdom Layer
 Wisdom is the knowledge of what is true or right coupled with just judgment as to
action. Wisdom requires a specific kind of knowledge and experience to make the
right decisions and judgments in actions."
BI Life cycle
1.Analyze the Business requirements:
 The user identifies the business

requirements in order to determine the type

of analysis that the user then needs to
perform.
 Identifying the requirements, let the user

decides the further action to be performed.

 For example, any retail company can

analyse the sales data to figure out the

products that are top-selling and the
products that least sell.
 Design the Physical Schema
 Once the logical model is prepared the next

step is to design the physical schema using

the data model.
 The physical schema describes the

structure and the content of the data

warehouse.
 For example, in any retail company,

physical schema consists of sales-related

facts, product-customer relationships, and
the sales transactions
Once the logical and physical schema is
designed, the next step is to build the data
warehouse.
 The design of a data warehouse depends

on the physical and logical schema. After

the design of the data warehouse, the data
and the content from the source system are
loaded into the data warehouse for further
steps.
 For example, for the retail system,
designing the data warehouse consists of
developing a database that would store the
details of customers, products, and other
requirements for the business.
 Create the Project Structure
(Metadata)
 The next step after designing the data

warehouse is to create a project structure

also known as metadata.
 With the help of this created project

structure, the mapping of the tables and

data in the data warehouse is easier.
 Creating the project structure describes the

further steps and types that need to be

implemented.
For example, The project structure of the
retail company consists of the attributes of
the data, the design, and the working flow
of the system.
 This project structure or metadata gives a

brief idea about the working of the system.

BI Objects:
 The next step is to develop the BI objects

such as metrics, attributes, dashboards,

reports, and facts.
 This step consists of developing the reports

and dashboards that can be used to analyze

the data in the data warehouse.

For example, the retail company can develop

reports and statistics charts that can describe
the profit and loss margins.
 The last step is to administer and maintain
the project continuously as it undergoes
changes.
 The project needs to be monitored to

maintain the changes, security, and

performance of the system.
 For example, the retail company needs to

monitor the reports and statistics

accordingly to increase the profit of the
sales.
Business analytics
Examples of Descriptive
analytics
 Performance of abc shampoo in year 2020
 Dash boards
 reports
Examples of predictive
analytics
 Sale of abc shampoo in year 2022
 Machine learning
 Deep learning
 AI
Examples of prescriptive
analytics
 Suggestions and possible result
 Self driving cars
 (predictive+prescriptive)
Components of BA
Data for Business
Intelligence
 The data used in BI can come from various
sources, and different types of data may be
required depending on the goals of the
analysis.
 Here's an overview of common data sources

and types of data used in Business

Intelligence:
 Structured Data

 Transactional Data: Information about transactions such as

sales, purchases, payments, etc.
◦ Example: Sales records, order data.

 Customer Data: Data related to customers, including

demographics, preferences, and purchase history.
◦ Example: CRM (Customer Relationship Management) data.

 Financial Data: Data that helps in understanding the

financial health of the organization.
◦ Example: Balance sheets, income statements, cash flow reports.

 Product Data: Information about the products or services

offered by the business.
◦ Example: Inventory data, product sales, pricing, SKU information.
 2. Unstructured Data

 Textual Data: Email communications, customer feedback, social media

comments.

 Documents: PDFs, reports, contracts.

 Images and Video: Media related to customer feedback, advertisements, or
product demonstrations.

3. External Data
 Market Trends: Industry analysis, competitor data, and external economic

conditions.

 Social Media Data: Insights from platforms like Facebook, Twitter, LinkedIn,
and others, which can be analysed for customer sentiment.
 Geospatial Data: Location-based data, often useful for businesses with
physical locations or delivery systems.

 Third-Party Data: Data from market research firms, partners, or public

databases.
 4. Real-Time Data
 Data generated continuously in real-time from
sources like website interactions, point-of-sale
systems, or sensor-based data (IoT).
 Example: Website traffic, sensor data from
production machinery, or customer support data.

5.Historical Data
 Long-term data about business performance,

trends, and other patterns over time.

 Example: Quarterly sales data, year-on-year

revenue comparisons, historical customer

behavior.
 6. Key Performance Indicators (KPIs)
 Metrics like customer acquisition cost,

lifetime value, churn rate, revenue per user,

etc., are essential for understanding
business performance.
Considerations for BI data
 Data Quality: The data must be accurate,
clean, and consistent for BI to produce
reliable insights.
 Data Security: Sensitive information needs

to be protected through encryption and

access controls.
 Data Governance: Ensuring that data is

used responsibly, with clear ownership and

oversight.