Chapter 11 Business Intelligence and Knowledge Management

Question 1

Data warehouse

Answer 1

• a large database containing historical transactions and other data
• Data warehouses are useless without software tools to process the data into meaningful information

Question 2

BI

Answer 2

Business intelligence (BI): information gleaned with information analysis tools
   - Also called business analytics

• BI software is becoming easier to use
  Intelligent interfaces accept queries in free form
• BI software is integrated into Microsoft’s SQL Server database software

Question 3

Data mining

Answer 3

The process of selecting, exploring, and modeling large amounts of data
- Used to discover relationships that can support decision making

• Data-mining tools may use complex statistical analysis applications
• Data-mining queries are more complex than traditional queries
• Data-warehousing techniques and data-mining tools facilitate the prediction of future outcomes
• Data mining techniques are applied to various fields, including marketing, fraud detection, and targeted marketing to individuals
• Predicting customer behavior
  
  • Banking: help find profitable customers, detect patterns of fraud, and predict bankruptcies
  • Mobile phone services vendors: help determine factors that affect customer loyalty
• Customer loyalty programs ensure a steady flow of customer data into data warehouses
• Many industries utilize loyalty programs, e.g., frequent-flier programs and consumer clubs
  
  • Huge amounts of data about customers amassed
• UPS’ Customer Intelligence Group
  
  • Analyzes customer behavior
  • Predicts customer defections so that a salesperson can intervene to resolve problems
• Identifying profitable customer groups
  
  • Financial institutions dismiss high-risk customers
  • Companies attempt to define narrow groups of potentially profitable customers
• Utilizing loyalty programs
  
  • Companies develop customized email newsletters targeted to individual customers
  • Targeted special offers and partner specials provided are tailored to each customer
• Inferring demographics
  
  • Predict what customers are likely to purchase in the future
  • Amazon.com
    
    • Determines a customer’s age range based on his or her purchase history
    • Attempts to determine customer’s gender
    • Advertises for appropriate age groups based on the inferred customer demographics
    • Infers holiday gift selections

Question 4

Objectives of data mining

Answer 4

• Sequence or path analysis: finding patterns where one event leads to another
• Classification: finding whether certain facts fall into predefined groups
• Clustering: finding groups of related facts not previously known
• Forecasting: discovering patterns that can lead to reasonable predictions

Question 5

Identifying profitable customer groups

Answer 5

• Financial institutions dismiss high-risk customers

- Companies attempt to define narrow groups of potentially profitable customers

Question 6

Utilizing loyalty programs

Answer 6

• Companies develop customized email newsletters targeted to individual customers
  
  • Targeted special offers and

Question 7

nferring demographics

Answer 7

• Predict what customers are likely to purchase in the future
  
  • Amazon.com
    
    • Determines a customer’s age range based on his or her purchase history
    • Attempts to determine customer’s gender
    • Advertises for appropriate age groups based on the inferred customer demographics
    • Infers holiday gift selections

Question 8

OLAP

Answer 8

Online analytical processing (OLAP): a type of application used to exploit data warehouses

• Provides extremely fast response times
• Allows a user to view multiple combinations of two dimensions by rotating virtual “cubes” of information
• Application composes tables “on the fly” based on the desired relationships
• Can use relational or dimensional databases designed for OLAP applications
• OLAP applications are usually installed on a special server
• OLAP applications are faster than relational applications
• increasingly used by corporations to gain efficiencies
  
  • Office Depot used OLAP on a data warehouse to determine cross-selling strategies
  • Ben & Jerry’s tracks the popularity of ice cream flavors

Question 9

Drilling down

Answer 9

the process of starting with broad information and then retrieving more specific information as numbers or percentages

Question 10

Dimensional database

Answer 10

data is organized into tables showing information summaries

- Also called multidimensional databases

Question 11

More Customer Intelligence

Answer 11

• A major effort of business is collecting business intelligence about customers
• Data-mining and OLAP software are often integrated into CRM systems
• Web has become popular for transactions, making data collection easy
• Targeted marketing is more effective than mass marketing
• Clickstream software: tracks and stores data about every visit to a website
• Data from customer activity on a website may not provide a full picture
• Third-party companies, e.g., DoubleClick and Engage Software, may be hired to study consumer activity
  
  • These companies compile billions of consumer clickstreams to create behavioral models
• Can determine consumers’ interests
  
  • Capture where, what, when, and how often web pages are visited; ads clicked; etc.
• Drugstore.com: a Web-based drugstore
  
  • Wanted to reach more customers
  • Razorfish, Inc., to perform customer profiling
• Razorfish compiles anonymous information about customers continuously, and also collected and analyzed data from Drugstore.com
  
  • Information used by Drugstore.com to develop a marketing strategy to reach new customers

Question 12

Clickstream software

Answer 12

tracks and stores data about every visit to a website

Question 13

Dashboard

Answer 13

an interface between BI tools and the user

• Resembles a car dashboard
• Contains visual images to quickly represent specific business metrics of interest to management
• Helps management monitor revenue and sales, monitor inventory levels, and pinpoint trends and changes over time
• It is important to compare captured real data to benchmark or historical values
• KPIs

Question 14

Key performance indicators (KPIs)

Answer 14

a business’ strategic initiatives evaluated to determine the costs, savings, and benefits to be derived from their implementation

Question 15

Knowledge management (KM)

Answer 15

gathering, organizing, sharing, analyzing, and disseminating knowledge to improve an organization’s performance

• focuses on knowing where to find information about the subject
• Storage costs continue to decrease, making it cost effective to store more information
  • The challenge is to develop tools that can quickly find the most relevant information for solving problems

Question 16

purposes of KM

Answer 16

• Transfer individual knowledge into databases
• Filter and separate the most relevant knowledge
• Organize knowledge to provide easy access to it, or to push it to employees based on needs

Question 17

Knowledge workers

Answer 17

research, prepare, and provide information

- There is much overlap in the work they do

Question 18

Capturing and Sorting Organizational Knowledge

Answer 18

Money can be saved by collecting and organizing knowledge gained by workers
- Avoid having workers solve the same problem that has already been solved by others

• The biggest challenge for employees is how to find answers to specific questions
  
  • Some software tools can help
• Bank of Montreal implemented application software providing information to its corporate credit card managers and sales force
  
  • Replaced multiple reports with only a few dashboards
  • Provides purchase volume and number of transactions over a series of months by region/city

Question 19

To support KM, organizations should require

Answer 19

• Workers to create reports of findings

- Reports about sessions with clients

Question 20

Employee Knowledge Networks

Answer 20

a tool that facilitates knowledge sharing through intranets

• In addition to building knowledge bases, some tools direct employees to other employees who have the required expertise
  
  • Such experts can provide non-recorded expertise
  • No need to waste money hiring experts in every department
• Learning from past mistakes can save money
• Tacit Systems’ ActiveNet tool
• AskMe’s software detects and captures keywords from e-mail and documents created by employees
  
  • Creates a knowledge base with names of employees and their interests
  • Allows free-form search queries on Web
  • A search returns the names of employees who have created documents, e-mail, or presentations on the subject

Question 21

Tacit Systems’ ActiveNet tool

Answer 21

• Continually processes business communications (e-mail, documents, etc.) to build a profile of each employee’s topics, expertise, and interests
• Profiles are accessible by other employees, but the private information used to create the profiles is not accessible to others
• Helps ensure uninhibited brainstorming and communication

Question 22

Knowledge from the Web

Answer 22

• Consumers post opinions of products on web at various locations, such as:
  
  • On the vendor’s site
  • At product evaluation sites such as epinions.com
  • In blogs
• Distilling consumer opinions
  
  • Could aid a company’s market research, e.g., learning about their own products and those of their competitors
• Some companies have developed software to search for this information
• Factiva: a software tool that gathers online information from over 10,000 sources
  
  • Collects information from newspapers, journals, market data, and newswires
  • Screens all new information for information specified by a subscribing organization
  • Helps an organization know what others say about their products and services

Question 23

Factiva

Answer 23

a software tool that gathers online information from over 10,000 sources

• Collects information from newspapers, journals, market data, and newswires
• Screens all new information for information specified by a subscribing organization
• Helps an organization know what others say about their products and services

Question 24

Autocategorization

Answer 24

or automatic taxonomy:

• automates classification of data into categories for future retrieval
  
  • Used by companies to manage data
  • Used by most search engines
  • Constantly improved to yield more precise and faster results
• U.S. Robotics (USR) wanted to reduce its customer support labor
  
  • A survey showed that most clients visited their website before calling support personnel
  • USR purchased autocategorization software
  • Accuracy and response was improved, allowing a higher number of support issues to be resolved by the web visit

Question 25

Summary

Answer 25

• Business intelligence (BI) is any information about organization, its customers, or its suppliers that can help firms make decisions
• Data mining is the process of selecting, exploring, and modeling large amounts of data to discover previously unknown relationships
• Data mining is useful for predicting customer behavior and detecting fraud
• Online analytical processing (OLAP) puts data into two-dimensional tables
• OLAP either uses dimensional databases or calculates desired tables on the fly
• Drilling down means moving from a broad view to a specific view of information
• Dashboards interface with BI software tools to provide quick information such as business metrics
• Knowledge management involves gathering, organizing, sharing, analyzing, and disseminating knowledge
• The main challenge of knowledge management is identifying and classifying useful information from unstructured sources
• Most unstructured knowledge is textual
• Employee knowledge networks are software tools to help employees find other employees with specific expertise
• Autocategorization is the automatic classification of information

Question 26

The main challenge of knowledge management

Answer 26

is identifying and classifying useful information from unstructured sources