Page 66 - CITP Review

Business intelligence
The BI tools include data mining, other mining, and link mapping as examples. The BI tool most
applicable in a situation is often a data mining tool. Web and text mining are becoming more popular as
other mining tools. The link analysis tool provides mapping of relationships among data and can be
useful for certain situations, for example, fraud detection and espionage.

Tool selection process
Many factors go into selecting a tool for various functions of the BI system, data analytics and reporting
system. The selection process probably begins with the infrastructure choice: Will the entity try to get by
using its ERP or enterprise system, or develop a more sophisticated and useful DW type system?

Understanding which analyses and reporting tools are best

Using exhibit 2-2, and the discussion following, it can be seen that the differences between the tools may
be subtle but obviously, a best fit is the objective. If the entity already owns one of the reporting tools —
for example, Crystal Reports — then it is likely that tool could serve much of its BI reporting needs as well.
If the entity can develop a robust dashboard system, it could possibly serve as general reporting, visual
reporting, EIS, strategy management, and performance management. These processes should enable
the entity to make efficient use of its resources and still build a sophisticated, effective BI system.

Performance metrics and reporting

Care should be taken not to get caught up with the process of developing and using metrics and lose
sight of the primary purpose, which is strategic alignment. The term key performance indicator (KPI)
means the performance indicator being measured has been analyzed to ensure it is aligned strategically;
it is key to strategic success. A KPI represents a strategic objective, and measuring its performance is
done against a strategic goal.

Key performance indicators and metrics

Effective KPIs will usually be multidimensional in nature. For example, a KPI might include a specific goal
(for example, 5% profit margin), but also a target range (for example, 5% or more is good or green, 3.5–
4.99% is caution or yellow, 0–3.49% bad or red, and a loss terrible or black). If that goal is for three years,
then there should be some past, present, and future results. For instance, in year 2, there would be the
actual results of year 1 (for example, 4.7%), and the current year results (4.6%), and some prediction
model result for year 3 (4.5%).

KPIs should be developed not only for outcomes (sometimes referred to as lagging results), but also for
driver KPIs (sometimes referred to as leading indicators). Much like the drivers in activity-based costing
(ABC), where drivers were related to the processes or factors that drive the costs, leading indicators drive
the results being measured as KPIs. For instance, the number of sales meetings scheduled, or the
number of prospects might have a linear relationship to the number of new customers. If new customers
are a KPI, then the number of sales meetings scheduled or number of prospects should be a driver — a
leading indicator.

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