Chapter 11: Business Intelligence and

Knowledge Management
Oz (5th edition)
Data Mining
Data warehouses are useless without software tools
that process data into information

Currently Decision Support Systems are called
Business intelligence (BI) software

BI software takes data and produces information
useful for managerial decision-making

Data mining refers to the use of tools to extract
information from a data warehouse; business
intelligence is one result of data mining
Data-Mining and Data-Mining Tools
Data-mining is the process of selecting, exploring, and
modeling large amounts of data to discover previously
unknown relationships that support decision making.
Traditional data mining tools answer questions about
variables that we think are related
Query languages (QBE or SQL)
Report generators
Multidimensional analysis tools (OLAP or pivot
tables)
Standard statistical procedures (regression,
ANOVA)
Knowledge discovery tools are data-mining tools for
finding relationships that are not discernable to the
human eye (see next slide);
Typical Data Mining Tasks Related to
Knowledge Discovery
Clustering- this activity is designed to take a
population of objects (e.g., customers) and develop
characteristics that can be used to classify them.
You start with no pre-defined classes. Often
clustering is the first step in market segmentation.
Classification examines the features of new
objects and assigns them to one of a predetermined
set of classes. Often preceded by clustering.
Clustering could be used to determine
characteristics of customers who respond to
selected types of promotions. Customers in the
same cluster get the same type of promotion
material.
Typical Data Mining Tasks (cont.)
Affinity grouping (market basket analysis)- This task
is used to determine which things go together.
Typically used to help in cross-selling (e.g., diapers
and beer).

Prediction used to determine patterns that can lead
to predictable results. For example, customer churn
or who will default on a loan. Amazon uses items
purchased as gifts to predict the age range of
recipients. Amazon uses your past purchases to
determine what to offer you when you return to the
Amazon site.
Collecting Data for the Warehouse
Customer loyalty cards have multiple uses, but one
use is to collect data for the data warehouse

Examples (see textbook for more details)
Grocery stores
Web sites
Harrahs
Store related credit cards

Assurance of a steady flow of data
Multidimensionality or OLAP
Multidimensional data analysis (or OLAP) enables
users to view data using various dimensions,
measures and time frames (i. e., OLAP)
dimensions: products, business units,
country, industry (e.g., categories)
measures: money, unit sales, head count,
variances
time: daily, weekly, monthly, quarterly, yearly)
This type of analysis also provides the ability to
view data in different ways (tables, charts, 3-D,
geographically)
OLAP tools provide for this
Pivot tables in Excel or Access
Characteristics of OLAP Tools
Primarily used to exploit data warehouses
Provide extremely fast response
View combinations of two dimensions
Enable drilling down (start with broad info and get
more specific)
Produces results as counts or percentages
Conversion of tables to charts/graphs
Usually requires a tailored-made relational database
OLAP applications are widely used by mid-level and
upper level managers
A form of business intelligence software


An OLAP Example
Other Firms that Use OLAP
Office Depot

CVS

Ben & Jerrys

DrugStore.com
Customer Relationship Management
(CRM) Systems
CRM systems are programs to learn more about
customers needs and behaviors in order to develop
stronger relationships with them.
Some sources of data for CRM systems
Data from Web users click stream (see example
about Drugstore.com in the textbook)
Data from the firms data warehouse
Data from the firms customer call centers
Data from the firms help line
Service and support records
Customer responses to ad campaigns


Goals of CRM Systems

CRM systems try to use technology to gain insight
into the behavior of customers and the value of
those customers. If CRM works as hoped, a
business can:
provide better customer service
make call centers more efficient
cross sell products more effectively
help sales staff close deals faster
simplify marketing and sales processes
discover new customers
increase customer revenues
OLAP and other data mining tools are often available
in CRM software

Summary Thoughts
CRM software is concerned with data/information
flows between firm and customers
Datamining is concerned with internal
data/information flows from the data warehouse to
managers (although data originates from external
sources)
BI software is a more common term for software
once called DSS
Current BI software focuses on Simons intelligence
stage of decision making
Traditional DSS software focuses more on the
design and choice stages of the Simon model
Summary Thoughts on BI
Much of BI concerns finding information about
customers
Datamining and OLAP are often integrated into CRM
systems
The Web is a popular way to gather BI
BI on customers promotes targeted marketing rather
than mass marketing
Third parties often provide BI (e.g., Acxiom and
DoubleClick)
Overzealous BI efforts are sources of moral and
ethical issues
Executive Dashboards
A dashboard is a common form of interface between BI tools and
users
Resembles a car dashboard with clock like indicators and
scales
Designed so users can quickly grasp business situations

Knowledge Management
What is knowledge?
Answer: Knowledge in an organization is the
primarily the collective expertise/experiences of
the organizations employees
Tacit versus explicit knowledge
Tacit knowledge is embedded in the human brain
and cannot be expressed easily
Explicit knowledge is knowledge that exist
outside the brain often in a text format

Examples of Explicit Knowledge
Written descriptions of best practices for a business
process

Written knowledge about products, markets, or
customers

Lessons learned on projects or product development

Written records of experiences with new approaches

Examples of successful and failed projects (e.g.,
contracts, proposals, bids, etc)

Knowledge Management
Capture employee knowledge

Transfer captured knowledge into a database

Filter and separate the most relevant knowledge

Organize the knowledge so that it is accessible to
employees or push specific knowledge to
employees based on pre-specified needs

Examples of Knowledge Management
Systems
Xerox built a Web-based maintenance knowledge
base for field engineers who repair copiers
AT&T developed a people finder database that
provides an on-line directory of who knows what
(a knowledge directory)
HP has a Web-based site that provides knowledge
about competitors, research, products, and
customer satisfaction
Dow Chemical devised a system to manage its
patents. To keep a patent enforced can cost up to
$250,000. Dow needed to determine which patents
had value. Saved over 40 million in 18 months
Employee Knowledge Networks
Some tools direct employees to other employees

Expert can provide non-recorded expertise

No need to waste money hiring experts in every
department

Learning from past mistakes saves money

Employee knowledge network facilitate knowledge
sharing through intranets