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What is Active Business Intelligence? Part 1

  • April 01 2002, 1:00am EST

Active business intelligence (ABI) is using BI as an active (rather than passive) component in performing the business of the corporation. It produces tangible impacts to the quality of day-to-day business transactions. It creates real differences in serving customers, delivering products, manufacturing goods and securing supplies –­ across the entire value chain.

With ABI, the shift from a passive role to an active role is the key differentiator. According to Webster's dictionary, the term "active" implies "to take action," rather than just contemplating the situation. Traditional BI, in contrast, reports and analyzes the business dynamics within operational systems. The initiation of actions was a hope, but not a design, of traditional systems. For traditional BI, responsibility sadly ends with pixels on the screen and beeps on the pager.

The design of ABI should embed (as close as possible) intelligence into the appropriate business processes to support specific actions. As such, the key characteristics of ABI are:

  • Supporting tactical decision making,
  • Leveraging actionable intelligence and
  • Enabling the learning cycle.

Supporting Tactical Decision Making

Emphasis on tactical decision making guides minute-by-minute business activities. This is an extension, not elimination, of the focus upon strategic decision making of traditional BI. Instead of being confined to executive suites for use by managers and business analysts, ABI has a presence on the shop floors, branch offices and even customer desktops.

Most importantly, ABI impacts the tactical and operational levels of management, in addition to the strategic level. These levels of management activity are classic concepts in the IT industry. In his 1965 book, Planning and Control Systems: A Framework for Analysis (Harvard University Press), R. N. Anthony defined these three categories as follows:

  • Strategic Planning: Definition of goals, polices ... Determination of organizational objectives.
  • Management and Tactical Control: Acquisition of resources, tactics ... Establishment and monitoring of budgets.
  • Operational Planning and Control: Effective and efficient use of existing facilities and resources to carry out activities within budget constraints.

These definitions seem antiquated with their emphasis on manufacturing industries. However, the Anthony framework has endured for almost forty years and has contributed key concepts to the IT profession. The framework is often shown as a management pyramid, in which a few are engaged at the strategic level while many more are involved at the tactical and operational lower levels.
In addition, the Anthony framework provides a way to specify the information requirements by management level, as summarized in Figure 1.

Figure 1: Information Requirements by Management Level
Source: G. B. Davis and M. H. Olson, Management Information Systems: Conceptual Foundations, Structure and Development (Second Edition), McGraw- Hill, 1985, p. 35-36.

BI efforts have traditionally focused more on the right side with summarized analyses directed toward future business activities. ABI enables us to move toward the left and extend coverage across all three levels.

There are three requirements for supporting the tactical level with ABI as follows:

1. The information provided by ABI must be more detailed, current and accurate to properly support the tactical and even operational levels. To be current, the time latency from the transaction event to the transaction analysis must be reduced. Some argue for zero latency; however, the proper requirement is just- in-time latency needed to perform a specific action within a business process.

2. ABI must support a larger and more diverse user base, possibly extending externally to customers, suppliers and other partners. When confined to the strategic level, there was a rather homogeneous group of executives to satisfy. Now, ABI is extending support to the entire enterprise and beyond.

3. The workload required by ABI systems will increase significantly, not only because of an increased number of users, but especially because of the diversity of analysis requirements.

Part 2 of this column will describe the second and third characteristics of ABI, along with some practical conclusions.

Author's note: Support for this work came from Teradata, a division of NCR, as part of their investigation into the value propositions behind Active Data Warehousing.

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