I recently taught a business intelligence (BI) fundamentals class that included a discussion of the three distinct types of BI - strategic, tactical and operational. To gauge the knowledge level of the audience, I asked how many of them were using their data warehouses for anything other than strategic BI. I got a smattering of hands. A question on the definition of each type brought responses such as "strategic BI sets organizational direction, tactical BI fosters achieving tactics and operational BI is used on the front line." While these answers might have been technically correct, they were far less than illuminating. When I asked for examples of a BI application used to set direction versus one that fosters tactics, I drew blank stares.
This exchange made me realize that it might be nice to distinguish strategic, tactical and operational BI. Probing beneath the surface yields concepts not as intuitive as the names might imply. It is important to understand the differences because each type has a different audience, a different requirement for data currency and a different business purpose. While your BI program might eventually address all three types, it is quite likely that you will focus on a single BI type at first. Many organizations begin with a specific business user and match the BI type to the needs of that user. Evolution to the other types of BI applications comes only as the BI user base expands to incorporate users with different needs.
Strategic BI is used by statisticians, operational planners and researchers. Common data operations behind these applications include aggregations, statistical analysis, multidimensional analysis, data mining and exploration. The business purpose includes trend and pattern discovery, development of business and behavioral models and what-if analysis. The results are used to set strategic direction, and the data currency requirement ranges from daily to monthly or quarterly. A casino that wants to improve customer satisfaction and stimulate loyalty might build a strategic BI application to analyze customer behavior as its first step. This application would provide profitability analysis, analysis to isolate important customer characteristics, behaviors and preferences, and analysis to determine actions required to increase loyalty and motivate more frequent visits. Results might include development of a frequent visitor rewards program. Data currency requirements would be weekly to monthly, and the users would be statisticians and analysts developing the rewards program and the planners who conceived of it.
Tactical BI is a little different. Target users are the executives and managers tasked with executing strategies to meet business objectives and analysts tasked with implementing programs. The business purpose is to address short-term goals and to measure progress toward long-term objectives. Common data operations include detailed integrated data combined with historical analysis results, and the data is generally required to be more current for tactical uses than for strategic timeliness; needs range from daily to weekly. The casino may add a tactical BI application to monitor results of the program and to develop and track marketing campaigns. Transaction data from each location is loaded into the data warehouse on a weekly basis. When a customer meets preset aggregate visit or expenditure targets, an offer such as a free night's stay is generated and mailed. Program and marketing managers use the data warehouse to analyze responses to offers, measure the success of the program across all customers and modify the campaigns in flight.
Operational BI evolved to meet the need to respond to specific events that happen in the operational world with real-time BI analysis. The target audience is the customer-facing staff. Data operations include detailed integrated data combined with historical analysis results, but use is for on-the-spot decision-making rather than analysis. Data currency is daily to real time. The casino develops a need for operational BI when it decides to migrate the rewards program from reactive mode (offers mailed after a visit) to proactive mode (offers made during the visit in response to events happening on the casino floor). They move certain transaction data (dollars spent, won and lost) into the data warehouse on a near real-time basis. Loss thresholds are dynamically calculated based on data for the current visit as well as recent visit history. Alerts and offer recommendations are sent to casino managers to be provided to customers reaching their threshold.
Strategic, tactical and operational BI vary widely in terms of who uses the application, what they use the application for and how the application is constructed. While this casino example follows a fairly linear progression from strategic through tactical and on to operational, this is not always the case. Your organization will likely begin with the type of BI that best meets the needs of the current sponsor. If you recognize the possibility of expanding the BI program across types and architect your solution accordingly, you can ensure value and continued use.
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