Given the technology available today, it’s difficult to figure out which data analytics tools best optimize business operations. Here’s a look the difference between business intelligence and operational intelligence and the real-time decision tools that drive digital transformation.
Business intelligence (BI) as a tool is nothing new — the data-driven technology has been available since the early ‘90s. But as business has become more complex, more global and more dynamic, real-time visibility and true managerial control has become much more of a challenge.
What is business intelligence?
Business intelligence refers to the variety of software applications that analyze raw data to improve and optimize business decisions and performance – including data mining, online analytical processing, querying and reporting. BI can comprise of data visualizations and dashboards built into enterprise software, while dedicated BI software can lie on top of these transactional systems to turn transactional data into actionable insights.
More to BI than tools would have you believe
To drive business into the digital age, executives need real-time views of KPIs, but these traditional BI-driven metrics only provide historical data with no context in terms of business goals. Corporate performance management (CPM), a discipline largely focused on financials, at least places KPIs in the context of corporate goals, but by lacking operational insights, executives are looking at past data to inform future decisions – driving the company forward while looking in the rear-view mirror.
A deeper dive: Operational intelligence
Defining operational intelligence (OI) is a bit trickier. Essentially, OI refers to a category of real-time and dynamic business analytics that deliver visibility and insight into data, streaming events and business operations.
[ Related: Understanding Real-Time Business Intelligence ]
Operational Intelligence facilitates executive decisions and provides the tools for them to immediately act on these decisions through manual or automated actions. Analysts suggest that OI should be composed of not just BI, but alerts, event management, action management, reporting, dashboards and connectors to the various business systems and applications so a management team can take full advantage of transactional information.
Why might OI be necessary for business? A middle market company in the 1990s may have operated on one business model in a steady operational state. Today, that same business might manufacture in multiple modes, take orders through several online and in-person sales channels, and rely on a changing network of suppliers and vendors to complete an increasing workload. Regulatory changes, shorter product lifecycles, acquisitions and emerging trends such as servitization make for a more complex business environment that is harder to visualize and manage.
Operational intelligence goes one step further than BI by closing the loop between those past observations and immediate, rapid action — giving executive teams a decided advantage over their competitors. The system has origins in the most competitive sector of all — warfare. It was invented by Col. John Boyd, who was trying to determine why a disproportionate number of U.S. warplanes were shot down during the Vietnam War, despite the technical superiority of U.S. jets. His approach helped decision-makers rapidly progress through the stages of observation, orientation, decision and action (OODA) and has influenced multiple fields including current operational intelligence tools.
And then it gets complicated – enter digital transformation
Included in these dynamic environments is another complicating factor — digital transformation. Digital transformation refers to the changes produced by new technologies to society at large. For example, disruptions to taxi services by services like Uber or on-demand streaming services in the entertainment industry.
In industrial settings, digital transformation is paving the way for significant changes in product design, development and delivery. Changing expectations among customers for things such as web-based visibility and automated field service on assets means the company which can adapt best to these changes is in a better position to win market share.
Transactional and decision support tools, such as BI and OI, must also adapt quickly to these transforming environments to ensure companies meet their strategic objectives while industry and technology trends change. But OI is quite simply better equipped to provide the necessary intelligence to help businesses change and adapt.
Making the right decision, fast
Unlike BI applications, an OI system lets executives observe business processes, performance of suppliers and products lines, projects, sales channels and customers. It then lets them orient to determine where they are in terms of strategic goals, make decisions and take action, right down to the work execution level with the mapping of all inputs, resources and control elements. This is critical for root cause analysis of problems, as an effective OI system not only provides information on the cause, but also prescriptive analytics on recommendations of solutions or optimizations.
An OI application becomes even more appealing when there is a need for decision support or automation. The faster a management team can work through a problem, the better chance they have of outmaneuvering the competition. That is really where OI comes into play—providing high quality information and then actively facilitating decision-making. OI can offer prescriptive advice based on data, which not only informs decision-making, but can cut down time spent on making and operationalizing those decisions by automating time-sensitive decisions and ensuring decisions are acted on as needed in the enterprise.
Operation intelligence in action – the way forward
Operation intelligence can act as the executive management equivalent of a satellite navigation system. As you drive to a destination, your navigation system may tell you there is an accident up ahead, and ask if you would like an alternate route to reach your objective. Operation intelligence can help a management team identify operational, strategic, sales and execution roadblocks and help them find an alternate route to their goal. All of this happens faster than someone could configure a new dashboard, never mind identifying the problem to begin with. And that is the degree of agility required to keep up with digital transformation.