SECOND

EDITION

BUSINESS INTELLIGENCE
A MANAGERIAL APPROACH
INTERNATIONAL EDITION

Efraim Turban
University of Hawaii

Ramesh Sharda
Oklahoma State University Dursun Deleii Oklahoma State University David King JDA Software Group, Inc. With contributions by

Janine E. Aronson
The University of Georgia

Prentice Hall
Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

CONTENTS
Preface 15

Chapter 1 Introduction to Business Intelligence 23

Opening Vignette: Norfolk Southern Uses Business Intelligence for Decision Support to Reach Success 24 1.1 Changing Business Environments and Computerized Decision Support 26 The Business Pressures-Responses-Support Model ,26 1.2 A Framework for Business Intelligence (Bl) Definitions of Bl 28 29 30 A Brief History of Bl The Architecture of Bl Styles of Bl 32 32 35 36 36 37 The Benefits of BI Event-Driven Alerts 28

1.3 Intelligence Creation and Use and Bl Governance A Cyclical Process of Intelligence Creation and Use Intelligence and Espionage 37 38

1.4 Transaction Processing versus Analytic Processing 1.5 Successful Bl Implementation The'Typical Bl User Community 38

Appropriate Planning and Alignment with the Business Strategy Real-Time, 6n-Demand Bl Is Attainable Developing or Acquiring Bl Systems Security and Protection of Privacy 40 40 41 41 41 Justification and Cost-Benefit Analysis Integration of Systems and Applications The Tools and Techniques Selected Bl Vendors 1.7 Plan of the Book 41 42 41 40

39

1.6 Major Tools and Techniques of Business Intelligence

1.8 Resources, Links, and theTeradata University Network Connection 43 Resources and Links Cases 43 44 44 44 44 43

Vendors, Products, and Demos Periodicals

The Teradata University Network Connection The Book's Web Site

10

Contents Chapter Highlights 44 Key Terms 45 Questions for Discussion 45 Exercises 45 End of Chapter Application Case 46 References 47
Chapter 2 Data Warehousing 49 Opening Vignette: DirecTV Thrives with Active Data Warehousing 50 2.1 Data Warehousing Definitions and Concepts What Is a Data Warehouse? Data Marts 53 53 54 56 61 52 52 Characteristics of Data Warehousing Operational Data Stores (ODS) Metadata 55 58 52

Enterprise Data Warehouses (EDWs)

2.2 Data Warehousing Process Overview 2.3 Data Warehousing Architectures Which Architecture Is the Best? 63 Alternative Data Warehousing Architectures

2.4 Data Integration and the Extraction, Transformation, and Load (ETL) Processes 65 Data Integration 65 67 69 72 . Extraction, Transformation, and Load (ETL) 2.5 Data Warehouse Development Data Warehouse Vendors 72

Data Warehouse Development Approaches Additional Data Warehouse Development Considerations. 74 Representation of Data in Data Warehouse Analysis of Data in Data Warehouse OLAP versus OLTP 77 OLAP Operations 77 76

75

2.6 Data Warehousing Implementation Issues Massive Data Warehouses and Scalability 2.7 Real-Time Data Warehousing 85 84

80

2.8 Data Warehouse Administration, Security Issues, and Future Trends 90 The Future of Data Warehousing 91 2.9 Resources, Links, and the Teradata University Network Connection 93 Resources and Links 93 93

Cases 93
Vendors, Products, and Demos

Contents
Periodicals 93 94 94

11

Additional References

The Teradata University Network (TUN) Connection

Chapter Highlights 94 Key Terms 95 Questions for Discussion 95 Exercises 95 End of Chapter Application Case 97 References 98

Chapter 3

Business Performance Management

101
102

Opening Vignette: Double Down at Harrah's 3.1 Business Performance Management (BPM) Overview 105 BPM Defined 105 BPM and Bl Compared 105

3.2 Strategize: Where Do We Want t o Go? 107 * Strategic Planning 107 109 110 The Strategy Gap 108 3.3 Plan: How Do We Get There? Operational Planning 109 Financial Planning and Budgeting Diagnostic Control Systems 111 Pitfalls of Variance Analysis 112 115 117 3.5 Act and Adjust: W h a t Do We Need t o Do Differently? 3.6 Performance Measurement KPIs and Operational Metrics 117 120

3.4 Monitor: How Are We Doing? 111.

Problems with Existing Performance Measurement Systems 118 Effective Performance Measurement .3.7 BPM Methodologies Six Sigma 126 3.8 BPM Technologies and Applications BPM Architecture 132 135 137 Commercial BPM Suites 134 BPM Market versus the Bl Platform Market Dashboards versus Scorecards 137 Dashboard Design 138 What to Look for in a Dashboard 139 Data Visualization 139 3.9 Performance Dashboards and Scorecards 132 123 Balanced Scorecard (BSC) 123

Chapter Highlights Key Terms 143

142

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Contents

Questions for Discussion 143 Exercises 144 End of Chapter Application Case 145 References 147 Chapter 4 Data Mining for Business Intelligence
4.1 Data Mining Concepts and Definitions Definitions, Characteristics, and Benefits How Data Mining Works 161 4.2 Data Mining Applications 4.3 Data Mining Process 168 169 170 172 174 176 Step 1: Business Understanding Step 2: Data Understanding Step 3: Data Preparation Step 4: Modeling Building Step 6: Deployment 174 177 178 170 165 157

151
152 155

Opening Vignette: Data Mining Goes to Hollywood!

Step 5: Testing and Evaluation

Other Data Mining Standardized Processes and Methodologies 4.4 Data Mining Methods Classification 178 184 189

Estimating the True Accuracy of Classification Models Cluster Analysis for Data Mining Association Rule Mining Elements of ANN 190 Applications of ANN 192 4.6 Data Mining Software Tools 194 199 4.7 Data Mining Myths and Blunders 186

4.5 Artificial Neural Networks f o r Data Mining

Chapter Highlights 200 Key Terms 201 Questions for Discussion 202 Exercises 202 End of Chapter Application Case 205 References 206 Chapter 5 Text and Web Mining 209

Opening Vignette: Mining Text for Security and Counterterrorism 210 5.1 Text Mining Concepts and Definitions 5.2 Natural Language Processing 5.3 Text Mining Applications Marketing Applications Security Applications 220 220 220 215 212

Biomedical Applications 223 Academic Applications 225

Contents
5.4 Text Mining Process 226 227 228 230

13

Task 1: Establish the Corpus Task 3: Extract the Knowledge 5.5 Text Mining Tools Free Software Tools 235 Commercial Software Tools 236 5.6 Web Mining Overview

Task 2: Create the Term-Document Matrix

235 236

5.7 Web Content Mining and Web Structure Mining 238 5.8 Web Usage Mining 250 242 5.9 Web Mining Success Stories

Chapter Highlights 246 Key Terms 246 Questions for Discussion 247 Exercises 247 End of Chapter Application Case 248 References 249 ...
Chapter 6 Business Intelligence I m p l e m e n t a t i o n : I n t e g r a t i o n a n d E m e r g i n g Trends 2 5 1 Opening Vignette: Bl Eastern Mountain Sports Increases Collaboration and Productivity 252 6.1 Implementing Bl: A n Overview Bl Implementations Factors 255 256 258 255

Managerial Issues Related to Bl Implementation 6.2 Bl and Integration Implementation Types of Integration Why Integrate? 258 259 259 258

Levels of Bl Integration

Embedded Intelligent Systems

6.3 Connecting Bl Systems t o Databases and Other Enterprise Systems 260 Connecting to Databases 260 Integrating Bl Applications and Back-End Systems 260 Middleware 261 262 263 265 263 6.4 On-Demand Bl

The Limitations of Traditional Bl The On-demand Alternative Legal Issues Privacy 265 265

6.5 Issues of Legality, Privacy, and Ethics

Ethics in Decision Making and Support 6.6 Emerging Topics in Bl: A n Overview The Future of Business Intelligence 268

267 268

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Contents 6.7 The Web 2.0 Revolution 268

Representative Characteristics of Web 2.0 269 Web 2.0 Companies and New Business Models 269 6.8 Online Social Networking: Basics and Examples A Definition and Basic Information 270 Mobile Social Networking 271 Major Social Network Services: Facebook and Orkut 271 Implications of Business and Enterprise Social Networks 272 6.9 Virtual Worlds 275 279 6.10 Social Networks and Bl: Collaborative Decision Making The Rise of Collaborative Decision Making 280 Collaboration in Virtual Teams' Decision Making 280 6.11 RFID and New Bl Application Opportunities 6.12 Reality Mining 286 Key Terms 289 Questions for Discussion 289 Exercises 289 End of Chapter Application Case 291 References Glossary 295 Index 303 291 282 270