Chapter 11: Business Intelligence and Knowledge Management

TRUE/FALSE

	1.	Data-mining software searches through large amounts of data for meaningful patterns of information.

ANS:	T	PTS:	1	REF:	379

	2.	One objective of data mining is classification, finding whether certain facts fall into predefined groups.

ANS:	T	PTS:	1	REF:	379

	3.	One application of data mining is consumer clustering, which refers to the prediction of what each individual accessing a Web site is most likely to be interested in seeing.

ANS:	F	PTS:	1	REF:	380

	4.	Mobilcom GmbH, a German company, uses personal tracking systems to identify customers about to switch to a competitor, and approach them with inducements to continue or renew their contract.

ANS:	F	PTS:	1	REF:	380

	5.	One application of data mining is trend analysis, which refers to the identification of characteristics of transactions that are most likely to be fraudulent.

ANS:	F	PTS:	1	REF:	380

	6.	Loyalty programs such as frequent flier and consumer clubs help organizations amass huge amounts of data about their customers.

ANS:	T	PTS:	1	REF:	382

	7.	OLAP applications are powerful tools for shift employees.

ANS:	F	PTS:	1	REF:	383

	8.	OLAP is increasingly used by corporations to gain efficiencies.

ANS:	T	PTS:	1	REF:	385

	9.	Companies find that the data that they collect directly from consumers provides a full picture of customer needs.

ANS:	F	PTS:	1	REF:	387

	10.	By compiling billions of consumer forms and creating surfing models, companies can determine individual consumers’ interests from the sites they visited.

ANS:	F	PTS:	1	REF:	387

	11.	Expertise in broad domains can be easily programmed in expert systems.

ANS:	F	PTS:	1	REF:	390

	12.	Knowledge management is the attempt by organizations to put procedures and technologies in place to filter and separate the most relevant knowledge.

ANS:	T	PTS:	1	REF:	391

	13.	Tacit Systems’ ActiveNet tool “mines” structured data to build a profile of each customer in terms of topics and interests.

ANS:	F	PTS:	1	REF:	393

	14.	Consumers continue to post their opinions on products and services on the Web.

ANS:	T	PTS:	1	REF:	394

	15.	A key word such as “apple” means one thing to an employee of a hardware or software organization and something completely different to an employee in an agriculture or a supermarket chain.

ANS:	T	PTS:	1	REF:	395

MULTIPLE CHOICE

	1.	To make ____ useful, organizations must use software tools to process data from huge databases into meaningful information.
a.	data warehouses	c.	decision systems	
b.	databases 	d.	expert systems	

ANS:	A	PTS:	1	REF:	378

	2.	Data warehouses could be regarded as a type of ____, where the data is the ore, and new useful information is the precious find.
a.	vault	c.	diamond	
b.	mine	d.	wheel	

ANS:	B	PTS:	1	REF:	379

	3.	One objective of data mining is ____, the discovering of patterns in data that can lead to reasonable predictions.
a.	seeding	c.	forecasting	
b.	producing	d.	recovering	

ANS:	C	PTS:	1	REF:	379

	4.	In banking, ____ is employed to find profitable customers and patterns of fraud.
a.	resource recovering	c.	data exploiting	
b.	information mining	d.	data mining	

ANS:	D	PTS:	1	REF:	380

	5.	Companies selling mobile phone services face a growing challenge of customer churn (____).
a.	complaints	c.	lawsuits	
b.	changing service plans	d.	switching to a competitor	

ANS:	D	PTS:	1	REF:	380

	6.	To ensure a steady flow of customer data into their ____, companies in almost every industry operate customer loyalty programs similar to the original frequent flier programs.
a.	data dictionaries	c.	expert systems	
b.	data warehouses	d.	KM systems	

ANS:	B	PTS:	1	REF:	381

	7.	Some companies use ____ techniques to try to predict what customers are likely to purchase in the future.
a.	data-mining	c.	identity tracking	
b.	CRM	d.	expert systems	

ANS:	A	PTS:	1	REF:	382

	8.	____ enables managers to see summaries and ratios of the intersection of any two dimensions.
a.	CRM	c.	OLAP	
b.	SCM	d.	CAD	

ANS:	C	PTS:	1	REF:	383

	9.	OLAP applications are usually installed on a special server that communicates with both the user’s computer and the server or servers that contain a data warehouse or ____.
a.	house databases	c.	nondimensional databases	
b.	crossdimensional databases	d.	dimensional databases	

ANS:	D	PTS:	1	REF:	385

	10.	OLAP might process data from a ____.
a.	non-relational database	c.	cross-sectional database	
b.	transportable database	d.	transactional database	

ANS:	D	PTS:	1	REF:	385

	11.	Since OLAP applications are designed to process large amounts of records and produce summaries, they are usually significantly faster than relational applications such as those using ____.
a.	XML	c.	SQL queries	
b.	SQL replies	d.	SGML	

ANS:	C	PTS:	1	REF:	385

	12.	OLAP applications can process ____ records per second.
a.	10,000	c.	30,000	
b.	20,000	d.	40,000	

ANS:	B	PTS:	1	REF:	385

	13.	Employees who know very little about programming and report design are discovering that ____ software is becoming easier to use.
a.	BI	c.	SGML	
b.	AI	d.	2GL	

ANS:	A	PTS:	1	REF:	387

	14.	BI software has become so popular in large companies that Microsoft decided to integrate such software into its popular database management system, ____.
a.	SQL Server	c.	DB2	
b.	MySQL	d.	DBMS	

ANS:	A	PTS:	1	REF:	387

	15.	A major effort of most businesses, especially retail businesses, is to collect ____ about customers.
a.	artificial intelligence	c.	personal information	
b.	business intelligence	d.	knowledge management parameters	

ANS:	B	PTS:	1	REF:	387

	16.	Both data-mining and OLAP software are often integrated into ____ for the purpose of collecting business intelligence about customers.
a.	SCM systems	c.	CRM systems	
b.	ERP systems	d.	HRM systems	

ANS:	C	PTS:	1	REF:	387

	17.	Companies such as ____, Engage Software, and Avenue A | Razorfish, use cookies and spyware to track Web users’ clickstreams.
a.	MultiLock	c.	Sun Microsystems	
b.	SuperClick	d.	DoubleClick	

ANS:	D	PTS:	1	REF:	387

	18.	To make the use of BI tools convenient for executives, companies that develop BI tools create ____ that help the executives to quickly grasp business situations.
a.	options	c.	programming languages	
b.	alternatives	d.	interfaces	

ANS:	D	PTS:	1	REF:	389

	19.	The popular name of an interface for BI tools is ____.
a.	BITools	c.	dashboard	
b.	command line	d.	GUI	

ANS:	C	PTS:	1	REF:	389

	20.	____ are often designed to quickly present predefined business metrics such as occupancy ratios in hotels and hospitals, or inventory turns in retail.
a.	Toolkits	c.	Toolboxes	
b.	Dashboards	d.	BITools	

ANS:	B	PTS:	1	REF:	389

	21.	The purpose of ____ is mainly to learn where to find information about a given subject.
a.	knowledge management	c.	experience management	
b.	knowledge theory	d.	intelligence management	

ANS:	A	PTS:	1	REF:	390

	22.	Information that can be gleaned from stored data is ____.
a.	knowledge	c.	intelligence	
b.	experience	d.	wisdom	

ANS:	A	PTS:	1	REF:	390

	23.	____ is the attempt by organizations to put procedures and technologies in place to transfer individual knowledge into databases.
a.	Intelligence management	c.	Experience management	
b.	Knowledge management	d.	Expertise management	

ANS:	B	PTS:	1	REF:	391

	24.	To transfer knowledge into manageable ____, some companies require workers to create reports of their finding.
a.	folders	c.	online resources	
b.	dictionaries	d.	indexes	

ANS:	C	PTS:	1	REF:	391

	25.	To categorize knowledge into manageable data, companies use ____ software.
a.	autoclassification	c.	supercategorization	
b.	autocategorization	d.	superindexing	

ANS:	B	PTS:	1	REF:	396

COMPLETION

	1.	____________________ is the process of selecting, exploring, and modeling large amounts of data to discover previously unknown relationships that can support decision making.

ANS:	Data mining

PTS:	1	REF:	379

	2.	While data has traditionally been used to see whether this or that pattern exists, ____________________ allows you to ask what patterns exist.

ANS:	data mining

PTS:	1	REF:	379

	3.	One objective of data mining is ____________________, the finding of groups of related facts not previously known.

ANS:	clustering

PTS:	1	REF:	379

	4.	DB Intelligent Miner from ____________________ periodically looks for patterns of customer churns, and assigns each customer a score representing the likelihood of canceling the contract.

ANS:	IBM

PTS:	1	REF:	380-381

	5.	A dynamic ____________________ application responds to commands by composing tables “on the fly.”

ANS:	
OLAP
online analytical processing
online analytical processing (OLAP)

PTS:	1	REF:	383

	6.	In ____________________, the raw data is organized in tables that show information in summaries and ratios so that the inquirer does not have to wait for processing raw data.

ANS:	
dimensional databases
multidimensional databases

PTS:	1	REF:	383

	7.	____________________ applications can easily answer a question such as, “Where are my weakest-performing sales offices?”

ANS:	
OLAP
online analytical processing
online analytical processing (OLAP)

PTS:	1	REF:	383

	8.	Intelligent ____________________ allow employees to enter questions in free form or close to free form.

ANS:	interfaces

PTS:	1	REF:	387

	9.	BI ____________________ help executives quickly receive metrics, ratios, and trends in mostly graphic format.

ANS:	dashboards

PTS:	1	REF:	389

	10.	An organization can learn much about its customers, sellers, and itself by mining data warehouses and using OLAP software, but such techniques still do not satisfy another important challenge: how to manage ____________________.

ANS:	knowledge

PTS:	1	REF:	390

	11.	Samuel Johnson, the author of an early English dictionary, said that one type of ____________________ is what we know about a subject, and the other type is knowing where to find information about the subject.

ANS:	knowledge

PTS:	1	REF:	390

	12.	Knowledge management attempts to organize knowledge in databases that allow employees easy access to it or that “____________________” specific knowledge to employees based on prespecified needs.

ANS:	push

PTS:	1	REF:	391

	13.	The research company IDC argues that almost half of the work that ____________________ do in organizations has already been done, at least partially.

ANS:	knowledge workers

PTS:	1	REF:	391

	14.	While some tools build ____________________ and help employees access them, others put the emphasis on directing employees to other employees who have a certain expertise.

ANS:	knowledge bases

PTS:	1	REF:	392

	15.	Some software companies, such as Tacit Systems Inc., AskMe Corporation, Participate Systems Inc., and Entopia Inc., have developed ____________________, tools that facilitate knowledge sharing through intranets.

ANS:	employee knowledge networks

PTS:	1	REF:	392

	16.	____________________ tools help extract useful knowledge from millions of Web documents.

ANS:	
KM
Knowledge Management
Knowledge Management (KM)

PTS:	1	REF:	394

	17.	____________________ or automatic taxonomy automates the classification of data into categories for future retrieval.

ANS:	Autocategorization

PTS:	1	REF:	396

	18.	Practically all search engine sites, such as Google and Yahoo!, use ____________________ software, and continue to improve the software to provide more precise and faster responses to queries.

ANS:	autocategorization

PTS:	1	REF:	396

ESSAY

	1.	What are the objectives of data mining?

ANS:	
Data mining has four main objectives:
Sequence or path analysis: Finding patterns where one event leads to another, later event.
Classification: Finding whether certain facts fall into predefined groups.
Clustering: Finding groups of related facts not previously known.
Forecasting: Discovering patterns in data that can lead to reasonable predictions.

PTS:	1	REF:	379

	2.	Discuss the utilization of loyalty programs.

ANS:	
Loyalty programs such as frequent flier and consumer clubs help organizations amass huge amounts of data about their customers. Some grocery chains, for example, issue discount coupons only to the most loyal customers. Harrah’s Entertainment Inc., the gambling and hotel chain, uses its data warehouse to target individual customers, rather than groups. The techniques—whose specifics the company refuses to disclose for obvious reasons—enables Harrah’s to tailor lodging, dining, and gambling packages that are attractive to its customers. It helps discern the small spender from the big spender and decide how to price those services by individual spending patterns at the company’s facilities. This is an example of yield management or revenue management. Harrah’s relies heavily on its software applications to price-discriminate. It gives sales agents instructions to charge people who have a history of little spending on gambling higher per-night rates than they charge big gamblers.

PTS:	1	REF:	382

	3.	What are executive dashboards?

ANS:	
To make the use of BI tools convenient for executives, companies that develop BI tools create interfaces that help the executives to quickly grasp business situations. The popular name of such an interface is dashboard, because it looks something like a car dashboard. Car dashboards provide information in the form of clock-like indicators and scales. BI dashboards use similar visual images. They include speedometer-like indicators for periodic revenues, profits, and other financial information; plus bar charts, line graphs, and other graphical presentations whenever the information can be presented graphically. Dashboards are created by Business Objects and XeoMatrix, providers of BI software. Similar dashboards are parts of BI tools offered by other vendors, including Siebel, Cognos, and SAS. ERP vendors, such as SAP and Oracle, also include dashboards in their applications. Dashboards are often designed to quickly present predefined business metrics such as occupancy ratios in hotels and hospitals, or inventory turns in retail.

At TruServ, a member-owned hardware cooperative of 7,000 retailers worldwide, executives use dashboards to monitor revenue and sales of individual items. The cooperative operates stores under the names True Value, Grand Rental Station, Taylor Rental, Party Central, Home & Garden Showplace, and Induserve Supply. Using the dashboard to conduct analyses, managers can pinpoint trends and changes over time and receive alerts to help monitor, interpret, and make decisions. They can better track inventory. In the past, 20 percent of the cooperative’s inventory was in the “red zone.” Red zone inventory is either liquidated or sold for a loss after a promotion is ended. The executive dashboard was instrumental in helping TruServ reduce this loss inventory to 5 percent.

PTS:	1	REF:	389-390

	4.	Discuss employee knowledge networks.

ANS:	
While some tools build knowledge bases and help employees access them, others put the
emphasis on directing employees to other employees who have a certain expertise. The
advantage of this approach is that an expert can provide expertise that has not been captured in information systems. Large companies, especially multisite ones, often waste money because employees in one organizational unit are not aware of the experience of employees in another unit. For example, one energy company spent $1 million on a product designed to work on oil rigs to prevent sediment from falling into wells. When the equipment was installed, it failed. The executives of another unit decided to purchase the same equipment, which, not surprisingly, failed in the other location. Then a third unit, elsewhere, purchased the equipment, which also failed. While one can justify the loss of the first $1 million as legitimate business expense in the course of trying a product, the other $2 million was lost because decision makers did not know that the equipment had already been tried and failed. To alleviate similar problems, some software companies, such as Tacit Systems, Inc., AskMe Corporation, Participate Systems, Inc., and Entopia, Inc., have developed employee knowledge networks, tools that facilitate knowledge sharing through intranets. Recall that an intranet uses Web technologies to link employees of the same organization.

PTS:	1	REF:	392

	5.	What does autocategorization do?

ANS:	
To categorize knowledge into manageable data, companies use autocategorization software. Autocategorization automates the classification of data into categories for future retrieval. Practically all search engine sites, such as Google and Yahoo!, use autocategorization software, and continue to improve the software to provide more precise and faster responses to queries. Many companies have installed such software at their corporate Web sites.

For example, U.S. Robotics (USR), a large manufacturer of networking devices, operates in a market with narrow profit margins, and thus one call to the support personnel about a purchased item might wipe out the profit on that sale. Therefore, reducing support personnel labor is important. The firm’s surveys showed that 90 percent of clients calling technical support had visited the USR Web site before calling. USR purchased autocategorization software from iPhrase Technologies, Inc. to help customers help themselves in searching for answers to their questions at the Web site so that customers would not have to telephone the support staff. The software improved the accuracy and responsiveness of the support database at USR’s Web site. Consequently, support calls decreased by a third, saving the company more than $135,000 monthly.

Google, Yahoo!, and other companies in the search engine industry have developed applications that sift through documents both online and offline, categorize them, and help users bring up only links to the most relevant documents. These companies sell their products to corporations to use at their Web sites, intranets, and extranets.

PTS:	1	REF:	396