Using Excel As a Business Intelligence Tool

The world of business intelligence (BI) solutions is constantly evolving, with new technologies and specialized software emerging every year. Yet, amid this digital transformation, Microsoft Excel remains a steadfast tool in the arsenal of many businesses. 

Its ubiquity, flexibility, and ease of use continue to make it a valuable asset for BI, even as companies adopt more sophisticated solutions. 

This blog post explores how Excel is used as a BI tool, highlighting its benefits, limitations, and tips for maximizing its potential.

How Secure is Excel’s Place in The BI Landscape? 

While specialized Business Intelligence tools offer advanced data visualization, reports, complex analysis, and large-scale data management capabilities, they are unlikely to completely replace Excel. 

Excel retains a number of advantages that benefit companies of all kinds:

• Accessibility & Familiarity: Excel's widespread availability and user-friendly interface make it accessible to a broad range of users, from analysts to business managers. It is compatible with a large range of devices, and most professionals have at least a basic understanding of spreadsheets, making it easy to adopt and utilize for BI purposes.
• Flexibility: Excel's versatility allows users to manipulate and analyze data in various ways, tailoring it to their specific needs. Its formulas, functions, and pivot tables enable users to easily perform ad-hoc analyses, create custom reports, and build interactive dashboards.
• Cost-Effectiveness: Excel is a relatively inexpensive option compared to specialized BI tools, especially for small and medium-sized businesses (SMBs). It eliminates the need for significant investments in new software and training, making it an attractive choice for budget-conscious organizations.
• Integration Capabilities: Excel can seamlessly integrate with multiple data sources and BI tools, allowing users to combine data from different systems, rapidly perform data refresh operations, and perform comprehensive analyses.
• Collaboration: Excel files can be easily shared and manipulated by multiple users simultaneously, promoting teamwork and knowledge-sharing.

However, it's important to recognize that Excel's role in BI is evolving. While it remains a powerful tool for many tasks, it's increasingly being used in conjunction with specialized software to handle more complex and large-scale data analysis needs.

Which Companies Use Excel for Business Intelligence?

Companies of various sizes continue to use Excel for business intelligence. However, they use it to varying degrees, depending on business volume, the industry served, and specific BI requirements.

Excel is a mainstay for Small and Medium-Sized Businesses due to its affordability and ease of use. It provides them with essential BI capabilities without the need for significant investments in specialized software.

However, large enterprises may still prefer Excel for ad hoc analyses, quick data exploration, and report creation. Excel complements more sophisticated BI tools by offering a flexible, user-friendly platform for specific tasks. This is particularly so in industries that generate relatively manageable volumes of data and have less complex analysis requirements. 

Examples include sectors like retail, hospitality, and professional services. In these cases, the data generated is not as diverse as the information managed by sectors like healthcare, finance, or manufacturing. 

In these less demanding sectors, data is primarily transactional. For example, it will often consist mainly of sales, bookings, service records, customer data, and inventory data. This means that, generally, it is already well-structured at the time of input.

Finance, sales, and marketing departments often use Excel to track key performance indicators (KPIs), create financial models, and analyze sales data — later submitting that information for BI purposes.

When to Use Excel for Business Intelligence

Excel is most effective for BI in the following scenarios:

• Ad-Hoc Analyses: When you need to quickly explore data, perform calculations, or create custom reports, Excel's flexibility and ease of use make it an ideal choice.
• Data Cleaning and Preparation: Excel's data manipulation features allow you to easily clean and transform data before feeding it into other BI tools or visualizations.
• Small to Medium Datasets: Excel can efficiently handle datasets of moderate size. However, its performance may degrade with datasets exceeding 1 million rows.
• As a BI Training Tool: If your team is comfortable with Excel and has limited experience with specialized BI tools, it can be a good starting point for BI initiatives.
• Budget Constraints: When cost is a significant factor, Excel offers a cost-effective solution for BI, especially for SMBs or organizations with limited BI budgets.

When to Use Excel with Other BI Tools

Many companies combine Excel with specialized BI software to leverage the strengths of both tools. Excel's flexibility and familiarity make it an excellent companion for handling specific tasks within a broader BI ecosystem, particularly when collaboration is necessary. Tasks suited to this methodology include:

• Data Integration: Otherwise known as Extract, Transform, and Load (ETL), this function refers to transferring data from various sources and preparing it for analysis in specialized BI tools.
• Data Exploration and Visualization: While specialized BI tools may be preferable for creating interactive dashboards and visualizations, Excel's charting capabilities can still be useful for quick data exploration and ad-hoc visualizations.
• Report Creation: Excel's formatting and printing features make it convenient for generating reports that can be easily shared with stakeholders who may not have access to specialized BI tools.

Excel's Key Business Intelligence Components

Several key elements of Excel contribute to its effectiveness as a BI tool:

• Formulas and Functions: Excel's vast library of formulas and functions enables you to perform complex calculations, data transformations, and statistical analyses.
• Charts and Graphs: Excel offers a variety of customizable charting options to visualize data and communicate findings effectively.
• Data Validation: Data validation features help ensure data accuracy and integrity by restricting input to specific values or formats.
• Conditional Formatting: Conditional formatting allows you to highlight specific data points or trends, making it easier to identify patterns and outliers.
• Pivot Tables: The pivot function quickly summarizes and analyzes the data in a single table. You can easily group, filter, and sort data to uncover insights and trends.
• Power Pivot: This expands on the pivot tables function by manipulating data from multiple tables and multiple sources. It incorporates Data Analysis Expressions (DAX), a powerful formula language designed for data modeling and analysis, whereas pivot tables is restricted to Excel’s built-in formulas.
• Power Query: Power Query enables you to connect to and transform data from multiple sources, simplifying data integration and preparation.

Excel used to include the Power View data visualization tool for interactive charts, and the Power Map 3D visualization tool for maps. However, in 2021, these functions were migrated to Microsoft’s Power BI specialist business intelligence platform. 

Limitations of Excel for Business Intelligence

Just as there are circumstances in which Excel can be paired with specialized software, there are times when the solution cannot compete with the premium tools on the market. 

These limitations become apparent in the following areas:

• Scalability: Excel's performance can degrade when working with large datasets, limiting its suitability for big data analyses, such as the behavior of large populations.
• Data Governance: Excel lacks robust data governance features, making it challenging to maintain data security, integrity, and compliance in large organizations.
• Automation: Automating complex BI workflows in Excel can be cumbersome and error-prone compared to specialized BI tools.
• Advanced Analytics: Excel's built-in analytical capabilities are limited compared to specialized BI tools that offer advanced statistical modeling, predictive analytics, and machine learning functionalities.
• Visualization: While Excel offers ample charting capabilities, its visualization options are less sophisticated than those provided by dedicated BI tools.

Excel BI Best Practices

To maximize the effectiveness of Excel for BI, consider these best practices:

• Data Cleaning: Measures to clean and validate data before importing it to Excel include revising the data at source for unnecessary characters or spaces, checking related documentation or metadata, and verifying that the figures do not undergo formatting changes when transferred to Excel.
• Data Organization: Structure your data in a clear and consistent format using well-thought-out column headers and appropriate data types.
• Automated Formulas and Functions: Leverage Excel's formulas and functions to automate calculations and data transformations.
• Conditional Formatting: Highlight important data points or trends with text effects or color-coding. This is similar to applying filters to select groups of data points, but with conditional formatting, none of the background data is hidden. This emphasizes the difference between the selected trend and the rest of the data.
• Data Refresh: Regularly update your data to ensure your analysis and insights are based on the latest information.
• Documentation: Document your formulas, data sources, and analysis steps to ensure transparency and reproducibility.
• Training: Invest in training to enhance your team's Excel skills and BI capabilities.

Ready to Take Excel to The Next Level?

Excel is a complementary tool that can enhance your BI capabilities and empower your organization to make informed decisions. However, every company reaches a point where data volume and complexity strain the team’s ability to manage Excel documentation. 

If your organization is keen to simplify its use of Excel, Fluence Technologies has the ideal solution: the FluenceXL Excel reporting add-on.