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I had hard time in performing these steps in the absence of Screen Shots, so thought of adding this post with Screen Shots.

A BI semantic model connection is created in SharePoint and provides redirection to business intelligence semantic model data in a PowerPivot workbook or Analysis Services tabular model database on a network server. Before you can create a BI semantic model connection in SharePoint, you must extend a document library to allow the creation of a .bism file. This step only needs to be performed once for each library, but you will need to repeat it for any library from which you want to create .bism files. Best practices recommend that you create a centralized library for storing .bism files so that you can manage permissions in one place.