Description
A Stakeholder Model of Business Intelligence
A Stakeholder Model of Business Intelligence
Claire A. Simmers, Ph.D.
Associate Professor of Management
Erivan K. Haub School of Business
St. Joseph’s University, Philadelphia, PA 19131
[email protected]
Abstract
In the 21st century, organizations are evolving
into a new-form based on knowledge and networks in
response to an environment characterized by
indistinct organizational boundaries, information
abundance, and fast-paced change. This paper
explores the role of Business Intelligence (BI) in this
new-form organization. I develop a model that
positions Business Intelligence as the primary source
of explicit knowledge linking it with human capital
(tacit knowledge source) within a stakeholder
framework. This model is potentially useful for the
design, diagnosis, and enhancement of BI because it
looks to integrate stakeholder systems with technical
and human knowledge systems for the purpose of
improving organizational performance.
1. Introduction
The firm’s ability to take advantage of data and
information as part of knowledge construction and
utilization becomes more complex with the
increasing volume of both internally and externally
generated information. Firms are experiencing
unparalleled environmental change resulting from the
new economics of information [13] and the
increasingly dynamic and global nature of
competition [7]. Organizational survival depends on
the construction and integration of knowledge
fostering adaptation to the environment as well as
stimulating environmental change through the firm’s
knowledge and practices [10]. Organizations invest in
information technology in an effort to more
expeditiously gather and analyze information and to
create and share knowledge that can be leveraged for
competitive advantage. An important component of
this investment is in Business Intelligence (BI)
systems. BI is identified as an amalgamation of
reporting, data mining and online analytical
processing applications [21]. BI provides access to
data that has been integrated and cleaned so that it
can be analyzed, manipulated, transformed, and
combined to discover correlations, trends, and
patterns that offer new insights, aid in decision
making, and alter the competitive scene [5].
One of the signs of this changing competitive
landscape is the movement from bureaucratic
organizational forms toward new organizational
forms which are sensitive to vertical, horizontal, and
external challenges and opportunities. This new
structure has been labeled the radix or new-form
organization [32] and is characterized by network-
like interfaces up and across functions within and
outside the organization. Just as bureaucracy is a
term which covers many organizational forms, so too
is the new-form organization. The common thread
running through the new-form organization is that the
organization’s foundation is the value chain – a set of
primary and secondary activities that create value for
customers [9].
This paper builds on Schneider’s [32] work
applying similar theoretical development to another
research question: How does business intelligence
and the new-form organization link for enhancing
value creation?
2. BI and the New-form Organization
A knowledge-based theory view of the firm
posits that the primary role of the firm is the creation
and application of knowledge which will lead to
sustainable competitive advantage [15]. A
knowledge-based theory defines knowledge as
broader in scope than information, weaving facts
with ideas and understanding with action. There are
two distinct streams of research using the knowledge-
based view of the firm, each with discrete theories
and constructs. These are: 1) the information
processing view from the information technology
literatures and, 2) the behavioral processing view
from the strategic management and organizational
theory literatures. Knowledge which is formalized
and codified is called “explicit knowledge” and is
often equated with the information processing view.
This knowledge is captured in tangible records,
documentation, rules, databases etc. Recent advances
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in information technology, such as BI and enterprise
resource planning systems, offer fast, inexpensive
ways to capture, apply, and disseminate explicit
knowledge.
The social and cognitive skills embedded in the
minds of employees and organizational routines are
called “tacit knowledge” and are equated with the
behavioral processing view of knowledge. This tacit
knowledge is intangible and difficult to formalize,
but is “visible” in action, and emanates from two
sources – a social source (communities of practice)
and a cognitive source (know-how). Communities of
practice are nodes for the exchange and interpretation
of information, emphasizing the learning that people
have done together rather than the unit they report to,
or the project they are working on. The cognitive
component centers around expertise or skills built up
over time in actions. Know-how (capacity or
learning) is more than experience (things undertaken
before); it is the cumulative adjustment to experience
over time.
The rapidly changing environment and the
corresponding modifications in business practices
have increasingly blurred the heretofore generally
separate domains of explicit and tacit knowledge and
the two corresponding theoretical frameworks. I
present a model which captures this fusion in a world
where knowledge increasingly is developed and used
in nonhierarchical relationships, both internal and
external to the firm [3, 8]. The model expands the
application of stakeholder theory to BI.
Business Intelligence has grown in importance as
organizations increasingly perceive the value of their
intellectual capital and the potential profits of
unlocking this capital. This intellectual capital comes
in the form of the processes, solutions, expertise,
heuristics of individuals and groups within the
organization. These have value in solving problems,
identifying opportunities and threats, and improving
organizational effectiveness harvested from the data
provided by BI.
The new-form organization reflects the
increasing importance of knowledge and coincides
with innovations in, and widespread adoption of,
information technologies and the acceptance of
information as the newest factor of production [4].
Knowledge is different from other factors of
production (land, labor, and capital) as it is not
subject to diminishing returns; output associated with
knowledge increases at an increasing rate [4].
The organization’s ability to generate collective
knowledge is a function of how it combines its
infrastructure, culture, and processes with its explicit
knowledge base. The organization’s capacity to
generate value for customers is increasingly linked to
its use of BI, its treatment of human capital, and its
creation of social capital. Since the new-form
organization is firmly anchored in creating value that
is seamless across multiple products, regions, and
customer groups, it is more open and adaptive than
the bureaucratic designs which characterized the
industrial age [38]. BI facilitates the connections in
the new-form organization, bringing real-time
information to centralized repositories to create rich
and precisely targeted analytics that can be exploited
at every horizontal and vertical level within and
outside the firm [1, 20, 25].
3. BI and Stakeholder Theory
Stakeholder theory conceptualizes the firm as a
series of groups with interlocking relationships.
Stakeholders consist of internal and external
members and the organization is viewed as a
collection of cooperative and competitive interests
each possessing intrinsic worth. It requires as its key
attribute, simultaneous attention to the legitimate
interests of all appropriate stakeholders, in
establishing procedures, goals, and in day-to-day
decision-making [11]. Since the purpose of the
stakeholder theory is to both explain and guide the
structure and operations of the organization through
which numerous and diverse participants accomplish
multiple and not always congruent purposes, the
theory can be integrated with the literature regarding
BI. Effective BI will gather, analyze, and disseminate
data and information on and to these stakeholders to
minimize threats and maximize potential benefits.
For example, data collected through BI on the
demographics and psychographics of the market may
indicate a potential market. A supplier is approached
about forming a cooperative alliance to enter this new
market. By continuing to utilize BI that is linked
between partners, the chances of a successful
penetration of this new market can be improved.
The framework (See Figure 1) shows an external
environment, divided into extra-institutional,
institutional, and industry. These represent
stakeholders which influence and are influenced by
an organization at decreasing levels of impact. That
is to say that an organization has less influence over
extra-institutional forces than industry forces. The
internal organization is primarily a network,
generating and using information capital, human
capital, and social capital in knowledge creation,
within the external environment, to create value. The
main emphasis of this paper is on the internal
environment, specifying how business practices
associated with the new-form organization both
influence, and are influenced by knowledge bases
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Extra-Institutional
Environment
-Technological Advancements
-Globalization
Institutional Environment
-Economic Factors
-Political and Legal factors
-Demographic/Socio-cultural
factors
External Environment
Industry Environment
-Competitive Dynamics
-Value Chain
Business Practices
-Activity Based
Accounting
-Customer Relationship
Management
- Strategic Alliances &
Outsourcing
- Team Usage
Tacit Knowledge Sources
-Communities of Practice
-Customer Know-how
Explicit Knowledge Sources
-Business Intelligence
Knowledge Bases
Value Creation
Balanced Scorecard
Perspectives:
-Financial
-Customer
-Future
-Internal
Strategic Attributes
-Strategic Intent
-Strategic
Leadership
Internal Environment
Figure 1. A Stakeholder Model of Business Intelligence
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and how the relationship of these knowledge
bases with value creation is tempered by
strategic intent and leadership. The use of dotted
rather than solid lines in the model represents the
permeability of the boundaries within and
between the environments.
It is important to delineate how value
creation is conceptualized in this paper.
Evaluating and measuring value creation is
multifarious and the balanced scorecard
approach is a promising way to capture this
complexity [22]. The purpose of the scorecard is
to identify and track the key elements that drive
performance, providing measurement from four
perspectives: 1) the financial perspective
focusing on traditional measures of profitability;
2) the customer perspective centering on
evaluations of an organization’s relationships
with its customers; 3) the future perspective
assessing the firm’s ability to innovate and to
learn for future value creation; and 4) the internal
perspective appraising employees and
operations.
Measuring value creation using a balanced
scorecard approach, places demands on
knowledge bases to enable successful outcomes.
The model posits that it is the integration of both
explicit and tacit knowledge bases that will
heighten the likelihood of value creation.
Traditionally, BI has been a viewed as a function
and tool primarily of information technology
experts. A wider view of the role and place of
BI in value creation is developed in the
following sections, using stakeholder theory as a
theoretical basis.
4. BI and Explicit Knowledge
4.1. The Literature on Business
Intelligence
Information technologies play a central role
in today’s knowledge-intensive environment.
The IT systems must be able to bring together
and integrate disparate organizational systems to
provide seamless, consistent data flow,
connecting individual processes so that data is
made useful for decision-making throughout the
entire business system in a timely fashion.
BI has evolved from data warehousing with
its focus on static reporting to a focus on
intelligence; shifting from a data transformation
function into a function of information as a focal
point to a current function of data transformation
into intelligence. Over the past half of a decade,
the data warehouse (DW) has become a standard
component of the architecture and strategic
direction of most businesses. There is a driving
need for businesses to assess and improve their
competitive position in the marketplace
manifesting itself in the race to collect
information, analyze results, predict future trends
and make well-informed tactical and strategic
business decisions. These decisions affect a
myriad of corporate subjects, from customers to
products to suppliers and distributors, for a wide
range of industries from retailers and
manufacturers to banks, healthcare providers and
airlines [27].
In summary, BI is evolving through a series
of stages from single-department content to
multi-departmental collaboration, to an
enterprise view and finally to a business value
chain view. This evolution in functionality can
be termed BI breadth and means going beyond
querying and reporting of operational data to tie
to business goals across departments and even
organizations [26]. BI has moved from reactive
to proactive and from transaction silos to
corporate level performance assessment [19, 27].
5. BI and Business Practices
This section examines some key business
practices (activity based accounting, customer
relationship management, strategic alliances and
outsourcing, and team usage) of importance in
the knowledge-driven age. The increasing use of
these business practices has given rise to
spiraling demands for information; BI is able to
codify and share these demands through multiple
internal and external environments. In turn,
technical developments within BI have enabled
the increased diffusion of these business
practices.
5.1. Activity Based Cost Accounting
Activity-based cost (ABC) accounting
differs from traditional systems by modeling the
usage of all organizational resources on the
activities done by these resources and then
linking the cost of these activities to outputs such
as products, services, and customers [6]. In
traditional accounting systems, the allocation of
past expenses to products, mainly for inventory
valuation purposes is the focal point and is very
efficient in a bureaucratic form organization. In a
new-form organization with the foundation in the
value chain, activity based accounting is a better
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fit as the costs of resources used to perform
organizational activities are measured. An ABC
system, enabled by BI, allows more efficient
contemplation of how resource demands change
as decisions get made based on primary and
secondary activities making possible better
management of business activities than a
functional view.
5.2 Customer Relationship Management
Customer Relationship Management (CRM)
is a range of marketing and sales concepts and
techniques that requires a massive database
engine for conducting complex analyses of
customer behavior and defining and monitoring
micro-segments of the market. CRM manages
and optimizes customer interactions across an
organization’s traditional and electronic
interfaces [29]. It validates that customers are
primary stakeholders and is used to glean better
insight and understanding of customers’ buying
behaviors, thus helping to build competitive
advantage. Success of CRM depends on a
customer-focused strategy that is implemented
with legacy systems and processes, but often
with new processes and systems [18]. Since BI
includes the entire process from information
sourcing (from not only CRM systems, but also
enterprise resource systems, legacy applications,
and the Internet), through extracting and
transforming to populating (for example a data
warehouse), and then delivering to users, it
addresses performance issues with CRM. Often
CRM does not deliver as promised due to a lack
of focus on business objectives, and the poor
identification and management of scope [36].
The adaptive functionality of BI can be well
matched with the evolving demands of CRM,
thus reducing failures.
5.3. Strategic Alliances and Outsourcing
A characteristic of the existing business
setting is that many organizations form
cooperative inter-organizational relationships
[30]. Strategic alliances are driven both by
strategic needs to develop or enhance
competitive advantage and by knowledge
opportunities [12]. Cooperative opportunities,
whether for joint maximization of
complementary assets or for the pursuit of new
opportunities present the challenge of
coordinating information and creating a shared
knowledge base. Membership in alliances
results in interorganizational boundary spanning
where having BI systems can heighten
productivity and efficiency.
Outsourcing is having external sources for
activities that were previously performed inside
the firm. Activities which are outsourced still
need to be coordinated and integrated by the
home organization. Outsourcing results in
increasing roles for BI and increases its role
complexity. For example, organizations may
decide that outsourced activities need access to
aggregate demand levels for certain products or
product groups in order to assist in making better
manufacturing planning decisions. An integrated
BI platform, such as Hyperion’s Business
Performance Management Suite, can be used to
allow goal setting, target planning, measuring,
predicting, and reporting results across an
enterprise extended through alliances and/or
outsourcing [19].
5.4 Team Usage
Organizations have increased their reliance
on teams [37]. Teams are many times cross-
functional with different expertise and are often
working from different locations [34]. The rise
of team usage is associated with the expansion of
reliance on electronic communication to
complete work assignments [2]. BI provides the
explicit knowledge base to enhance team
effectiveness, and demands for communication
and coordination among teams fuels
enhancements in BI analytics.
It is proposed that those organizations that
are viewed as effective across multiple
stakeholders will tend to engage successfully in
the new-form business practices outlined above.
As organizations tend to develop these business
practices the breadth of BI usage will increase;
thus the movement toward these business
practices will heighten reliance on BI.
PROPOSITION 1. There will be a
positive relationship between the
breadth of business intelligence and the
usage of new-form business practices.
6. BI and Tacit Knowledge
The review of the new-form organization’s
business practices indicates that, contrary to
bureaucratic models, explicit knowledge is no
longer static, reactive and contained within
discrete units; indeed, the very nature of business
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intelligence suggests an integration of explicit
and tacit knowledge bases within and outside the
organization.
6.1 Communities of Practice and BI
The concept of communities of practice
refers to a theory that builds on learning as social
participation [23]. Communities are a way of
thinking about how work is done and express the
idea that people learn on the job and learn from
working together. Communities are not isolated;
they interact with each other and can be
geographically dispersed. The core principles
are simple: learning is social and learning
happens on the job [35]. Communities of
practice have been deeply rooted in the face-to-
face world; it has been generally thought that the
concept of communities of practice do not
transfer to the virtual world [31, 35]. However,
more recently, communities of practice have
been described as “a group whose members
regularly engage in sharing and learning, based
on their common interests.” [24]. Lesser and
Storck [24] suggest that communities of practice
are engines for the development of social capital
and that members may not be collocated. Critical
dimensions include: structural (individuals must
perceive themselves to be part of a network);
relational (a sense of trust needs to be
developed); and cognitive (common interest).
While face-to-face interaction is important for
developing trust, shared repositories and
discussion databases also contribute to the
creation and maintenance of trust. Lesser and
Storck [24] further posit that communities of
practice create organizational value, identifying
four areas of organizational performance:
decreasing the learning curve of new employees;
responding more rapidly to customer needs;
reducing re-work; and fostering new ideas for
products and services. BI functionality provides
fertile ground for the learning and interest
sharing which characterize communities of
practice and makes possible communities of
practice interactions. In return, the demands of
communities of practice push the improvement
of BI systems. In keeping with the development
of tacit knowledge through communities of
practice, I propose that value creation will be
enhanced when communities of practice and BI
are integrated knowledge bases.
PROPOSITION 2a. There will be a
positive relationship between the
breadth of business intelligence and
communities of practice.
PROPOSITION 2b. There will be a
positive relationship between the
breadth of business intelligence and
communities of practice and value
creation.
6.2 Customer Know-How and BI
This source of tacit knowledge is a complex
construct derived from collaborative know-how
[33]. Customer know-how is the capacity to
manage customers; it represents the skill to
access and internalize new strategic assets from
customers. It is knowledge that is embedded in
the minds of employees and organizational
routines and represents organization-wide culture
and expertise about customers’ current and
future needs that cuts across departments,
individuals and time. Since organizations with
customer know-how are better able to avoid
mistakes and to resolve problems, they are more
likely to develop trust and reputation with
customers, building more customer know-how. I
propose that BI as an explicit knowledge base
and customer know-how as a tacit knowledge
base feed off of each other. They are in a co-
evolutionary relationships and increasingly
overlapping. Researchers have increasingly
drawn attention to the links between learning as
represented by customer know-how and actual
firm performance [28].
PROPOSITION 3a. There will be a
positive relationship between the
breadth of business intelligence and
customer know-how.
PROPOSITION 3b. There will be a
positive relationship between the
breadth of business intelligence and
customer know-how and value creation.
7. BI and Strategic Attributes
Attributes of the organization set the
backdrop for the enactment of BI in the
stakeholder model and I propose that they play a
moderating role in the relationship between BI
and value creation.
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7.1 Strategic Intent
The leveraging of the firm’s internal
resources, capabilities, and core competencies to
achieve an organization’s goals in the
competitive environment is strategic intent [16].
Concerned with winning competitive battles,
strategic intent implies a significant stretch for
the organization. It describes the resolve,
stamina, and commitment of the organization,
emanating from the leadership throughout the
organization to strive to be the best [14]. It is the
dream that challenges and energizes the
organization [17]. Using the stakeholder model
implies that the strategic intent must be broad
enough to include relevant current and future
stakeholders. It should not be narrowly focused
on maintaining position, but on competing for
the future and providing the best for the
customer. Strategic intent is consistent with, and
drives the new-form organization business
practices. BI is a way to disseminate, as well as
coordinate this strategic intent, not only within
the organization, but also throughout the
organization’s stakeholders. Those organizations
with a broader strategic intent will need breadth
to BI to make this happen.
7.2 Strategic Leadership.
Leadership roles, relationships and leader
attributes may influence how an organization
acts in the new-form organization. Strategic
leaders will be able to assess stakeholders’
respective abilities and whether extra-
institutional and institutional forces represent
opportunities or challenges. To the extent that
leadership is able to discern the importance of
often conflicting stakeholder interests and
demands, the organization will be better able to
enhance value creation. Leaders need to possess
significant cognitive, emotional, and behavioral
abilities to cope with their complex
environments [32]. Organizations with
leadership that can assess the importance of
stakeholders and have interpersonal skills to
enhance human and information capital are
better able to envision the potential of BI. These
leaders will consistently demand BI that provides
more than transactional data; they will need
corporate performance management systems
which are integrated with tacit knowledge
sources. These integrated knowledge bases will
provide an overarching view of the internal and
external business landscape.
In summary, value creation is enhanced
when strategic intent and leadership look beyond
the traditional organizational model of
bureaucracy and embrace the practices of the
new-form organization emphasizing human and
social capital that is enabled by BI. Thus I
propose that the breadth of strategic intent and
leadership will moderate the relationship
between knowledge bases and value creation.
PROPOSITION 4. The positive
relationship between knowledge bases
and value creation is moderated by a
strategic intent and strategic leadership.
8. Conclusion
The stakeholder BI model depicted in
Figure 1 address issues regarding the
relationships of BI to those stakeholders outside
the traditional IT domain. The stakeholder
model describes how BI has changed with the
new-form organization; it is offered that explicit
and tacit knowledge bases will interact within
and across organizations. The model is at a
preliminary stage and is offered with the
intention of promoting research to fill the gap
between theory and practice. It fosters the
integration of information theories and
behavioral theories into a single model, which I
believe has the potential to more accurately
describe and inform practice. In addition, the
interplay between BI and the extra-institutional,
institutional, and industry forces is an area for
further development as these forces are often
only peripheral in IT research.
In particular, work is needed on BI
integration with communities of practice and
customer know-how. In the 21st century,
facilitation of knowledge through the integration
of explicit and implicit knowledge bases is
replacing the traditionally separate silos of
information technology and other organizational
functional areas such as marketing, operations,
and human resources. While BI remains, in part
about information technology, it is more about
developing social capital by enabling
relationships that offer access to human capital
both within and outside the organization. Thus it
is important for all within the organization to not
only understand these relationships, but to work
with them. This is particularly true for those in
power positions who can affect how things are
done.
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BI, within the new-form organization,
fosters interactions and connections while
incorporating technological advances, thus
entrenching its role within a larger stakeholder
model. This model offers to practitioners an
integrated perspective that formalizes the
realities of operating in a competitive
environment. I reason that organizations that
understand and integrate the different knowledge
sources into a seamless flow will be better
equipped to meet the business challenges of the
21st century. I propose that organizations that
integrate the knowledge sources will have better
knowledge-based advantages, leading to
enhanced organizational performance.
Those implementing BI or
reviewing/updating existing BI can use this
model as an evaluation tool for assessing how BI
is influenced and how it influences each of the
internal and external stakeholder forces. A
questionnaire or check list based on the proposed
framework would be a useful way to evaluate
whether all of these forces were recognized and
considered in the design or review phase. It
would provide a way to envision and then to map
the people and processes both internally and
external to the organization that are so critical to
the success of BI initiatives.
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Proceedings of the 37th Hawaii International Conference on System Sciences - 2004
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doc_704547125.pdf
A Stakeholder Model of Business Intelligence
A Stakeholder Model of Business Intelligence
Claire A. Simmers, Ph.D.
Associate Professor of Management
Erivan K. Haub School of Business
St. Joseph’s University, Philadelphia, PA 19131
[email protected]
Abstract
In the 21st century, organizations are evolving
into a new-form based on knowledge and networks in
response to an environment characterized by
indistinct organizational boundaries, information
abundance, and fast-paced change. This paper
explores the role of Business Intelligence (BI) in this
new-form organization. I develop a model that
positions Business Intelligence as the primary source
of explicit knowledge linking it with human capital
(tacit knowledge source) within a stakeholder
framework. This model is potentially useful for the
design, diagnosis, and enhancement of BI because it
looks to integrate stakeholder systems with technical
and human knowledge systems for the purpose of
improving organizational performance.
1. Introduction
The firm’s ability to take advantage of data and
information as part of knowledge construction and
utilization becomes more complex with the
increasing volume of both internally and externally
generated information. Firms are experiencing
unparalleled environmental change resulting from the
new economics of information [13] and the
increasingly dynamic and global nature of
competition [7]. Organizational survival depends on
the construction and integration of knowledge
fostering adaptation to the environment as well as
stimulating environmental change through the firm’s
knowledge and practices [10]. Organizations invest in
information technology in an effort to more
expeditiously gather and analyze information and to
create and share knowledge that can be leveraged for
competitive advantage. An important component of
this investment is in Business Intelligence (BI)
systems. BI is identified as an amalgamation of
reporting, data mining and online analytical
processing applications [21]. BI provides access to
data that has been integrated and cleaned so that it
can be analyzed, manipulated, transformed, and
combined to discover correlations, trends, and
patterns that offer new insights, aid in decision
making, and alter the competitive scene [5].
One of the signs of this changing competitive
landscape is the movement from bureaucratic
organizational forms toward new organizational
forms which are sensitive to vertical, horizontal, and
external challenges and opportunities. This new
structure has been labeled the radix or new-form
organization [32] and is characterized by network-
like interfaces up and across functions within and
outside the organization. Just as bureaucracy is a
term which covers many organizational forms, so too
is the new-form organization. The common thread
running through the new-form organization is that the
organization’s foundation is the value chain – a set of
primary and secondary activities that create value for
customers [9].
This paper builds on Schneider’s [32] work
applying similar theoretical development to another
research question: How does business intelligence
and the new-form organization link for enhancing
value creation?
2. BI and the New-form Organization
A knowledge-based theory view of the firm
posits that the primary role of the firm is the creation
and application of knowledge which will lead to
sustainable competitive advantage [15]. A
knowledge-based theory defines knowledge as
broader in scope than information, weaving facts
with ideas and understanding with action. There are
two distinct streams of research using the knowledge-
based view of the firm, each with discrete theories
and constructs. These are: 1) the information
processing view from the information technology
literatures and, 2) the behavioral processing view
from the strategic management and organizational
theory literatures. Knowledge which is formalized
and codified is called “explicit knowledge” and is
often equated with the information processing view.
This knowledge is captured in tangible records,
documentation, rules, databases etc. Recent advances
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in information technology, such as BI and enterprise
resource planning systems, offer fast, inexpensive
ways to capture, apply, and disseminate explicit
knowledge.
The social and cognitive skills embedded in the
minds of employees and organizational routines are
called “tacit knowledge” and are equated with the
behavioral processing view of knowledge. This tacit
knowledge is intangible and difficult to formalize,
but is “visible” in action, and emanates from two
sources – a social source (communities of practice)
and a cognitive source (know-how). Communities of
practice are nodes for the exchange and interpretation
of information, emphasizing the learning that people
have done together rather than the unit they report to,
or the project they are working on. The cognitive
component centers around expertise or skills built up
over time in actions. Know-how (capacity or
learning) is more than experience (things undertaken
before); it is the cumulative adjustment to experience
over time.
The rapidly changing environment and the
corresponding modifications in business practices
have increasingly blurred the heretofore generally
separate domains of explicit and tacit knowledge and
the two corresponding theoretical frameworks. I
present a model which captures this fusion in a world
where knowledge increasingly is developed and used
in nonhierarchical relationships, both internal and
external to the firm [3, 8]. The model expands the
application of stakeholder theory to BI.
Business Intelligence has grown in importance as
organizations increasingly perceive the value of their
intellectual capital and the potential profits of
unlocking this capital. This intellectual capital comes
in the form of the processes, solutions, expertise,
heuristics of individuals and groups within the
organization. These have value in solving problems,
identifying opportunities and threats, and improving
organizational effectiveness harvested from the data
provided by BI.
The new-form organization reflects the
increasing importance of knowledge and coincides
with innovations in, and widespread adoption of,
information technologies and the acceptance of
information as the newest factor of production [4].
Knowledge is different from other factors of
production (land, labor, and capital) as it is not
subject to diminishing returns; output associated with
knowledge increases at an increasing rate [4].
The organization’s ability to generate collective
knowledge is a function of how it combines its
infrastructure, culture, and processes with its explicit
knowledge base. The organization’s capacity to
generate value for customers is increasingly linked to
its use of BI, its treatment of human capital, and its
creation of social capital. Since the new-form
organization is firmly anchored in creating value that
is seamless across multiple products, regions, and
customer groups, it is more open and adaptive than
the bureaucratic designs which characterized the
industrial age [38]. BI facilitates the connections in
the new-form organization, bringing real-time
information to centralized repositories to create rich
and precisely targeted analytics that can be exploited
at every horizontal and vertical level within and
outside the firm [1, 20, 25].
3. BI and Stakeholder Theory
Stakeholder theory conceptualizes the firm as a
series of groups with interlocking relationships.
Stakeholders consist of internal and external
members and the organization is viewed as a
collection of cooperative and competitive interests
each possessing intrinsic worth. It requires as its key
attribute, simultaneous attention to the legitimate
interests of all appropriate stakeholders, in
establishing procedures, goals, and in day-to-day
decision-making [11]. Since the purpose of the
stakeholder theory is to both explain and guide the
structure and operations of the organization through
which numerous and diverse participants accomplish
multiple and not always congruent purposes, the
theory can be integrated with the literature regarding
BI. Effective BI will gather, analyze, and disseminate
data and information on and to these stakeholders to
minimize threats and maximize potential benefits.
For example, data collected through BI on the
demographics and psychographics of the market may
indicate a potential market. A supplier is approached
about forming a cooperative alliance to enter this new
market. By continuing to utilize BI that is linked
between partners, the chances of a successful
penetration of this new market can be improved.
The framework (See Figure 1) shows an external
environment, divided into extra-institutional,
institutional, and industry. These represent
stakeholders which influence and are influenced by
an organization at decreasing levels of impact. That
is to say that an organization has less influence over
extra-institutional forces than industry forces. The
internal organization is primarily a network,
generating and using information capital, human
capital, and social capital in knowledge creation,
within the external environment, to create value. The
main emphasis of this paper is on the internal
environment, specifying how business practices
associated with the new-form organization both
influence, and are influenced by knowledge bases
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Extra-Institutional
Environment
-Technological Advancements
-Globalization
Institutional Environment
-Economic Factors
-Political and Legal factors
-Demographic/Socio-cultural
factors
External Environment
Industry Environment
-Competitive Dynamics
-Value Chain
Business Practices
-Activity Based
Accounting
-Customer Relationship
Management
- Strategic Alliances &
Outsourcing
- Team Usage
Tacit Knowledge Sources
-Communities of Practice
-Customer Know-how
Explicit Knowledge Sources
-Business Intelligence
Knowledge Bases
Value Creation
Balanced Scorecard
Perspectives:
-Financial
-Customer
-Future
-Internal
Strategic Attributes
-Strategic Intent
-Strategic
Leadership
Internal Environment
Figure 1. A Stakeholder Model of Business Intelligence
Proceedings of the 37th Hawaii International Conference on System Sciences - 2004
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and how the relationship of these knowledge
bases with value creation is tempered by
strategic intent and leadership. The use of dotted
rather than solid lines in the model represents the
permeability of the boundaries within and
between the environments.
It is important to delineate how value
creation is conceptualized in this paper.
Evaluating and measuring value creation is
multifarious and the balanced scorecard
approach is a promising way to capture this
complexity [22]. The purpose of the scorecard is
to identify and track the key elements that drive
performance, providing measurement from four
perspectives: 1) the financial perspective
focusing on traditional measures of profitability;
2) the customer perspective centering on
evaluations of an organization’s relationships
with its customers; 3) the future perspective
assessing the firm’s ability to innovate and to
learn for future value creation; and 4) the internal
perspective appraising employees and
operations.
Measuring value creation using a balanced
scorecard approach, places demands on
knowledge bases to enable successful outcomes.
The model posits that it is the integration of both
explicit and tacit knowledge bases that will
heighten the likelihood of value creation.
Traditionally, BI has been a viewed as a function
and tool primarily of information technology
experts. A wider view of the role and place of
BI in value creation is developed in the
following sections, using stakeholder theory as a
theoretical basis.
4. BI and Explicit Knowledge
4.1. The Literature on Business
Intelligence
Information technologies play a central role
in today’s knowledge-intensive environment.
The IT systems must be able to bring together
and integrate disparate organizational systems to
provide seamless, consistent data flow,
connecting individual processes so that data is
made useful for decision-making throughout the
entire business system in a timely fashion.
BI has evolved from data warehousing with
its focus on static reporting to a focus on
intelligence; shifting from a data transformation
function into a function of information as a focal
point to a current function of data transformation
into intelligence. Over the past half of a decade,
the data warehouse (DW) has become a standard
component of the architecture and strategic
direction of most businesses. There is a driving
need for businesses to assess and improve their
competitive position in the marketplace
manifesting itself in the race to collect
information, analyze results, predict future trends
and make well-informed tactical and strategic
business decisions. These decisions affect a
myriad of corporate subjects, from customers to
products to suppliers and distributors, for a wide
range of industries from retailers and
manufacturers to banks, healthcare providers and
airlines [27].
In summary, BI is evolving through a series
of stages from single-department content to
multi-departmental collaboration, to an
enterprise view and finally to a business value
chain view. This evolution in functionality can
be termed BI breadth and means going beyond
querying and reporting of operational data to tie
to business goals across departments and even
organizations [26]. BI has moved from reactive
to proactive and from transaction silos to
corporate level performance assessment [19, 27].
5. BI and Business Practices
This section examines some key business
practices (activity based accounting, customer
relationship management, strategic alliances and
outsourcing, and team usage) of importance in
the knowledge-driven age. The increasing use of
these business practices has given rise to
spiraling demands for information; BI is able to
codify and share these demands through multiple
internal and external environments. In turn,
technical developments within BI have enabled
the increased diffusion of these business
practices.
5.1. Activity Based Cost Accounting
Activity-based cost (ABC) accounting
differs from traditional systems by modeling the
usage of all organizational resources on the
activities done by these resources and then
linking the cost of these activities to outputs such
as products, services, and customers [6]. In
traditional accounting systems, the allocation of
past expenses to products, mainly for inventory
valuation purposes is the focal point and is very
efficient in a bureaucratic form organization. In a
new-form organization with the foundation in the
value chain, activity based accounting is a better
Proceedings of the 37th Hawaii International Conference on System Sciences - 2004
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fit as the costs of resources used to perform
organizational activities are measured. An ABC
system, enabled by BI, allows more efficient
contemplation of how resource demands change
as decisions get made based on primary and
secondary activities making possible better
management of business activities than a
functional view.
5.2 Customer Relationship Management
Customer Relationship Management (CRM)
is a range of marketing and sales concepts and
techniques that requires a massive database
engine for conducting complex analyses of
customer behavior and defining and monitoring
micro-segments of the market. CRM manages
and optimizes customer interactions across an
organization’s traditional and electronic
interfaces [29]. It validates that customers are
primary stakeholders and is used to glean better
insight and understanding of customers’ buying
behaviors, thus helping to build competitive
advantage. Success of CRM depends on a
customer-focused strategy that is implemented
with legacy systems and processes, but often
with new processes and systems [18]. Since BI
includes the entire process from information
sourcing (from not only CRM systems, but also
enterprise resource systems, legacy applications,
and the Internet), through extracting and
transforming to populating (for example a data
warehouse), and then delivering to users, it
addresses performance issues with CRM. Often
CRM does not deliver as promised due to a lack
of focus on business objectives, and the poor
identification and management of scope [36].
The adaptive functionality of BI can be well
matched with the evolving demands of CRM,
thus reducing failures.
5.3. Strategic Alliances and Outsourcing
A characteristic of the existing business
setting is that many organizations form
cooperative inter-organizational relationships
[30]. Strategic alliances are driven both by
strategic needs to develop or enhance
competitive advantage and by knowledge
opportunities [12]. Cooperative opportunities,
whether for joint maximization of
complementary assets or for the pursuit of new
opportunities present the challenge of
coordinating information and creating a shared
knowledge base. Membership in alliances
results in interorganizational boundary spanning
where having BI systems can heighten
productivity and efficiency.
Outsourcing is having external sources for
activities that were previously performed inside
the firm. Activities which are outsourced still
need to be coordinated and integrated by the
home organization. Outsourcing results in
increasing roles for BI and increases its role
complexity. For example, organizations may
decide that outsourced activities need access to
aggregate demand levels for certain products or
product groups in order to assist in making better
manufacturing planning decisions. An integrated
BI platform, such as Hyperion’s Business
Performance Management Suite, can be used to
allow goal setting, target planning, measuring,
predicting, and reporting results across an
enterprise extended through alliances and/or
outsourcing [19].
5.4 Team Usage
Organizations have increased their reliance
on teams [37]. Teams are many times cross-
functional with different expertise and are often
working from different locations [34]. The rise
of team usage is associated with the expansion of
reliance on electronic communication to
complete work assignments [2]. BI provides the
explicit knowledge base to enhance team
effectiveness, and demands for communication
and coordination among teams fuels
enhancements in BI analytics.
It is proposed that those organizations that
are viewed as effective across multiple
stakeholders will tend to engage successfully in
the new-form business practices outlined above.
As organizations tend to develop these business
practices the breadth of BI usage will increase;
thus the movement toward these business
practices will heighten reliance on BI.
PROPOSITION 1. There will be a
positive relationship between the
breadth of business intelligence and the
usage of new-form business practices.
6. BI and Tacit Knowledge
The review of the new-form organization’s
business practices indicates that, contrary to
bureaucratic models, explicit knowledge is no
longer static, reactive and contained within
discrete units; indeed, the very nature of business
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intelligence suggests an integration of explicit
and tacit knowledge bases within and outside the
organization.
6.1 Communities of Practice and BI
The concept of communities of practice
refers to a theory that builds on learning as social
participation [23]. Communities are a way of
thinking about how work is done and express the
idea that people learn on the job and learn from
working together. Communities are not isolated;
they interact with each other and can be
geographically dispersed. The core principles
are simple: learning is social and learning
happens on the job [35]. Communities of
practice have been deeply rooted in the face-to-
face world; it has been generally thought that the
concept of communities of practice do not
transfer to the virtual world [31, 35]. However,
more recently, communities of practice have
been described as “a group whose members
regularly engage in sharing and learning, based
on their common interests.” [24]. Lesser and
Storck [24] suggest that communities of practice
are engines for the development of social capital
and that members may not be collocated. Critical
dimensions include: structural (individuals must
perceive themselves to be part of a network);
relational (a sense of trust needs to be
developed); and cognitive (common interest).
While face-to-face interaction is important for
developing trust, shared repositories and
discussion databases also contribute to the
creation and maintenance of trust. Lesser and
Storck [24] further posit that communities of
practice create organizational value, identifying
four areas of organizational performance:
decreasing the learning curve of new employees;
responding more rapidly to customer needs;
reducing re-work; and fostering new ideas for
products and services. BI functionality provides
fertile ground for the learning and interest
sharing which characterize communities of
practice and makes possible communities of
practice interactions. In return, the demands of
communities of practice push the improvement
of BI systems. In keeping with the development
of tacit knowledge through communities of
practice, I propose that value creation will be
enhanced when communities of practice and BI
are integrated knowledge bases.
PROPOSITION 2a. There will be a
positive relationship between the
breadth of business intelligence and
communities of practice.
PROPOSITION 2b. There will be a
positive relationship between the
breadth of business intelligence and
communities of practice and value
creation.
6.2 Customer Know-How and BI
This source of tacit knowledge is a complex
construct derived from collaborative know-how
[33]. Customer know-how is the capacity to
manage customers; it represents the skill to
access and internalize new strategic assets from
customers. It is knowledge that is embedded in
the minds of employees and organizational
routines and represents organization-wide culture
and expertise about customers’ current and
future needs that cuts across departments,
individuals and time. Since organizations with
customer know-how are better able to avoid
mistakes and to resolve problems, they are more
likely to develop trust and reputation with
customers, building more customer know-how. I
propose that BI as an explicit knowledge base
and customer know-how as a tacit knowledge
base feed off of each other. They are in a co-
evolutionary relationships and increasingly
overlapping. Researchers have increasingly
drawn attention to the links between learning as
represented by customer know-how and actual
firm performance [28].
PROPOSITION 3a. There will be a
positive relationship between the
breadth of business intelligence and
customer know-how.
PROPOSITION 3b. There will be a
positive relationship between the
breadth of business intelligence and
customer know-how and value creation.
7. BI and Strategic Attributes
Attributes of the organization set the
backdrop for the enactment of BI in the
stakeholder model and I propose that they play a
moderating role in the relationship between BI
and value creation.
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7.1 Strategic Intent
The leveraging of the firm’s internal
resources, capabilities, and core competencies to
achieve an organization’s goals in the
competitive environment is strategic intent [16].
Concerned with winning competitive battles,
strategic intent implies a significant stretch for
the organization. It describes the resolve,
stamina, and commitment of the organization,
emanating from the leadership throughout the
organization to strive to be the best [14]. It is the
dream that challenges and energizes the
organization [17]. Using the stakeholder model
implies that the strategic intent must be broad
enough to include relevant current and future
stakeholders. It should not be narrowly focused
on maintaining position, but on competing for
the future and providing the best for the
customer. Strategic intent is consistent with, and
drives the new-form organization business
practices. BI is a way to disseminate, as well as
coordinate this strategic intent, not only within
the organization, but also throughout the
organization’s stakeholders. Those organizations
with a broader strategic intent will need breadth
to BI to make this happen.
7.2 Strategic Leadership.
Leadership roles, relationships and leader
attributes may influence how an organization
acts in the new-form organization. Strategic
leaders will be able to assess stakeholders’
respective abilities and whether extra-
institutional and institutional forces represent
opportunities or challenges. To the extent that
leadership is able to discern the importance of
often conflicting stakeholder interests and
demands, the organization will be better able to
enhance value creation. Leaders need to possess
significant cognitive, emotional, and behavioral
abilities to cope with their complex
environments [32]. Organizations with
leadership that can assess the importance of
stakeholders and have interpersonal skills to
enhance human and information capital are
better able to envision the potential of BI. These
leaders will consistently demand BI that provides
more than transactional data; they will need
corporate performance management systems
which are integrated with tacit knowledge
sources. These integrated knowledge bases will
provide an overarching view of the internal and
external business landscape.
In summary, value creation is enhanced
when strategic intent and leadership look beyond
the traditional organizational model of
bureaucracy and embrace the practices of the
new-form organization emphasizing human and
social capital that is enabled by BI. Thus I
propose that the breadth of strategic intent and
leadership will moderate the relationship
between knowledge bases and value creation.
PROPOSITION 4. The positive
relationship between knowledge bases
and value creation is moderated by a
strategic intent and strategic leadership.
8. Conclusion
The stakeholder BI model depicted in
Figure 1 address issues regarding the
relationships of BI to those stakeholders outside
the traditional IT domain. The stakeholder
model describes how BI has changed with the
new-form organization; it is offered that explicit
and tacit knowledge bases will interact within
and across organizations. The model is at a
preliminary stage and is offered with the
intention of promoting research to fill the gap
between theory and practice. It fosters the
integration of information theories and
behavioral theories into a single model, which I
believe has the potential to more accurately
describe and inform practice. In addition, the
interplay between BI and the extra-institutional,
institutional, and industry forces is an area for
further development as these forces are often
only peripheral in IT research.
In particular, work is needed on BI
integration with communities of practice and
customer know-how. In the 21st century,
facilitation of knowledge through the integration
of explicit and implicit knowledge bases is
replacing the traditionally separate silos of
information technology and other organizational
functional areas such as marketing, operations,
and human resources. While BI remains, in part
about information technology, it is more about
developing social capital by enabling
relationships that offer access to human capital
both within and outside the organization. Thus it
is important for all within the organization to not
only understand these relationships, but to work
with them. This is particularly true for those in
power positions who can affect how things are
done.
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BI, within the new-form organization,
fosters interactions and connections while
incorporating technological advances, thus
entrenching its role within a larger stakeholder
model. This model offers to practitioners an
integrated perspective that formalizes the
realities of operating in a competitive
environment. I reason that organizations that
understand and integrate the different knowledge
sources into a seamless flow will be better
equipped to meet the business challenges of the
21st century. I propose that organizations that
integrate the knowledge sources will have better
knowledge-based advantages, leading to
enhanced organizational performance.
Those implementing BI or
reviewing/updating existing BI can use this
model as an evaluation tool for assessing how BI
is influenced and how it influences each of the
internal and external stakeholder forces. A
questionnaire or check list based on the proposed
framework would be a useful way to evaluate
whether all of these forces were recognized and
considered in the design or review phase. It
would provide a way to envision and then to map
the people and processes both internally and
external to the organization that are so critical to
the success of BI initiatives.
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