Description
Business Intelligence How it Works Why Business Intelligence Now!
“Business Intelligence: How it Works”
“Why Business Intelligence Now!”
Editorial: For the month of May, the author of IT Watch at Srithai wishes to introduce
the audience to the concept of gaining value of stored information (typically in
a sizeable data base and other conventional nondata based forms in the computer) to
use in ways that would improve the decisions made by the user commonly
practiced In the IT industry, that is called “Business Intelligence”.
The first article was published by The PC Magazine July 2001 Ziff Davis Media Inc.
titled “Business Intelligence: How it Works” that provides easy to understand terms
such as Databases, Data warehouse, Querry, Reports? all of which form
the essential components in a business intelligence solution typically marketed
by IT software companies nowadays to enhance the quality decisions made by
business leaders in the computer age.
In reading about these concepts by Srithai employees and management, it is hope that
the understanding will help them appreciate the value and the need to benefit from any
future implementation of Business Intelligence at Srithai. It is Srithai’s IT enhancement
strategy to support its management goal with effective and modernized IT tools that
would enhance its ability to compete not only in Asia but globally.
Feature article #1:
Business Intelligence: How it Works
PC Magazine, July, 2001
URL: http://findarticles.com/p/articles/mi_zdpcm/is_200107/ai_ziff7963
Databases
A company has information—and lots of it—stored in various databases. Take a national retail chain,
for example, that sells everything from grills and patio furniture to plastic utensils. The company is
sure to have inventory, customer information, data about past promotions, and sales numbers in
various databases. Though all this information may be scattered across multiple systems—and may
seem unrelated—business intelligence software has to bring it together and help employees find
important pieces of information and the correlations among them. For instance, when this retail chain
plans a sales promotion, the marketing department staff can analyze which products (right down to
the colors) are popular in which regions. And they can see whether any particular products are
commonly sold together: Perhaps customers buying blue plastic cups often buy blue plastic plates as
well.
Data Warehouse
ADVERTISEMENT
The data in all the databases is brought together in the data warehouse. Here, tables can be linked,
and data cubes are formed. For instance, inventory information is linked to sales numbers and
customer databases, allowing for deep analysis of information. Some data warehouses have a
dynamic link to the databases, while some are static. A dynamic link means that as data is added to
the inventory database, the data warehouse sees the changes and reflects them in the queries being
performed. A static connection, on the other hand, requires the data warehouse to import information
from the databases on a specific command. In this situation, the data being queried may be out of
sync.
Query
Deep analysis is carried out by performing multilayer queries. Because all the databases are linked,
you can search for what products a store has too much of. You can then determine which of these
products commonly sell with popular items, based on previous sales. After planning a promotion to
move stock, you can dig deeper to see where this promotion would be most popular (and most
profitable).
Reports
Once you have the answers, you'll want to share the numbers with managers at the stores the
promotion is planned for, so they can take a close look at the data (perhaps they will know of a local
event, such as a parade or festival) that will drive sales for plastic plates. Though reports can be
delivered electronically over the Internet or an intranet, methods vary. Some reports provide a static
view of the analysis—meaning the charts are there, but you can't interact with them—and some link
back to the original data, allowing you to manipulate the numbers within the reports for further
analysis.
Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in PC Magazine.
Editorial: The second article, “Why Business Intelligence Now!” is an article written by
Dave Stark and Steve Humphrey of Analysis Team, Inc. in its July 2003 publication.
It is particularly useful because it captured the concept of putting the information
derived from business data and corporate knowledge to their eventual usage.
It articulated why business intelligence is important and must be put to good use
when it is practical and at the time frame “sooner (if feasible) rather later”. It
summarized for the reader why there are needs to do so. But most importantly, to
gain most benefits, one needs to understand what Business Intelligence as a
technology can do for you.
Feature article #2:
URL: http://www.analysisteam.com/Newsletter_V1n3_subd.html
Why Business Intelligence NOW!
Your company is up against the most
challenging business environment of recent
times. Do you know where you are going and
how you will get there?
Good business performance analysis and planning are never out of style.
Whether times are good or bad, whether you are concerned about growth
or just keeping the company’s doors open, understanding your business,
planning effectively and taking profitable action are key to keeping your
company on track.
Times are not good. Economic growth has slowed to a crawl. Sales are
down and unemployment is up. Corporate budgets have been locked
down and the end is not in sight. So, what are you doing about it? Are
you hiding under your desk waiting for a better economy to lift your
business or are you using this opportunity to move ahead of your
competition? If you are not working today to reinvent your business and
innovate your way to the head of your industry, chances are that one of
your competitors is. Your need is urgent.
Moving ahead during a slow economy is difficult. It requires vision and
unconventional thinking. It requires speed, agility, and economy. Most of
all, it requires good information — information that will help you and your
team discover new opportunities and exploit them. Business Intelligence
is the key you need to unlock those opportunities.
There are many ways to build advantage without engaging in large
development projects, and this article will discuss several of them. They
include:
· Improving Profitability
· Enhancing Customer Value
· Setting Cohesive Direction
· Leveraging Existing Assets
· Streamlining Processes
Each of these areas is fertile with opportunity if you have the correct
information. An additional area of opportunity (and need) is Sarbanes
Oxley compliance. That will also be covered. Before discussing these
prospects, it is important to create a common framework for
understanding Business Intelligence.
Understanding Business Intelligence
Business Intelligence (or Business Performance Management) is the
dynamic use of business data and corporate knowledge to make
decisions and identify actions. Business Intelligence maintains the
alignment of your company’s strategic objectives, tactical processes and
operational efficiencies. It extracts value from the data your corporate
systems are gathering as well as from the knowledge of people who
understand the business and its markets. It streamlines business
processes by automating routine analysis and reporting. It enlightens
decision makers by providing insight into the status of the business at
any given time across its many “dimensions.” It enables discovery of new
opportunities for profit. It aligns all departments and levels in the
organization with corporate goals.
In spite of all the changes in the business world, some things remain
constant. Your operational data still come from large systems (e.g., ERP,
CRM) while other businesscritical data are stored in spreadsheets. Your
data come from different sources in various levels of granularity. Perhaps
they are not readily available or compatible. Moreover, they may difficult
to access by decisionmakers and analysts. Nevertheless, you still need
to understand the intersections of these data to set direction and manage
your business. What qualities are needed, then, to reconcile these
constants with the challenges of the current economic environment?
· Acuity: You need to be able to get to critical information
faster and more dependably
· Affordability: You can’t afford to invest in expensive
software and major development
· Flexibility: Not only do you need to be able to set
direction, you need to be able to make adjustments as the
environment and corporate objectives change
· Leveragability: You need to be able to take advantage of
all existing resources and the investment you have
already made in systems, data and people
· Dimensionality: You need to be able to manage an
increasing breadth of business factors in today’s changing
market place
Clearly, Business Intelligence is not just technology? it is the combination
of data, knowledge, systems, processes, and people that delivers
improved corporate performance. It is an ongoing process of analyzing
information, measuring results against objectives, understanding the
future, and aligning actions across the enterprise to drive the business
forward. Relevant, timely information enables Business Intelligence, but
the process gives it value. When it is effective, people at all levels in the
company (from senior management making strategic decisions down to
those “in the trenches” making realtime operational decisions) are better
able to identify opportunity, make enlightened decisions, and act more
profitably.
Neither Business Intelligence technology nor the Business Intelligence
process needs to be expensive. The technology is a fraction of the cost of
an ERP or CRM system, and some platforms can be implemented for less
than $10,000. If you already own a Business Intelligence platform and
have some technical knowledge of that platform in house, you are miles
ahead. The Business Intelligence process is an integral and ongoing part
of your organization in which relevant information is delivered to
enquiring minds. This means that Business Intelligence can be fast and
light — exactly what you need when budgets are slim and time is short.
In fact, it is both realistic and possible to achieve these gains on marginal
budgets. Start small and do not think that you need to solve all problems
at once. Choose one critical business need, address it well and quickly,
and then move on to the next priority. Do not be bogged down with
“nicetohaves?” focus on achieving results. You may wish to read our
article on implementing Business Intelligence solutions entitled Think Big,
Start Small in this same newsletter issue.
Build Advantage by Improving Profitability
As tough as revenue growth and profitability are to attain and keep these
days, finding ways to improve profitability, even incrementally, is more
important now than ever. You have three vectors to examine in your
quest for profitability – revenue, cost of products or services, and
expenses. Business Intelligence can provide insight into what drives each
component and ways to improve them. Here are a few examples:
Increase revenue and margin
· Which products are more profitable? Where are the
customers who buy the highmargin products?
· Which products are less profitable or not profitable?
Should we continue to make and sell them?
· Which sales and distribution channels are truly the most
profitable? Should emphasis on certain channels be
increased or decreased?
· Which customers are more valuable to the company? Are
we keeping them or losing them? How can we find more
highvalue customers?
· Would overall profitability increase if prices are increased
or reduced? Is there a lowrisk way to find out?
· Are advertising and promotions adding profitable revenue
or reducing profit? Could they be more effective? How?
Reduce cost
· Where should we look to reduce manufacturing cost? Is
there opportunity in reducing materials cost or improving
process efficiency?
· Are allocations of indirect costs and overhead realistic
given the activities of the business?
· Are product inventories in the right place at the right
time? Are inventory levels too low or too high? Can we
free up some working capital by reducing inventory?
Reduce expenses
· What drives expenses? Are certain expenses out of line
with the business activities they are supposed to support?
· Are retail staffing levels appropriate for the level of
activity and number of customers being served?
· How can more be done with fewer resources and tighter
budgets, especially with respect to analysis, reporting and
planning and the systems that support these key
management activities?
In addition to improving daytoday profitability, by using Business
Intelligence to address issues like these you will achieve longterm
competitive advantage for your company. When you have maximized
revenue and margin, minimized expense, and aligned your financial
ratios, your company will be in an even better position when overall
demand picks up to grow profitably, and grow faster than your
competitors. This is known as a “breakaway strategy,” and it has been in
use by Cisco Systems through the recent tech sector downturn.
Build Advantage by Enhancing Customer Value
The reality of a slow economy is that your company is competing for
fewer available customer dollars in an increasingly competitive market.
Just as you are trying to spend less and get more, your customers are
trying to do the same. The bar for customer value continues to rise, and
to you it feels like being caught in a vise that is getting tighter and
tighter. What can you do?
You need to innovate. How? The clues you need are among those
terabytes of data stored in your computers or the treasure trove of
commercially available market data. Customers still measure value by
the intersection of price, quality, and service. Can you minimize your
production costs in order to reduce price? Are there customer needs that,
if addressed today (e.g., as product improvements or new products),
would drive increased sales through competitive advantage or market
expansion? Have you made it easy for customers to communicate with
you and get answers? Find value in the data you collect in your CRM
system and from market research firms to determine how, when and
where to innovate your products or services. Ultimately, it is customer
perception of value, and not really lowest price, that drives demand in
almost every industry.
Being able to build advantage during a recession means being able to
respond and innovate quickly. You need to be building new models and
applying new ways of thinking about your business every single day.
Salient, timely information is the seminal ingredient and, when combined
with an analytical thought process, discovery occurs. Then take action to
win while the current market opportunity still exists!
Build Advantage by Setting Cohesive Direction
At no time is it more important to have a plan and manage to it than
when times are tough. A ship might be allowed to drift for a short time in
calm seas with no disastrous consequences, but in stormy seas there
must be a firm hand at the helm and a sharp eye on the radar and sonar.
Business Intelligence improves the cycle that links understanding,
planning, and action between organizational levels and across all
departments. When applied to improving business planning, effective
Business Intelligence:
· Aligns actions with corporate goals, which is especially
necessary when a stormy economy dictates that the
corporate ship must change direction
· Assures that everyone is connected into the planning
process using the same business assumptions to build
their budget
· Encourages collaboration across departments and
business units, improving thoroughness and accuracy of
the plans
· Accounts for economic interdependencies between
departments and business units
· Improves accountability and budget ownership
· Connects business drivers to their impact on financial
results, preparing management to better understand
variances between actual results and plan at monthend
and quarterend
· Enables anticipation of how financial results will be
impacted by changes in the business, providing an early
warning to enable management to react faster and adjust
tactics earlier to reduce the risk of earnings “surprises”
You may still be operating a spreadsheetbased budgeting process? this
is errorprone, slow and does not easily allow quick turnaround of
“whatif” scenarios. The managers who actually run the business are less
likely to be directly involved in planning their business, resulting in huge
disconnects that turn a planning process into a stressful “wishing”
exercise, with the resulting budgets being obsolete as soon as they are
finalized. On the other hand, you may not have hundreds of thousands of
dollars to spend on purchasing and implementing a complex planning
application that provides all manner of bells and whistles (plus the
kitchen sink). Neither approach makes it possible for you to be fast, light,
flexible, thorough and accurate at a time when you need to be.
A sane, lowercost, quickdeployment approach to improving planning by
orders of magnitude could be to utilize a leading Business Intelligence
platform and acquire or design just the additional functionality your own
planning process demands. You could be navigating a betterconnected,
highervalueadded planning process for the next budget or forecast
cycle.
Most Business Intelligence platforms today have writeback capability,
and a range of user interface applications can provide graphic pointand
click input screens. Managers can input and adjust their own plans and
forecasts. Your analysts can perform “whatif” scenarios until a plan is
locked into place. The platform handles the aggregations and the
dimensionality, so you are not at risk from broken or corrupted
spreadsheet links. Start by choosing a key segment of your planning
process and paring it down to its essentials. Your objective should be to
deliver correct (validated) information quickly. Save the big systems
expense for better times.
Build Advantage by Leveraging Existing Assets
Your company has already made huge investments in systems,
infrastructure, and data acquisition. This may include ERP or CRM
systems, a Data Warehouse, or external market research data. Your
company may operate different business units or divisions, each with its
own, incompatible systems. Can your people get information they need
from these sources easily and when they need it? Can data from different
systems be brought together easily for analysts and managers to
“complete the picture” and better understand the dimensions that drive
the business? Are you achieving the maximum return on investment with
these systems and the data stored in them?
Business Intelligence can provide rapid and inexpensive integration of
these disparate sources, transforming data into information delivered to
decisionmakers and analysts when and how they need it. As noted
above, the technology costs very little compared to the investments you
have already made. Inexpensive tools to automate data extraction and
delivery from source systems are also available. With or without a data
warehouse, Business Intelligence can make a 360degree view of the
business available to users through standard reports and intuitive ad hoc
query interfaces.
In addition, welldesigned Business Intelligence applications are readily
and quickly extensible as your business changes. When a new “view”,
report or performance indicator calculation is required, it can be
accommodated quickly and easily through the Business Intelligence
engine or its user interface, and not require an expensive and time
consuming update to the underlying operational system or data store.
Analysis and reporting keep up with the changing needs of your business.
Although there is effort required to extract, transform, and validate data
from source systems when Business Intelligence applications are
deployed, the efficiency is directly proportional to the expertise of your
staff and/or consultants. Considering the value that is achieved, it is a
highleverage effort. If you start with a simple and focused approach,
you can have results within just a few weeks. See our 5Week Plan for
rapid Business Intelligence deployment.
Build Advantage by Streamlining Processes
As current economic reality has forced most companies to reduce
headcount as well as expenses, the staff remaining must provide at least
the same level of support as before. Business Intelligence enables you to
do more with less on two fronts: within in the IT department, where
systems and data are managed, and in departments that use systems
and data to analyze and plan the business, such as finance, marketing,
and sales.
Requests from all corners of the company for additional information and
new reports find their way to IT daily. Especially today, with companies
scrambling to understand their business better and find ways to restore
profit, the need for information is greater. IT can use Business
Intelligence applications to deliver not only more and better data, but
also to improve user access to data, reducing the burden of supporting
users. Designing and implementing a Business Intelligence application
requires the assistance of a programmer analyst to extract data from
source systems and automate the feeds, but once that is accomplished,
the ongoing IT maintenance effort should be minimal (in general, making
sure update processes run and the server is operating optimally). The
business users typically are responsible for designing and maintaining the
business model and creating reports from the application. Once the
source data are available through the Business Intelligence application in
the relevant dimensionality, the “selfservice” environment users now
have enables them to meet their own reporting and analysis needs.
For information users such as functional analysts and managers, the time
previously required to search for data is nearly eliminated, and through
intuitive interfaces, the time to create reports and ad hoc queries is
significantly reduced. The interfaces provided by many Business
Intelligence tools, especially those that are already integrated into
Microsoft Excel, enable pointandclick access for analysts already well
experienced in the use of spreadsheets. Web interfaces enable browser
based reporting in numeric and graphical formats, speeding information
around the company to inform managers about the status of the
business. Accounting staff can close the books each month more quickly.
Everyone who thrives on information can perform his or her respective
functions more efficiently.
Because Business Intelligence results in such an efficient way to retrieve
and use data, it also tends to leverage new efficiencies in process as well.
When you have to accomplish more with a smaller staff, these are
powerful benefits.
Prepare for SarbanesOxley – It’s Actually Good Business
The imminent challenge of complying with SarbanesOxley legislation is
weighing heavily on the minds of senior financial executives in all
publiclytraded companies. The minimum requirement is to certify
internal reporting processes on the company’s financial reports, but soon
the law will require “realtime” disclosure of any event that could affect
bottomline performance. It will not be enough to just improve the
integrity, credibility and transparency of financial reporting –
management will have to be able to explain and report the “why” behind
the numbers when the financial impact is significant enough.
In addition to having an accounting system that reports accurate and
timely results, CFOs need to be connected into all operations of the
company to understand the underlying factors that impact business
performance. In many companies, internal reporting systems are not
compatible or are barely linked together. Business Intelligence can
interface these disparate systems into a business model to help
executives “see” the business as they need to understand it – not just in
the format of a GAAPdriven ERP system – but as the interdependent,
multidimensional model that is the business. Business Intelligence,
implemented and practiced effectively, enables rapid notification of
changes and “drilldown” capability to investigate why, and brings to light
the underlying business drivers that impact current (and future) results.
Compliance with the spirit of SarbanesOxley throughout your company’s
performance management processes and systems will provide more than
just information needed for legal compliance. It will also result in
improving the information that management uses to make decisions,
guiding strategic and operational actions that impact the company’s
bottom line, and helping management to set realistic expectations in the
stock market during the quarterly analyst conference calls.
Good Business Intelligence can provide the framework for accuracy,
speed and flexibility in understanding, managing and reporting financial
results. It also provides the foundation of extensibility. As it becomes
clearer what is considered “material” for realtime disclosure under
SarbanesOxley, you will be able to react quickly.
It’s Not “All or Nothing” – Make Gains Incrementally
If you are content to wait until the economy gets better, Business
Intelligence is not for you. If you want to be leading your industry when
your competition is still crawling out from under their desks, then you
need to be innovating and reinventing your business today. Innovation,
productivity, and profitable decisions are products of the Business
Intelligence process.
The biggest impediment to success is the notion that Business
Intelligence does not pay unless it is all encompassing. This is the “All or
Nothing Syndrome” (ANS) and it is poison to projects, careers, and
companies alike. Victims suffering from this condition can only see a
project or application as successful if it delivers all of its promised
functionality at once. This has caused projects to literally double in cost
while waiting for the last 5% of functionality to be completed, in spite of
the fact that the available 95% would already achieve breakthrough
improvement for the company.
Business Intelligence cannot thrive in an ANS atmosphere. In order to
drive innovation during a recession, both your company and the Business
Intelligence activities you undertake must be fast and light. Small
focused projects aimed at specific needs will generate real return on
investment. Begin with a single area of your business that is critical to
your survival or competitive success.
If you still are not convinced by all the previous reasons and plan to wait
until next year, do not wait to begin talking with people about Business
Intelligence. Learn as much as you can today about the platforms,
products, and services that are available. Begin meeting with consultants
and software vendors and drafting your list of priority challenges and
functional requirements. Watch software demonstrations, read success
stories and see what Business Intelligence has done for other businesses.
The reality is that just about every business needs Business Intelligence.
Your company is no exception. Develop your roadmap now and get a
strategy together because it will help you prioritize projects according to
business need across the board. Do not wait for a bigger budget? start
your guerrilla war today. Look for every little opportunity you can to get
critical, timely information into intelligent hands to drive profitable action.
How else will you know where you are going and how to get there?
Dave Stark
Steven Humphrey
Analysis Team, Inc.
July, 2003
doc_344349764.pdf
Business Intelligence How it Works Why Business Intelligence Now!
“Business Intelligence: How it Works”
“Why Business Intelligence Now!”
Editorial: For the month of May, the author of IT Watch at Srithai wishes to introduce
the audience to the concept of gaining value of stored information (typically in
a sizeable data base and other conventional nondata based forms in the computer) to
use in ways that would improve the decisions made by the user commonly
practiced In the IT industry, that is called “Business Intelligence”.
The first article was published by The PC Magazine July 2001 Ziff Davis Media Inc.
titled “Business Intelligence: How it Works” that provides easy to understand terms
such as Databases, Data warehouse, Querry, Reports? all of which form
the essential components in a business intelligence solution typically marketed
by IT software companies nowadays to enhance the quality decisions made by
business leaders in the computer age.
In reading about these concepts by Srithai employees and management, it is hope that
the understanding will help them appreciate the value and the need to benefit from any
future implementation of Business Intelligence at Srithai. It is Srithai’s IT enhancement
strategy to support its management goal with effective and modernized IT tools that
would enhance its ability to compete not only in Asia but globally.
Feature article #1:
Business Intelligence: How it Works
PC Magazine, July, 2001
URL: http://findarticles.com/p/articles/mi_zdpcm/is_200107/ai_ziff7963
Databases
A company has information—and lots of it—stored in various databases. Take a national retail chain,
for example, that sells everything from grills and patio furniture to plastic utensils. The company is
sure to have inventory, customer information, data about past promotions, and sales numbers in
various databases. Though all this information may be scattered across multiple systems—and may
seem unrelated—business intelligence software has to bring it together and help employees find
important pieces of information and the correlations among them. For instance, when this retail chain
plans a sales promotion, the marketing department staff can analyze which products (right down to
the colors) are popular in which regions. And they can see whether any particular products are
commonly sold together: Perhaps customers buying blue plastic cups often buy blue plastic plates as
well.
Data Warehouse
ADVERTISEMENT
The data in all the databases is brought together in the data warehouse. Here, tables can be linked,
and data cubes are formed. For instance, inventory information is linked to sales numbers and
customer databases, allowing for deep analysis of information. Some data warehouses have a
dynamic link to the databases, while some are static. A dynamic link means that as data is added to
the inventory database, the data warehouse sees the changes and reflects them in the queries being
performed. A static connection, on the other hand, requires the data warehouse to import information
from the databases on a specific command. In this situation, the data being queried may be out of
sync.
Query
Deep analysis is carried out by performing multilayer queries. Because all the databases are linked,
you can search for what products a store has too much of. You can then determine which of these
products commonly sell with popular items, based on previous sales. After planning a promotion to
move stock, you can dig deeper to see where this promotion would be most popular (and most
profitable).
Reports
Once you have the answers, you'll want to share the numbers with managers at the stores the
promotion is planned for, so they can take a close look at the data (perhaps they will know of a local
event, such as a parade or festival) that will drive sales for plastic plates. Though reports can be
delivered electronically over the Internet or an intranet, methods vary. Some reports provide a static
view of the analysis—meaning the charts are there, but you can't interact with them—and some link
back to the original data, allowing you to manipulate the numbers within the reports for further
analysis.
Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in PC Magazine.
Editorial: The second article, “Why Business Intelligence Now!” is an article written by
Dave Stark and Steve Humphrey of Analysis Team, Inc. in its July 2003 publication.
It is particularly useful because it captured the concept of putting the information
derived from business data and corporate knowledge to their eventual usage.
It articulated why business intelligence is important and must be put to good use
when it is practical and at the time frame “sooner (if feasible) rather later”. It
summarized for the reader why there are needs to do so. But most importantly, to
gain most benefits, one needs to understand what Business Intelligence as a
technology can do for you.
Feature article #2:
URL: http://www.analysisteam.com/Newsletter_V1n3_subd.html
Why Business Intelligence NOW!
Your company is up against the most
challenging business environment of recent
times. Do you know where you are going and
how you will get there?
Good business performance analysis and planning are never out of style.
Whether times are good or bad, whether you are concerned about growth
or just keeping the company’s doors open, understanding your business,
planning effectively and taking profitable action are key to keeping your
company on track.
Times are not good. Economic growth has slowed to a crawl. Sales are
down and unemployment is up. Corporate budgets have been locked
down and the end is not in sight. So, what are you doing about it? Are
you hiding under your desk waiting for a better economy to lift your
business or are you using this opportunity to move ahead of your
competition? If you are not working today to reinvent your business and
innovate your way to the head of your industry, chances are that one of
your competitors is. Your need is urgent.
Moving ahead during a slow economy is difficult. It requires vision and
unconventional thinking. It requires speed, agility, and economy. Most of
all, it requires good information — information that will help you and your
team discover new opportunities and exploit them. Business Intelligence
is the key you need to unlock those opportunities.
There are many ways to build advantage without engaging in large
development projects, and this article will discuss several of them. They
include:
· Improving Profitability
· Enhancing Customer Value
· Setting Cohesive Direction
· Leveraging Existing Assets
· Streamlining Processes
Each of these areas is fertile with opportunity if you have the correct
information. An additional area of opportunity (and need) is Sarbanes
Oxley compliance. That will also be covered. Before discussing these
prospects, it is important to create a common framework for
understanding Business Intelligence.
Understanding Business Intelligence
Business Intelligence (or Business Performance Management) is the
dynamic use of business data and corporate knowledge to make
decisions and identify actions. Business Intelligence maintains the
alignment of your company’s strategic objectives, tactical processes and
operational efficiencies. It extracts value from the data your corporate
systems are gathering as well as from the knowledge of people who
understand the business and its markets. It streamlines business
processes by automating routine analysis and reporting. It enlightens
decision makers by providing insight into the status of the business at
any given time across its many “dimensions.” It enables discovery of new
opportunities for profit. It aligns all departments and levels in the
organization with corporate goals.
In spite of all the changes in the business world, some things remain
constant. Your operational data still come from large systems (e.g., ERP,
CRM) while other businesscritical data are stored in spreadsheets. Your
data come from different sources in various levels of granularity. Perhaps
they are not readily available or compatible. Moreover, they may difficult
to access by decisionmakers and analysts. Nevertheless, you still need
to understand the intersections of these data to set direction and manage
your business. What qualities are needed, then, to reconcile these
constants with the challenges of the current economic environment?
· Acuity: You need to be able to get to critical information
faster and more dependably
· Affordability: You can’t afford to invest in expensive
software and major development
· Flexibility: Not only do you need to be able to set
direction, you need to be able to make adjustments as the
environment and corporate objectives change
· Leveragability: You need to be able to take advantage of
all existing resources and the investment you have
already made in systems, data and people
· Dimensionality: You need to be able to manage an
increasing breadth of business factors in today’s changing
market place
Clearly, Business Intelligence is not just technology? it is the combination
of data, knowledge, systems, processes, and people that delivers
improved corporate performance. It is an ongoing process of analyzing
information, measuring results against objectives, understanding the
future, and aligning actions across the enterprise to drive the business
forward. Relevant, timely information enables Business Intelligence, but
the process gives it value. When it is effective, people at all levels in the
company (from senior management making strategic decisions down to
those “in the trenches” making realtime operational decisions) are better
able to identify opportunity, make enlightened decisions, and act more
profitably.
Neither Business Intelligence technology nor the Business Intelligence
process needs to be expensive. The technology is a fraction of the cost of
an ERP or CRM system, and some platforms can be implemented for less
than $10,000. If you already own a Business Intelligence platform and
have some technical knowledge of that platform in house, you are miles
ahead. The Business Intelligence process is an integral and ongoing part
of your organization in which relevant information is delivered to
enquiring minds. This means that Business Intelligence can be fast and
light — exactly what you need when budgets are slim and time is short.
In fact, it is both realistic and possible to achieve these gains on marginal
budgets. Start small and do not think that you need to solve all problems
at once. Choose one critical business need, address it well and quickly,
and then move on to the next priority. Do not be bogged down with
“nicetohaves?” focus on achieving results. You may wish to read our
article on implementing Business Intelligence solutions entitled Think Big,
Start Small in this same newsletter issue.
Build Advantage by Improving Profitability
As tough as revenue growth and profitability are to attain and keep these
days, finding ways to improve profitability, even incrementally, is more
important now than ever. You have three vectors to examine in your
quest for profitability – revenue, cost of products or services, and
expenses. Business Intelligence can provide insight into what drives each
component and ways to improve them. Here are a few examples:
Increase revenue and margin
· Which products are more profitable? Where are the
customers who buy the highmargin products?
· Which products are less profitable or not profitable?
Should we continue to make and sell them?
· Which sales and distribution channels are truly the most
profitable? Should emphasis on certain channels be
increased or decreased?
· Which customers are more valuable to the company? Are
we keeping them or losing them? How can we find more
highvalue customers?
· Would overall profitability increase if prices are increased
or reduced? Is there a lowrisk way to find out?
· Are advertising and promotions adding profitable revenue
or reducing profit? Could they be more effective? How?
Reduce cost
· Where should we look to reduce manufacturing cost? Is
there opportunity in reducing materials cost or improving
process efficiency?
· Are allocations of indirect costs and overhead realistic
given the activities of the business?
· Are product inventories in the right place at the right
time? Are inventory levels too low or too high? Can we
free up some working capital by reducing inventory?
Reduce expenses
· What drives expenses? Are certain expenses out of line
with the business activities they are supposed to support?
· Are retail staffing levels appropriate for the level of
activity and number of customers being served?
· How can more be done with fewer resources and tighter
budgets, especially with respect to analysis, reporting and
planning and the systems that support these key
management activities?
In addition to improving daytoday profitability, by using Business
Intelligence to address issues like these you will achieve longterm
competitive advantage for your company. When you have maximized
revenue and margin, minimized expense, and aligned your financial
ratios, your company will be in an even better position when overall
demand picks up to grow profitably, and grow faster than your
competitors. This is known as a “breakaway strategy,” and it has been in
use by Cisco Systems through the recent tech sector downturn.
Build Advantage by Enhancing Customer Value
The reality of a slow economy is that your company is competing for
fewer available customer dollars in an increasingly competitive market.
Just as you are trying to spend less and get more, your customers are
trying to do the same. The bar for customer value continues to rise, and
to you it feels like being caught in a vise that is getting tighter and
tighter. What can you do?
You need to innovate. How? The clues you need are among those
terabytes of data stored in your computers or the treasure trove of
commercially available market data. Customers still measure value by
the intersection of price, quality, and service. Can you minimize your
production costs in order to reduce price? Are there customer needs that,
if addressed today (e.g., as product improvements or new products),
would drive increased sales through competitive advantage or market
expansion? Have you made it easy for customers to communicate with
you and get answers? Find value in the data you collect in your CRM
system and from market research firms to determine how, when and
where to innovate your products or services. Ultimately, it is customer
perception of value, and not really lowest price, that drives demand in
almost every industry.
Being able to build advantage during a recession means being able to
respond and innovate quickly. You need to be building new models and
applying new ways of thinking about your business every single day.
Salient, timely information is the seminal ingredient and, when combined
with an analytical thought process, discovery occurs. Then take action to
win while the current market opportunity still exists!
Build Advantage by Setting Cohesive Direction
At no time is it more important to have a plan and manage to it than
when times are tough. A ship might be allowed to drift for a short time in
calm seas with no disastrous consequences, but in stormy seas there
must be a firm hand at the helm and a sharp eye on the radar and sonar.
Business Intelligence improves the cycle that links understanding,
planning, and action between organizational levels and across all
departments. When applied to improving business planning, effective
Business Intelligence:
· Aligns actions with corporate goals, which is especially
necessary when a stormy economy dictates that the
corporate ship must change direction
· Assures that everyone is connected into the planning
process using the same business assumptions to build
their budget
· Encourages collaboration across departments and
business units, improving thoroughness and accuracy of
the plans
· Accounts for economic interdependencies between
departments and business units
· Improves accountability and budget ownership
· Connects business drivers to their impact on financial
results, preparing management to better understand
variances between actual results and plan at monthend
and quarterend
· Enables anticipation of how financial results will be
impacted by changes in the business, providing an early
warning to enable management to react faster and adjust
tactics earlier to reduce the risk of earnings “surprises”
You may still be operating a spreadsheetbased budgeting process? this
is errorprone, slow and does not easily allow quick turnaround of
“whatif” scenarios. The managers who actually run the business are less
likely to be directly involved in planning their business, resulting in huge
disconnects that turn a planning process into a stressful “wishing”
exercise, with the resulting budgets being obsolete as soon as they are
finalized. On the other hand, you may not have hundreds of thousands of
dollars to spend on purchasing and implementing a complex planning
application that provides all manner of bells and whistles (plus the
kitchen sink). Neither approach makes it possible for you to be fast, light,
flexible, thorough and accurate at a time when you need to be.
A sane, lowercost, quickdeployment approach to improving planning by
orders of magnitude could be to utilize a leading Business Intelligence
platform and acquire or design just the additional functionality your own
planning process demands. You could be navigating a betterconnected,
highervalueadded planning process for the next budget or forecast
cycle.
Most Business Intelligence platforms today have writeback capability,
and a range of user interface applications can provide graphic pointand
click input screens. Managers can input and adjust their own plans and
forecasts. Your analysts can perform “whatif” scenarios until a plan is
locked into place. The platform handles the aggregations and the
dimensionality, so you are not at risk from broken or corrupted
spreadsheet links. Start by choosing a key segment of your planning
process and paring it down to its essentials. Your objective should be to
deliver correct (validated) information quickly. Save the big systems
expense for better times.
Build Advantage by Leveraging Existing Assets
Your company has already made huge investments in systems,
infrastructure, and data acquisition. This may include ERP or CRM
systems, a Data Warehouse, or external market research data. Your
company may operate different business units or divisions, each with its
own, incompatible systems. Can your people get information they need
from these sources easily and when they need it? Can data from different
systems be brought together easily for analysts and managers to
“complete the picture” and better understand the dimensions that drive
the business? Are you achieving the maximum return on investment with
these systems and the data stored in them?
Business Intelligence can provide rapid and inexpensive integration of
these disparate sources, transforming data into information delivered to
decisionmakers and analysts when and how they need it. As noted
above, the technology costs very little compared to the investments you
have already made. Inexpensive tools to automate data extraction and
delivery from source systems are also available. With or without a data
warehouse, Business Intelligence can make a 360degree view of the
business available to users through standard reports and intuitive ad hoc
query interfaces.
In addition, welldesigned Business Intelligence applications are readily
and quickly extensible as your business changes. When a new “view”,
report or performance indicator calculation is required, it can be
accommodated quickly and easily through the Business Intelligence
engine or its user interface, and not require an expensive and time
consuming update to the underlying operational system or data store.
Analysis and reporting keep up with the changing needs of your business.
Although there is effort required to extract, transform, and validate data
from source systems when Business Intelligence applications are
deployed, the efficiency is directly proportional to the expertise of your
staff and/or consultants. Considering the value that is achieved, it is a
highleverage effort. If you start with a simple and focused approach,
you can have results within just a few weeks. See our 5Week Plan for
rapid Business Intelligence deployment.
Build Advantage by Streamlining Processes
As current economic reality has forced most companies to reduce
headcount as well as expenses, the staff remaining must provide at least
the same level of support as before. Business Intelligence enables you to
do more with less on two fronts: within in the IT department, where
systems and data are managed, and in departments that use systems
and data to analyze and plan the business, such as finance, marketing,
and sales.
Requests from all corners of the company for additional information and
new reports find their way to IT daily. Especially today, with companies
scrambling to understand their business better and find ways to restore
profit, the need for information is greater. IT can use Business
Intelligence applications to deliver not only more and better data, but
also to improve user access to data, reducing the burden of supporting
users. Designing and implementing a Business Intelligence application
requires the assistance of a programmer analyst to extract data from
source systems and automate the feeds, but once that is accomplished,
the ongoing IT maintenance effort should be minimal (in general, making
sure update processes run and the server is operating optimally). The
business users typically are responsible for designing and maintaining the
business model and creating reports from the application. Once the
source data are available through the Business Intelligence application in
the relevant dimensionality, the “selfservice” environment users now
have enables them to meet their own reporting and analysis needs.
For information users such as functional analysts and managers, the time
previously required to search for data is nearly eliminated, and through
intuitive interfaces, the time to create reports and ad hoc queries is
significantly reduced. The interfaces provided by many Business
Intelligence tools, especially those that are already integrated into
Microsoft Excel, enable pointandclick access for analysts already well
experienced in the use of spreadsheets. Web interfaces enable browser
based reporting in numeric and graphical formats, speeding information
around the company to inform managers about the status of the
business. Accounting staff can close the books each month more quickly.
Everyone who thrives on information can perform his or her respective
functions more efficiently.
Because Business Intelligence results in such an efficient way to retrieve
and use data, it also tends to leverage new efficiencies in process as well.
When you have to accomplish more with a smaller staff, these are
powerful benefits.
Prepare for SarbanesOxley – It’s Actually Good Business
The imminent challenge of complying with SarbanesOxley legislation is
weighing heavily on the minds of senior financial executives in all
publiclytraded companies. The minimum requirement is to certify
internal reporting processes on the company’s financial reports, but soon
the law will require “realtime” disclosure of any event that could affect
bottomline performance. It will not be enough to just improve the
integrity, credibility and transparency of financial reporting –
management will have to be able to explain and report the “why” behind
the numbers when the financial impact is significant enough.
In addition to having an accounting system that reports accurate and
timely results, CFOs need to be connected into all operations of the
company to understand the underlying factors that impact business
performance. In many companies, internal reporting systems are not
compatible or are barely linked together. Business Intelligence can
interface these disparate systems into a business model to help
executives “see” the business as they need to understand it – not just in
the format of a GAAPdriven ERP system – but as the interdependent,
multidimensional model that is the business. Business Intelligence,
implemented and practiced effectively, enables rapid notification of
changes and “drilldown” capability to investigate why, and brings to light
the underlying business drivers that impact current (and future) results.
Compliance with the spirit of SarbanesOxley throughout your company’s
performance management processes and systems will provide more than
just information needed for legal compliance. It will also result in
improving the information that management uses to make decisions,
guiding strategic and operational actions that impact the company’s
bottom line, and helping management to set realistic expectations in the
stock market during the quarterly analyst conference calls.
Good Business Intelligence can provide the framework for accuracy,
speed and flexibility in understanding, managing and reporting financial
results. It also provides the foundation of extensibility. As it becomes
clearer what is considered “material” for realtime disclosure under
SarbanesOxley, you will be able to react quickly.
It’s Not “All or Nothing” – Make Gains Incrementally
If you are content to wait until the economy gets better, Business
Intelligence is not for you. If you want to be leading your industry when
your competition is still crawling out from under their desks, then you
need to be innovating and reinventing your business today. Innovation,
productivity, and profitable decisions are products of the Business
Intelligence process.
The biggest impediment to success is the notion that Business
Intelligence does not pay unless it is all encompassing. This is the “All or
Nothing Syndrome” (ANS) and it is poison to projects, careers, and
companies alike. Victims suffering from this condition can only see a
project or application as successful if it delivers all of its promised
functionality at once. This has caused projects to literally double in cost
while waiting for the last 5% of functionality to be completed, in spite of
the fact that the available 95% would already achieve breakthrough
improvement for the company.
Business Intelligence cannot thrive in an ANS atmosphere. In order to
drive innovation during a recession, both your company and the Business
Intelligence activities you undertake must be fast and light. Small
focused projects aimed at specific needs will generate real return on
investment. Begin with a single area of your business that is critical to
your survival or competitive success.
If you still are not convinced by all the previous reasons and plan to wait
until next year, do not wait to begin talking with people about Business
Intelligence. Learn as much as you can today about the platforms,
products, and services that are available. Begin meeting with consultants
and software vendors and drafting your list of priority challenges and
functional requirements. Watch software demonstrations, read success
stories and see what Business Intelligence has done for other businesses.
The reality is that just about every business needs Business Intelligence.
Your company is no exception. Develop your roadmap now and get a
strategy together because it will help you prioritize projects according to
business need across the board. Do not wait for a bigger budget? start
your guerrilla war today. Look for every little opportunity you can to get
critical, timely information into intelligent hands to drive profitable action.
How else will you know where you are going and how to get there?
Dave Stark
Steven Humphrey
Analysis Team, Inc.
July, 2003
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