There is a lot of buzz these days about Business Intelligence (BI) and Analytics. Three leading BI software vendors (Business Objects, Cognos, and Hyperion) were acquired last year (by SAP, IBM, and Oracle, respectively) for over $15 billion. Books like Thomas Davenport’s “Competing on Analytics: The New Science of Winning” are best sellers, and articles like “Math Will Rock Your World” (Business Week, January 2006) are appearing in mainstream and trade publications. Why all the attention?
To quote from Davenport’s book, “At a time when firms in many industries offer similar products and use comparable technologies, business processes are among the last remaining points of differentiation.” Put differently, companies are starting to view the information they collect about their customers and supply chains as a corporate asset they can leverage to create more efficient, flexible and impactful business processes.
But what is Business Intelligence? Webster’s Dictionary and Wikipedia both offer their definitions, but here is mine: “BI is about empowering people, across all levels of the organization, to make smarter and faster business decisions by providing them with a more detailed, accurate, and timely understanding of their role in achieving the company’s strategic, tactical, and operational goals“. And you thought it was just a type of software application!
Of course, technology is a key enabler of BI and Analytics. Logistics software vendors have been investing heavily in “performance management” solutions, which provide companies with more timely and insightful visibility to key performance indicators (KPIs). Online dashboards that track carrier and vendor performance, as well as planned versus actual costs, are particularly popular today. Supply chain network design tools and other types of optimization solutions are also important components of BI and analytics.
But companies that approach BI solely from an IT perspective are missing out on the “big picture” opportunity of actually changing the way people work and make decisions, from the CEO all the way down to the employee loading boxes onto a truck. In short, there are many facets to implementing a successful BI strategy. Technology is certainly a critical component, but not the only one.
At last month’s The Logistics & Supply Chain Forum, I conducted a workshop on BI for over 60 senior logistics executives. The information I presented was based on primary and secondary research we conducted at ARC, including conversations with companies that have implemented BI solutions and leading software vendors like Manhattan Associates, Oracle, RedPrairie, and SAP. I’ve distilled the research findings into these Five Key Steps to a Successful BI Strategy:
CEO commitment is a must. This is a given with any strategic initiative that requires a significant investment of time, money, and resources. Companies like Harrah’s Entertainment and Amazon, recognized for their effective use of BI and analytics, are lead by CEOs that “get it” and drive the use of BI across the company. One of the workshop participants asked me a great question: What if my CEO doesn’t get it, how do I build the business case? The quick answer is to start small, achieve success, and build up from there. P&G is a great example. Although the company had a BI and analytics group for many years, it wasn’t until the team saved the company $200 million annually by consolidating P&G’s manufacturing and distribution network that the CEO fully recognized the value and role of BI and analytics.
Determine upfront which KPIs are important and create standard definitions. In my opinion, this is the most important step because it forces companies to think about why they’re investing in BI and what benefits and outcomes they expect to achieve. Best practice is to align corporate and operational KPIs with strategic objectives and desired competitive differentiators. If you don’t know why you’re collecting certain data or can’t explain the value of a metric, you probably don’t need it.
Hire and train the “right” people; create incentives to use BI tools. “Personable geeks with MBAs” is the way some folks characterize the talent required to successfully leverage BI. Put differently, companies need people with the right mix of analytical, business, and relationship skills. These types of people are in high demand, but short supply. As Davenport states, “Analytical talent may be to the early 2000s what programming talent was in the late 1990s“.
Take a “manage globally, act locally” approach to BI. Just like many companies have established centralized load control centers, BI leaders like P&G and Schneider National have centralized their BI and analytics operations. This approach makes it easier to evaluate strategic and tactical scenarios, where the analysis may span across multiple business units, geographies, and functional groups. But to achieve the greatest value from BI, it’s also important to bring BI and analytics down to the operations level, so that employees can make smarter and faster decisions on a day-to-day basis, particularly in response to exceptions.
Establish a BI Governance Framework and Process. Most companies don’t think about this step until it’s too late. BI Governance is about answering some basic questions: What decisions need to be made? Who will make those decisions? How will the decisions be made? How will the decisions be monitored? The more strategic your BI focus, the more critical governance becomes because strategic decisions typically come with the most financial risk.
Here are a few other things companies should consider:
- Poor data quality (stale, incomplete, inaccurate) is the Achilles heel of BI. Data quality must move beyond IT and become part of the business agenda.
- There’s a lot of information about customers, suppliers, and the market embedded in e-mails, instant messages, PowerPoint presentations, podcasts, webcasts, etc. How do you incorporate this “unstructured information” into the analysis?
- How do you gather external benchmarking data and include it in the analysis?
Is Business Intelligence a strategic initiative at your company? Do you agree with my five key steps to success? Are there other things you would add to the list? Let me know. I think we’re just starting to scratch the surface on how companies can use BI and analytics to create a competitive advantage.
