6 June 2006 Jake Liddell
How should companies confront the growing need to develop their own computer-based business intelligence systems? Jake Lidell, formerly of Charteris' Project and Programme Management Service Line looks at the benefits and pitfalls of distilling information into intelligence.
In the renowned movie 2001: a Space Odyssey, the on-board thinking computer, HAL, is a great friend in a crisis until he actually causes one. Confronted for the first time with the threat of disconnection, HAL immediately sets out to kill every human on the spaceship - and nearly succeeds.
Today, businesses that really want to get ahead are confronted by the need to develop their own computer-based intelligence - business intelligence.
In practice, business intelligence is not 'intelligence' as such - just as HAL himself perhaps wasn't really so intelligent because he didn't know he could be switched back on again.
DISTILLATION OF INFORMATION
Instead of trying to simulate genuine human intelligence, business intelligence provides what is essentially a distillation of information. This distillation allows people to apply their own decision forming where and when it matters rather than taking up valuable thinking time in mundane sorting, sifting and calculating.
With business intelligence you still need to make specific decisions, but the computer-assembled and computer-presented information on which you are basing those decisions will be available 'on tap' meaning that you will have at your fingertips access to an incredibly powerful and effective management information resource.
So what kind of information does your organisation need to distil? Any which has a direct relevance to winning you revenue and profits. In an increasingly service-oriented economy, a company's assets are typically as likely to be 'soft' assets, such as data, as they are to be warehouses full of stock. Indeed, soft data assets are often the most important (and hence most valuable) assets that most businesses possess.
At Charteris we define business intelligence as 'the utilisation of a business's internal information assets, its externally sourced information, and the mechanism for delivery of that information, all of which contribute to winning the business its customer mandate and its competitive edge'.
What is especially useful about this definition is that it readily lends itself to applying business intelligence at a practical level within an organisation. One might even go so far as to say that if you start with that definition, everything else follows.
BUSINESS INTELLIGENCE TOOLS
There are, of course, many specific industry examples of how certain processes should be managed in business, such as yield management at airlines or shelf planning in supermarkets.
However, now that technology makes possible rapid feedback between what is happening and what response should be made to what is happening, executives are actually fundamentally disadvantaged if they do not have access to modern business intelligence tools in addition to their knowledge of the major processes in their business and their innate commercial sense.
Business intelligence tools are inevitably computer-based because it is only computer-based tools that can have any chance of collating and then processing the great breadth of information that will form part of the system.
CATEGORIES OF INTELLIGENCE
What specific categories of business intelligence should an organisation take steps (and vigorous steps, for that matter) to gather if it is to make the most of the fight for competitive supremacy? The most important are:
Fundamental business knowledge - this is the sum total of an organisation's know-how. It encompasses the technological, procedural and sheer commercial knowledge an organisation has about its own business. It is the knowledge that comes from experience of doing business in a sector, and thus the specifics of this are particular to a business.
Specific customer information - the business needs to understand how all of its individual customers have actually been engaging with the organisation, in terms of purchases, personal preferences and so on.
Major trends in customer behaviour - the organisation needs to know, at a macroscopic level, what the key trends are in customer activity, both long-term, and over recent months. It is especially important to link these trends to specific activities carried out by the company, so that it becomes possible to draw useful conclusions relating to what specific corporate initiatives drive the desired customer behaviour.
Supplier information - this is information relating to what the organisation is getting from its suppliers.
Financial information - organisations often get thoroughly (and justifiably) excited about drilling down into cost trends for departments, projects, teams and so on. In practice, another extremely important type of financial information involves aligning costs to the external services you offer customers. If you can't, in fact, view this high-level financial picture of your organisation, you will have little real idea of which services you offer are profitable and which aren't.
So how should an organisation actually set about gathering the information that forms its business intelligence?
Traditionally, organisations collated information in a highly departmentalised fashion, with individual teams of employees gathering together the particular information they need to do their job.
Where an organisation has evolved its information-handling in this fundamentally haphazard way, the information it needs will in practice be distributed across the company in numerous different formats. Some of the information, for example, will probably be held in Excel spreadsheets. Some teams may have put together databases - typically the department's computer expert will have created something in a small database software package, such as Microsoft Access.
This data is rarely backed up, and is often repeatedly stored in many different locations across the company. Some information will most likely not be held electronically at all, but will be entirely paper-based. Some information will be in core systems that have been provided either by the IT department or by an external supplier. The trouble is that these core systems may in fact only operate at a departmental level, and so may not be accessible to everyone in an easy and quick manner.
In practice the best approach, before you implement any business intelligence solution, is to make a real effort to get a better handle on the kind of intelligence it needs to access in the first place.
The first and most important advice is to educate yourself about what is really possible on the business intelligence front. Things have changed a great deal in the last few years. Consider reading up, for example, about what other companies have done and are doing in the business intelligence field.
Don't restrict the investigation to looking at what your competitors are doing; different organisations in different fields will also be doing interesting things and may be prepared to share the fruits of what they have learned with you.
In practical terms, what you need is a proper 'top-down' approach to managing business intelligence. You must give careful thought to the goals of your business, and then decide how you can best measure whether you are achieving those goals.
In adopting this top-down approach, you don't commit large funding to managing data that may have little value - you commit small funding to acquiring the information that has real business value. Value is delivered early, and is continually delivered throughout the life of the programme.
The role of a third-party adviser such as a consultancy can be very important here. The adviser can ask probing and important questions about why the current business information is valuable, what is being done with the data that is currently collected, and what particular information might allow your business greater insight into its market or customers.
The adviser can also tell your organisation about particular useful analytical methods, and will have the experience to implement them effectively. The adviser might also have experience of how other organisations in other sectors have won benefits from business intelligence applications, and which of their approaches might be applicable to your business.
Importantly, the adviser can bring insight into what value certain types of data that a business might hold would have in the commercial world, usually beyond the traditional market sector of the business. For example, a travel company might increase its revenue through the selling of its information about customers taking a world trip to a company marketing travel insurance.
In addition to the practicalities of the implementation project itself, the adviser can recommend to your organisation how it can protect itself from the pitfalls of dealing with personal customer information.
This is a heavily regulated and fraught area. The adviser may also recommend a particular technology that will ideally allow for rapid prototyping of what an end-solution will look like. This will help your organisation to develop a vision for what the end project will achieve, and to embody this vision from day one.
Your new business intelligence initiative should deliver you a solution that helps you maximise the quality and timeliness of your own business intelligence. The initiative should also make the fruits of this intelligence available, in real-time, to any team or department at your organisation who could use it to win your organisation maximum commercial success.
These tools are out there, waiting for you to make the most of them. Why not use them to bring a new dimension to the thinking and planning at your organisation?