To increase the return of a given BI investment requires maximizing the extra profit the company makes a result of the BI deployment.
In his Theory of Constraints, Dr. Goldratt states very clearly that in a for profit company, the main goal is to achieve sustainable profitability. In other words, it’s to “make money now and in the future”.
In order to increase profitability companies can only do three things:
1. Decrease Operating Expenses.
2. Decrease Investment / Inventory.
3. Increase Sales Revenue (by increasing sales volume and/or selling price of the products or services marketed).
Note that a company can only decrease operating expense or inventory up to a certain point beyond which servicing customers would not be possible, resulting in loss of sales.
On the other hand, the potential to increase Sales Revenue has no limit, as long as the company offers products or services that create value for its customers faster or better than the competition. This is exactly what Apple Computers has done with its creative new products (iPod, iTunes, iPhone, iPad).
Therefore the most effective way to maximize profitability and ROI is by increasing Sales Revenue.
Business Intelligence solutions should be deployed to support all three activities. Unfortunately, most BI implementations aim just at controlling operating expenses and inventory as they populate sophisticated BI software with just internal raw data from the ERP. The problem is that while this supports tactical functions, it doesn’t provide the immediate strategic analysis and direction necessary to grow Sales Revenue.
Supporting the increase in revenue is more difficult because the necessary external market and competitor data is not readily available in a compatible format and therefore it’s normally left out of BI objects or data marts.
When companies integrate both sources of data, the external market intelligence provides structure to the internal transaction data.
Current BI interactive analytic applications are useful to drill down, filter, and drill through in order to find the root causes of both problems and opportunities very fast.
Data integration and interactive software help Marketing and Sales do their job of growing the business. When BI is implemented to support commercial strategy the company gets a competitive edge because decisions will now be based on a 360 degree view of the market-business-profit reality, right from the BI software; while the competition would still be relying on internal raw data and managers’ intuition.
I’ve seen this strong competitive advantage translate into increased market share, revenue and profit; fully supporting the main goal of the company. This is the most effective way to increase the return on the BI investment, normally so difficult to justify when BI supports just back office functions and not strategic and profitable growth.
By Bill Cabiró and Strat-Wise LLC
„Please visit their web site at www.strat-wise.com for additional articles and resources on the strategic use of Business Intelligence and Analytics”