Even in the case of extremely small businesses, a strategic deployment of a Business Intelligence solution can have major impact on the growth and profitability of the company. Having a clear view of the profitable customers, products, regions and market segments is fundamental to understand the causes and expand upon the successes. Equally important is to find those customers, brands, markets, segments and competitors responsible for draining cash and quickly stop the bleeding.
- Should we treat all customers equally? (If you say yes, I’d suggest reading “Angel Customers & Demon Customers”)
In a company that has more than thirty customers, the Pareto Principle will be evident. Looking inside the famous 80/20 rule one can find that five percent of the customers generate close to 50% of the profits while the bottom 50% of the customers generate only 5% of the total profit. Many companies have a hard time identifying which customers belong to each group. A strategic deployment of Business Analytics provides the answers instantly.
Even when sales revenue is growing, management should be able to ask key questions and find the answers right away, so the train of thought isn’t interrupted:
- Is revenue growing profitably? Where? How and Why?
- Are we paying sales reps commissions for bringing in unprofitable tonnage?
- Can we quickly tell whether the growth trend is just over last month, last quarter, same quarter last year or year to date?
- How about the profit growth of the last 52 weeks compared to the previous 52 weeks? Is it really growing?
- Is our growth accelerating or decelerating? How much?
- How is our profit growth versus budget or business plan? Where is it failing to meet objectives? Why?
- Which competitors are threatening our business?
- In what regions and market segments can we maximize our growth?
A BI solution is fundamental to find answers to the seven layers of WHY's in order to get to the root cause of issues. Being able to understand and correct these issues faster than the competition provides the company a competitive advantage regardless of how small the business is. In the past deploying a BI solution was not affordable by small companies, not only due to licensing cost but also because the internal and external resources needed for set-up and maintenance.
While IT may own the physical aspects of the data (storage, security, format, connectivity, etc.), the Business (e.g. Marketing & Sales) must own its strategic meaning and be committed to auditing and maintaining its high quality.
A survey by Gartner Research found that poor data quality costs companies an average $8 million per year. In a different study published by The Data Warehousing Institute more than 50% of companies experience customer dissatisfaction and cost problems due to poor data.
With well over 500 million users around the globe, it’s no wonder that spreadsheets are the de-facto Business Intelligence/ Analytics application.
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”.
Having seen BI implementations ranging from the very good to the very bad, I think a BI solution needs to be:
1) User friendly, self-help oriented and designed for the users and not for IT experts, because constantly needing an IT person to run SQL, MDX or complex reports is a slow and unproductive process for everyone.
As the global market for Business Intelligence and Analytics continues to experience double digit growth, BI vendors from around the globe will offer creative and lower cost solutions to gain share in the mid and small size company segments that are turning to BI for the first time.
Cloud computing vendors will expand their offerings to include ETL, Data warehouse, reporting, OLAP, advanced visualization and dashboards in one package for the early adopters that moved passed the security concerns.
Software companies will follow the IBM-Cognos lead integrating advanced statistical packages and predictive analytics modeling into their current BI solutions.
More vendors will offer better mobile BI, analytics and advanced visualization applications.
More companies will realize that they can use BI/ Analytics beyond the back office tactical day-to-day operation. They will start to exploit the power of BI software to perform strategic and competitive analysis on the fly to understand market trends better than the competition and increase market share, revenue and profit.
More companies will realize that the semantic quality of their data is constraining the Business Analytics results. They will start to cleanse, organize and structure the data to contain more strategic meaning and provide direction to grow the business.
Some companies will gradually realize they have built unnecessary complexities in the configuration of analytic, BI tools and data marts. While this isn’t an impediment to IT or analyst experts, it causes casual business users to underutilize or not utilize at all the systems. This will gradually change towards a more business intuitive, self serve “analytics for the masses” model.
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”
According to a study published by Gartner, the Business Intelligence market increased by 13,4% in 2010, the total value of the global BI market reaching $ 10.5 billion. The growth reflects the customers interest for business efficiency solutions and competitive advantage achievement in economic crisis time. Regarding to Gartner, the BI market is 59% controlled by the major vendors, such as SAP, IBM, Oracle, Microsoft and MicroStrategy.
In a discussion started on Business Intelligence Professionals Group on LinkedIn, 276 BI specialists have tried to answer to a simple question: why BI implementations fail. And how can specialists prevent this from happening again and again and again and ...
Although each of the respondents see somewhat different the answer to that question, finally they reached the same results, grouped into two categories: reasons to fail and reasons to succeed.
So, the BI Implementation fails with few reasons:
1) Not enough data to make history.
2) The company management does not have proper hierarchy.
3) BI is designed for Managers to facilitate them take quick decision support, they should know what they want and what they looking at.
4) The critical users not being involved from the beginning.
5) Ineffective or incompetent project management.
6) Understand the business needs.
BI Implementations will succeed when there is a:
1) Good Business Analyst who understands Business.This is a role that can bridge gap between Functional Experts and IT- BI Experts.
2) Good Dimensional models with flexibility to enhance future requirements. Basically well thought out models expecting future rquirements.
3) Requirements understanding between data modelers, Data integrators and Reporting people.
4) Proper resource and project management.
5) User friendly, self-help oriented and designed for the users and not for IT experts.
6) Identify how the business needs fit into the current BI architecture.
What is your point?
