Business Intelligence, Management Information and Data Warehousing. These are all terms and concepts that have been embraced by large companies over the past decade in an attempt to gain strategic insight into customer behaviour and steal that all important market advantage away from the competition, but what do all of these terms really mean and do they need to be part of the business vocabulary for managers of the more typical small to medium enterprise found in and around the Gibraltar area?
In 2005 a study of Fortune 100 companies undertaken by Wirthlin Worldwide on behalf of Accenture; a leading Business Intelligence provider, found that that 90% of senior executives within these companies saw Business Intelligence capability as the number one most influential benefit for company prosperity.
In the 2006 annual Gartner survey of over 1400 Chief Information Officers of leading organisations from over 30 countries, Business Intelligence capability came out as the top technical priority.
So what is all the fuss about? In order to understand exactly what all of the concepts mean and the benefits they provide it helps to start by looking at the problem that these principles address; primarily the analysis and reporting of consolidated business information.
Information Technology has been an operational business tool to some extent in most companies for decades now. Many organisations run several operational computer systems, each one addressing a particular business process such as stock ordering, sales processing or account management. These systems usually serve their primary operational tasks well and to some extent may even exchange information, but when managers try consolidating the wealth of disparate system data in order to aid the strategic decision making process, it can some times seem like they are trying to extract the proverbial “blood from a stone”.
There is a justified reason for this apparent frustration, if operational systems were designed with holistic reporting and data analysis in mind, they would not perform their primary task as well. The design concepts associated with reporting and analysis systems are at odds with those required for a successful operational system and as a result the operational data is often held in an esoteric and inaccessible way.
This is where Business Intelligence (BI) solutions provide the key. The typical business is data rich but information poor. There is usually a wealth data held in operational systems but in order to unlock the potential of this data it must become information. It must be consolidated, given a business context and made available in a timely fashion to the strategic decision makers within the organisation. These benefits are exactly what a Business Intelligence solution provides. A good BI solution turns data into information and should deliver, as a minimum, the benefits listed below:
-
Consolidated historical and topical information about sales and customer behaviour.
-
Scheduled or on-demand Key Performance (KPI) Indicator reports.
-
The ability to analyse information in a variety of ways. To look at customer behaviour, to perform market segmentation and understand better how to win new business without losing existing customers.
-
The ability to analyse growth trends, model the impact of changes in influential parameters and predict sales trends or customer behaviour.
-
The ability to set realistic targets for growth and monitor the progress daily.
-
A single version of the truth where business performance is concerned.
-
The ability to manage proactively not reactively.
Data Warehousing, Management Information and Business intelligence, are all terms that are often used interchangeably but in reality they are subtly different.
In simple terms, a data warehouse is a large database containing consolidated, historical and topical operational data that has been re-modelled for analytical purposes. It may be directly accessible by business users and have a business user context but not necessarily. It is often the creation of a business user interface that provides the translation between the data warehouse database design and the common business terms. The key element of the user interface is referred to as meta-data (information about data) or a semantic layer and it provides the translation of the consolidated database design into common business terms. Meta-data can pre-define common business measures and formula and wrap them up as simple re-usable definitions, ensuring there is a single corporate version of the truth.
To see where this may be of benefit, consider a bank acquiring new credit card accounts. The bank employee who signed up the customer will be keen to register the account form the day the customer signed up as their performance may well be measured against the amount of new business they generate. In corporate terms however, this may bee too simplistic. Customers who open an account but do not use their card, or cancel their agreement within 3 months of signing up may actually cost the bank money. In such cases, the bank will want to differentiate between new sign ups and active accounts. Sign ups may be counted at the time the customer signs, but active accounts may be considered to be those that have transactions equal to or above a certain monetary amount within the first 3 months after sign up.
Defining sign-ups and active accounts differently within the semantic layer by incorporating the necessary qualifying factors, ensures that at a corporate level, that there is no ambiguity between the different performance measures. Anyone using these pre-defined measures in reporting analysis will always be using the same consistent definition. It also provides a starting point for managers to analyse the relationship between sign ups and account activity, thus promoting a better understanding of the types of customers and activity that generates revenue rather than costs.
The semantic layer that sits on top of the data warehouse is the enabler for those capabilities termed Management Information (MI) and Business Intelligence (BI). These terms are closely aligned but BI typically offers a more holistic benefit. Management information has historically been used to refer to the ability to report upon Key Performance Indicators (KPIs) for the business. The MI viewpoint tends to provide the benefit of consolidated reporting, but in a pre-determined, scheduled fashion such as daily sales reports that show progress against targets.
Business Intelligence takes this a step further by not only reporting out the current position of the business but allowing detailed analysis (often referred to as data-mining) of current and historical information. Key performance measures such as new customer accounts or product sales are combined with dimensional context information such as the store where a sale was made, demographics relating to the customer and time dependant elements. This holistic view of business information allows us not only to see how well the business is performing now, but gives insight into historical trends, customer profiles and their spending habits, the effects of changes to products and pricing structures and a wealth of other analytical information.
In having this information at their fingertips, business managers can perform “What If?” modelling using historical trend analysis to predict what might happen when price changes are made, new products are introduced or any number of influencing parameters are changed.
Analysis of customer spending profiles can lead to a better understanding of the customer base, allowing for customer segmentation and marketing activity that is targeted towards specific groups of customers or even individual customers.
These abilities are just the tip of the iceberg. A good BI solution can offer potentially limitless insight into corporate information and can ensure that any organisation, irrespective of its size can manage its growth proactively, rather than reactively. Today’s economic and political situations can be very volatile and customers have an ever increasing choice of supplier to turn to. Being able to provide a better and more personalised customer experience and the capability to manage the future not just the present is key to the long term survival prospects of any business.
When considering the economic profile of the local area, it is easy to see how it can benefit from Business Intelligence. The sales and services industries are the bedrock of the Gibraltarian economy and these business models are the ideal candidates to benefit from BI, especially the Gaming, Legal, Financial and Real Estate sectors. Understanding and predicting customer potential, engaging the customer with targeted marketing and using the information to nurture long term, high value customer relationships is not only essential for company survival, but for the prosperity of Gibraltar’s economy as a whole.
Solutions do not have to be costly or complicated to install, In fact a good BI solution should simplify the business manager’s interaction with IT and for that reason BI solutions should be business led initiatives rather than IT led ones. The technology employed need not be complicated either and whilst BI for the large organisation may require a generous amount of computing power, the small to medium business can achieve a lot with very little. The key resource is the human one, ensuring that the right questions are asked and that the insight provided is acted upon.
So the answer to the question posed at the start of this article is unquestionably YES, Business Intelligence should be in the business vocabulary of every Gibraltarian business manager, the Rock’s commercial future depends upon it.
If you would like to explore what Beacon can do to help your business contact us or register for free BI and CRM tips and information.
|
