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Strategic Insight:
Operations-Focused BI vs. Strategic BI

  Column published in DM Review Magazine
May 2002 Issue
 
  By Richard Skriletz

Strategic business intelligence (BI) is the greatest missed opportunity in information technology today. Strategic BI provides information to help executives and managers make decisions which lead to high-value business results that flow to the corporate bottom line. Why this is a missed opportunity is clear.

Most applications of BI are operations-focused: BI is used to support front-line staff, supervisors and managers charged with delivering services and processing the associated transactions. Implementations of enterprise resource planning (ERP), customer relationship management (CRM), supply chain management (SCM), financial and other applications in recent years are examples of IT investments focused on improving business operations. BI supports operations applications by organizing and delivering information -- including exceptions and items that need attention -- to operations people and helping them to do their jobs. BI takes operational data, standardizes it and applies BI analytics technology, making it useful for managing and analyzing operational activities. The left side of Figure 1 shows the critical nature of operations-focused BI.


Figure 1: Operations-Focused BI vs. Strategic BI

The practical focus on operations support, however, limits the value and impact of BI: operations- focused BI is used to solve recognized operational problems and make work easier. If your car no longer runs smoothly, you want a mechanic to fix it - you know you need a smooth-running car for reliable transportation. Similarly, managers of business units know what is critical for improving their business operations. I call this the "I know what I need" focus, and too often the implementation of BI technology -- like most IT -- provides only what operations staff know they need or want.

Consider the operations divisions and business processes in your company. Managers and staff in these areas know what applications of technology they want in order to improve the way their work is done. However, providing what is known to be needed or wanted does not produce the "I didn't know that!" response that comes from a discovered, important insight. Strategic BI focuses on finding the important "I didn't know" information that can help executives and managers make decisions that enhance revenues, contain costs, prevent losses and pursue new opportunities -- the business objectives which are the responsibility of more than one business unit (see the right side of Figure 1).

Does your production management have the information available to know the optimum conditions for producing high-quality products? This information helps reduce costs associated with poor-quality products and factory shut-down or start-up. Do you have the information that identifies your most and least profitable products so that action can be taken? And do you monitor sales and suppliers to optimize inventory and profitability? This information helps increase inventory turnover and product profitability. Do you know your most profitable, loyal or problem customers and their preferences? This information aids cross- and up- selling and helps drive incremental revenues. Are you discovering these kinds of insights using strategic BI and turning them into profitable actions? Your competition may be among those companies making this move right now.

In my view, of all the technologies available today, BI is the only one that can be considered strategic. While technology focused on improving business operations can be purchased or duplicated by business competitors, BI is an information analysis and delivery technology that is only limited by the ability to collect useful data, ask interesting questions of that data to gain insight and act effectively on the results. It can be tailored to enable a company's specific strategic goals and organization structure.

Companies miss the strategic BI opportunity for practical and organizational reasons. Practically, the focus for IT spending is on technology that improves business operations, so BI is deployed as an information delivery technology to support this. Organizationally, a focus on business operations can alleviate known problems that impact an executive or manager who wants them solved. Unfortunately, management attention is not focused on strategic BI because no single executive (other than the CEO) is solely responsible for enhancing revenues, containing costs, preventing losses or pursuing new opportunities.

Expanding BI to be strategic as well as operations-focused is essential for driving business results. Strategic BI is achieved when executive management recognizes the positive impact on business results that can come from it and when the IT investment process for BI initiatives changes from projected ROI to real payback. It's the difference between the "I know I need" and "I didn't know I need" perspectives. I'll address these topics in next month's column.

...............................................................................

For more information on related topics visit the following related portals...
Business Intelligence.

Richard Skriletz is the national managing principal for business intelligence and data warehousing at RCG Information Technology, a leading national provider of IT professional services. Skriletz has more than 30 years of experience in information technology and consulting services in the computer, insurance, banking, utilities, telecommunications and manufacturing industries. He passionately believes that business intelligence is a critical success factor for business today and that successful business intelligence requires a focus on improving business results and strategy. Skriletz may be reached via e-mail at rskrilet@rcgit.com.

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