Published in DM Review Online in August 2001.|
Printed from DMReview.com
Business Intelligence: The Value of Business Intelligence Applications: Part 3by Jonathan Wu
The perceived value of business intelligence (BI) is extremely compelling based upon the successes of organizations that have implemented this technology. In an effort to emulate these successes and benefits, organizations often embrace this technology without having a true need or a strategy.
The first column in this three-part series (which appeared May 28) established that BI applications not only empower users with easy access to information but also increase users' knowledge of the business by enabling them to identify and analyze trends and exceptions. The second column (which appeared June 25) addressed how organizations govern their data and the factors that can help them realize the value of their BI applications. This final column of this series focuses on who needs BI and the importance of establishing a BI strategy before selecting and implementing the technology.
The need for BI for decision-making varies among organizations. Some organizations have only a limited need, while others must have it to survive. Howard Dresner of the Gartner Group has described four types of organizations and their relative need for BI. I have identified these types as follows:
Brick-and-mortar small businesses – Use of information systems may be cost prohibitive and not critical to business operations. The local independent convenience store, a gas station, or a legal or accounting service provider are example of such small businesses. Based on their experience, the owners usually have a strong understanding of customer preferences, seasonal trends and changes in the market.
These businesses have not usually had information systems to capture data or to support BI technology. In addition, BI's potential value in identifying trends or new business opportunities is likely to be offset by cost and to simply validate the owners' accumulated knowledge. BI technology does not provide significant value for these businesses, and the return on investment may be minimal.
Monopolies – Organizations with captive customers also may not realize significant benefits from BI. Municipal water districts, local governments and utility companies in some locations are examples of organizations that have no competition. Without the competitive threat, there is no compelling reason to use BI technology to reduce expenses or to increase revenue.
E-commerce companies – Internet companies with information systems in place to support their Web sites, to conduct e-commerce activities and to facilitate enterprise resource planning need BI to survive in this competitive, rapidly changing environment. These organizations have the information systems to support BI and the need to identify trends and new business opportunities. With BI, these organizations can recognize customer preferences and market trends, and assess the effectiveness of their business strategies.
For example, an e-commerce company uses BI technology to analyze data about the effectiveness of their marketing campaign. They identify the number of customers visiting the Web site, the items they purchased, the cost of their purchases and the cost of the campaign compared to the revenue and profit it directly generated. Without BI technology, this company would not be able to easily assess the effectiveness of a marketing campaign because the information would be in separate and disparate systems.
Integrating data from the separate systems and providing it in an easy-to-use format would be a time consuming, manual process without BI. Companies in this group need to make decisions quickly and to have a strong understanding of their customer preferences, market trends and effectiveness of their business strategies as a competitive advantage.
Large organizations – Organizations that use information systems to collect and process data for customer relationship management, enterprise resource planning or sales force automation need BI to analyze their business activities. In Part I of this series, the example was given of a regional sales manager who analyzed transactional data to identify a trend and then acting upon that information.
While the transactional systems collected and provided the data, BI let her access the data easily without having to understand the complex transactional database. BI enables large organizations with complex and disparate information systems to realize the value of their data. With BI, these organizations make it easy for their employees to extract and analyze the data for decision-making purposes.
Developing a BI Strategy
Organizations that need BI must develop a strategy to realize the greatest benefit of this technology. This strategy should outline the current and desired means of accessing and delivering data from the organization's information systems, as well as a course of action to allow the organization to realize its desired BI goal. The BI strategy must contain the functional requirements coupled with the supporting technology.
The success stories illustrated in Bernard Liautaud's book, E-Business Intelligence – Turning Information into Knowledge into Profit (McGraw-Hill, 2001) show examples of organizations that developed a BI strategy before implementing the technology. If an organization undertakes a BI initiative without a strategy, management runs the risk of having the project fail or of creating isolated solutions that will not meet the needs of the entire organization.
BI applications are easy to use and make information more accessible. While not all organizations need BI, those that do find it critical to their success. Organizations that have successfully implemented BI invariably have based their implementation on a BI strategy, which has enabled them to realize the greatest benefits.
Jonathan Wu is a senior principal with Knightsbridge Solutions, www.knightsbridge.com, the largest independent professional services firm specializing in business intelligence and data warehousing. He has extensive experience designing, developing and implementing information solutions for reporting, analysis and decision-making purposes. Wu initiated and contributed to the development of the Business Intelligence and Data Warehousing Certificate Program at the University of California, Berkeley Extension and is also a lecturer in the program. In addition to this quarterly column, Wu is the business intelligence online columnist for DMReview.com. He can be reached at firstname.lastname@example.org.
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