C OV E R STO R Y
5
Barriers
to BI Success
and how to
overcome them
By Steve Williams
E
ven the most experienced pilots wouldn’t ignore their plane’s sophisticated instrumentation
and fly into a vicious storm on gut instinct, thinking they could outmaneuver the worst of it and land
safely. So why should running a company in a rocky economy be any different?
But that’s just what a lot of leaders of large U.S. companies do—shoot from the hip. According to the
findings of a 2008 Accenture survey of more than 250 executives, 40% said they base their major decisions on judgment instead of on business analytics, many times because good data isn’t available.
Moreover, 36% of the executives surveyed said their company “faces a shortage of analytical talent.” A
second, concurrent study of companies based in the U.K. produced similar results.
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Those numbers are distressing, especially in an era
where we have plenty of robust tools to collect and analyze data across all of a company’s operations. The good
news is that upper management—especially at larger
firms—is beginning to realize that information is worthless if it isn’t used to maximize profits. Over the past 10
years, I’ve had the privilege of doing business intelligence
(BI) strategy work with companies such as Northwestern
Mutual Life, Marriott International, McCormick & Company, Pinnacle Foods Group, Principal Financial Group,
Toronto Hydro Electric System, and Lockheed Martin. All
of these companies realized that they couldn’t continue to
compete and thrive in the current marketplace without
integrating BI into their business strategy.
What BI Success Looks Like
Essentially, business intelligence is used to create value by
enabling a company to increase its revenues, reduce its
costs, or both—thus leading to higher profits. Sound
overly simplistic? There’s actually a lot to it. BI is like a
carpentry toolkit, which can be used to build all manner
of structures from a shelf, to a shed, to a single-family
home. Accordingly, BI success looks different to different
executives and managers:
◆ For the CFO and financial management
professionals, BI success means having a precise and
granular understanding of the relationship between operational performance and financial results; better tools for
performance management; high-quality, easily accessible
historical facts for planning, forecasting, and budgeting;
and better information and analytical tools for managing
working capital.
◆ For the COO and operations management
professionals, BI success means having precise and granular information available for cost analysis, analytical
tools for monitoring and improving customer service and
product quality, and high-quality historical facts readily
available for demand management and capacity planning.
◆ For the CMO, sales leaders, and marketing professionals, BI success means having complete information
about individual customers to enable such things as better customer segmentation, more precise campaign targeting, improved customer service and customer
retention, more timely campaign return on investment
(ROI), improved ability to determine customer lifetime
value, a better understanding of the price elasticity of
demand, and improved tools for category and performance management.
◆ For the CIO, BI directors, and BI team, success
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means being able to measure business intelligence usage
and impact, being able to do a better job of meeting the
demands of business users, moving beyond being order
takers for standard reports, and being able to operate
with a solid business case and adequate time and money
to be effective in helping improve business performance
and profits.
This is just a sample of what BI success looks like to
the people who are charged with meeting business objectives, delivering profits, and meeting competitive challenges. Ultimately, BI success is measured in improved
business performance and profitability, so it’s important
to understand and overcome the strategic barriers companies sometimes face.
Five Strategic Barriers to BI Success
Although every company has different strengths and
challenges when it comes to achieving BI success, I’ve
identified five strategic barriers that can cause financial
professionals and the companies they serve to struggle
with capturing the demonstrable benefits of business
intelligence. These are in no particular order because, in
my view, they’re all important.
Barrier #1: Confusing terminology makes the
value of BI hard to determine.
Even though business intelligence is becoming more pervasive in U.S. companies, most executives aren’t yet comfortable with BI and BI-related terminology. That isn’t
too surprising. BI is a broad field, encompassing a wide
range of technologies, data integration approaches,
canned and custom applications, and information/analysis delivery methods. While it evolved from data warehousing, with an emphasis on analyzing historical
Figure 1:
The Many Sides of Business Intelligence
STYLES OF BI
NEW AGE BI
NEW AGE DATA
FUNCTIONAL
ANALYTICS
TOOLS
Reporting
Agile BI
Social Media
Data
Performance
Management
Analytics
Scorecarding &
Dashboarding
Ad Hoc Query
SaaS BI
Unstructured
Data
Financial
Analytics
Query &
Reporting
Parameterized
Queries
Pervasive BI
Mobile Data
Supply Chain
Analytics
Statistics &
Data Mining
OLAP
Pervasive
Analytics
Customer
Analytics
OLAP Cubes
Advanced
Analytics
Self-Service
Analytics
Operations
Analytics
ETL
Predictive
Analytics
Social
Analytics
HR
Analytics
EAI
Real-Time
Analytics
“Fill-in-the
Blank” Analytics
Master Data
Management
Mobile BI and
Analytics
OLAP=Online Analytical Processing; SaaS =Software as a Service;
ETL=Extract, Transformation, and Loading; EAI=Enterprise Application Integration;
BI=Business Intelligence; HR=Human Resources
transactional facts about a business to improve performance and profits, the lines between business intelligence, business performance management, and content
management are increasingly blurred. Figure 1 lists just
some of the terminology you’ll encounter under the BI
umbrella.
The business executives, managers, and analysts with
whom I’ve dealt are successful men and women who have
risen to their positions in large measure because they’re
effective decision makers. While their access to information and analysis has been limited in many cases to
canned reports and Excel spreadsheets, they’ve combined
those inputs with industry experience, knowledge of their
company culture, and discussions with other smart people to arrive at plenty of good decisions. The same can be
said of making decisions in the absence of “a single version of the truth” or in the absence of data that’s readily
“accessible and actionable.” Business leaders are confused
and skeptical when it comes to information technology,
and they need to have a much more concrete idea of what
BI is and what they would be getting from it before
approving six-figure to seven-figure BI budgets. In the
absence of such enlightenment, BI tends to be underfunded, which inhibits its success.
Barrier #2: The mission and importance of BI
are unclear.
Any business strategy won’t succeed unless a company’s
various units work together. To do this, of course, each
unit must have defined strategic missions and functional strategies that reflect those missions. For example,
Japanese auto companies used operations management
strategies that resulted in competitive advantages in
manufacturing costs and product quality, which supported their business strategy of marketing highly reliable, profitable vehicles. The strategic mission of the
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operations function was to create an operations-based
competitive advantage. In contrast, the consumer electronics industry competes mainly on product innovation, and many competitors use contract manufacturers
like Flextronics to rapidly ramp up production and
manage the flow of products through the supply chain.
For these companies, the strategic mission of the operations function is to get products out the door rather
than to try to create an operations-based competitive
advantage.
As such, to define the mission for BI at any given company, you need to first determine the strategic importance of BI to that company and the industry in which it
competes. Factors to consider include:
◆ The number of individual customers the company
serves,
◆ The number of products it sells,
◆ The number of suppliers from whom it obtains
products and/or services,
◆ The number of geographical areas in which the
company operates,
◆ The number of business units it has,
◆ The variability of the demand for its products or
services,
◆ The number of industries in which it operates,
◆ Its position in the supply chain, and
◆ How its competitors are using BI.
Essentially, the more complex the business, the more
important BI is to its success. You can apply this thinking
to the task of determining the appropriate mission for BI.
To illustrate one way of defining a BI mission, Figure 2
shows four stages of BI capabilities in relation to BI’s
strategic importance.
A company in a complex industry, such as software or
automobile manufacturing, needs to invest in and deploy
BI capabilities that either confer a competitive advantage
(Stage 4) or enable parity (Stage 3). On the other hand, a
company in a more straightforward business, such as
extraction of natural resources or consulting services,
may not have opportunities for a BI-enabled competitive
advantage, in which case an appropriate BI mission
would be to deliver Stage 1 capabilities. My experience
has been that many companies don’t explicitly determine
the proper mission for BI. Accordingly, they lack a reference point to anchor BI investment decisions, and they
fund BI at some level based on what generally amounts to
a collective gut feel. Times being what they are, and business people being skeptical of IT in general, the tendency
is, again, to underfund BI.
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Barrier #3: There’s no clear link to business
strategy and critical business processes.
BI success comes down to improving the performance of
the critical processes that determine business success. If
you think about it, a company can’t earn a return on an
investment in BI unless that investment yields increased
revenues, reduced costs, or both. Elementary, you may
say, but many companies satisfy themselves with BI value
propositions that aren’t clearly linked to their business
strategies and critical business processes.
For example, large manufacturers of packaged food
and other consumer goods operate in a very complicated
industry. They make thousands of products and sell them
to millions of people through a large multichannel distribution system that reaches tens of thousands of retail
outlets. To push their products, these companies execute
hundreds of thousands of promotional campaigns that
further cloud an already muddled picture of consumer
demand and how that varies by time of year and geography. All of the leading companies in a particular industry
have essentially the same business strategy, and the key to
success is effective execution of consumer marketing,
product innovation, trade marketing, operations, and
supply chain processes. Given these industry drivers and
dynamics, a well-aligned BI strategy would encompass
leveraging business information and analytics within
these critical processes:
◆ Performance management,
◆ Customer service,
◆ Financial management (budgeting, cost analysis, and
variance analysis),
◆ Revenue management,
◆ Sales and operations planning,
◆ Operations management,
◆ Trade promotions management,
◆ Inventory management,
◆ Category management and assortment optimization,
and
◆ Purchasing management.
By closely matching planned BI investments with specific critical business processes, companies can target and
measure performance improvements in a concrete way
that executives and managers can believe in. Absent such
a tight linkage, the BI initiative will be adrift.
Barrier #4: There’s no sense of urgency among
upper management.
Companies can readily overcome barriers presented by
confusing terminology, unclear value propositions, and
Figure 2:
The Strategic Importance of BI Defines Its Mission
More Strategic Importance of BI
STAGE 4
Competitive Advantage
Company
BI Capabilities
Superior to
Competitors’
STAGE 3
Externally Neutral
Company
BI Capabilities
on Par with
Competitors’
Less Strategic Importance of BI
STAGE 2
Internally Enhancing
Company BI
Capabilities Enhance
Execution of
Business Strategy
STAGE 1
Internally Neutral
Company BI
Capabilities Do Not
Impede Execution of
Business Strategy
Comparative
Capability of
Company BI Unit
Less BI Capability
lack of alignment with critical business processes through
a combination of executive education, rapid prototyping,
and structured BI opportunity analysis. But the effort
required to overcome barriers 1, 2, and 3 will be for
naught if there’s no sense of urgency in the executive
suite. Change management experts agree that establishing
a “burning platform”—a need for immediate and radical
change—is essential to creating the commitment to
change. I’ve heard executives say things such as:
◆ “We can’t continue to run the company without a
better idea of the potential and actual impact of
strategic initiatives.”
◆ “We have huge amounts of data but limited
information.”
◆ “There’s an increased demand for a more timely, integrated, and holistic view of product performance from
multiple perspectives.”
More BI Capability
Yet the contrast between what executives and managers
say they want from BI and what actually happens with
respect to funding, intensity of effort, and executive
engagement is sometimes stark. A couple of change management issues may explain this:
◆ No burning platform. Despite obvious needs and
BI opportunities, leadership may not view BI as being
critical to business success. There’s no compelling internal vision and consensus or no persuasive external driver
to create a sense of urgency within these companies.
◆ Fear of accountability. Although executives like to
talk about accountability and performance metrics and
although the phrase “fact-based management” has crept
into the business vernacular, my 30-plus years of working
with large and mid-sized organizations tells me that
many senior executives and managers are accustomed to
having meaningful amounts of “maneuvering room”
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because of a lack of good information and analytics. The
absence of hard facts and solid analyses allows them to
offer a variety of plausible (but not provable) explanations for performance shortfalls.
◆ Lack of business leadership. Ultimately, the ROI on
BI comes from changing business processes, and only the
business side of the house can do that. While IT can bring
BI to a firm’s attention, IT can’t lead business process
change. Accordingly, companies need to create businessled coalitions to drive the development, deployment, and
use of BI to improve performance and profits. Nevertheless, many business executives think of business intelligence as an IT initiative, many are intimidated by the
technology side of BI, and many prefer to be the judges
rather than the judged when it comes to implementation.
Ultimately, companies can change their processes when
they want to and when they feel the urgency to do so. BI
is no different, and the absence of a burning platform
and effective change management get in the way of its
success.
Barrier #5: Not everyone is on the same page.
For business intelligence initiatives to succeed, business
strategy, business systems and processes, IT strategy, and
IT operations and processes must be aligned effectively.
That’s a pretty broad cross section of enterprise activities.
Assuming a company has determined the strategic
importance of BI and the business units are willing to
change their systems and processes to leverage it, it’s still
necessary for IT to align its strategy, processes, and operations to support delivery of BI applications.
Consider the scenario whereby a financial services
company determines that BI is critical for identifying, targeting, and winning new clients; for expanding its relationships with existing clients; for managing customer
service based on predicted customer lifetime value; and
for retaining its most profitable clients over time. The
sales and marketing groups are excited about BI and are
ready to change their processes to leverage new applications. But then comes the need to actually do the IT
work, and the company runs into such challenges as:
◆ The designated BI team lacks BI skills and experience.
◆ IT is run as a shared service, so BI takes a back seat.
◆ Business leaders lack IT savvy and thus avoid meaningful engagement.
◆ The BI team lacks business savvy and therefore struggles with BI requirements.
◆ IT development methods are inappropriate for rapid,
effective delivery of BI.
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◆ IT people are spread across various development projects, so gaining focus and accountability on the BI
project is difficult.
◆ IT policies are optimized for control, risk avoidance,
and high reliability/availability systems, whereas BI
development is best served by speed and agility.
All of these challenges point to an alignment gap
between the business need for BI and the ability of the
business and IT units to work together effectively to
deliver BI in a timely, cost-effective manner.
Knocking Down Walls
It’s important to approach formulation of a BI strategy
from two primary perspectives that are shown in Figure 3:
◆ A top-down perspective that determines a BI mission and its importance based on a company’s business
strategies and the way the company elects to compete
within its industry or industries and
◆ A bottom-up, risk-reward perspective that identifies
specific BI opportunities related to critical business
processes that impact profits (rewards) and that takes a
hard-nosed look at the business, organizational, and IT
barriers to succeeding with BI (risks).
The five red and numbered circles within Figure 3 correspond to the five strategic barriers to BI success. The
first barrier occurs when business people don’t understand what BI is and how it can improve processes that
drive profits. The second barrier arises when a company
hasn’t conducted a structured BI opportunity analysis
that links BI to critical processes in a way that business
leaders can understand and validate. The third barrier
occurs when companies haven’t determined a suitable BI
mission. The fourth and fifth barriers arise when business
people don’t accept responsibility for BI and lead its
adoption and when IT doesn’t align its strategy, systems,
processes, and people with the business need to leverage
BI to drive profits.
Figure 3:
BI Strategy: Linking Business Strategy to Greater Profits
INDUSTRY CHARACTERISTICS & COMPANY BUSINESS STRATEGY
STRATEGIC IMPORTANCE OF BI
3
BI MISSION
BI STRATEGY
BI OPPORTUNITIES:
• INCREASE REVENUES
• REDUCE COSTS
• IMPROVE PERFORMANCE
IMPACT
2
CRITICAL BUSINESS PROCESSES
THAT IMPACT PROFITS
4
BI BARRIERS & RISKS:
• BUSINESS BARRIERS
• IT/BI BARRIERS
• ORGANIZATIONAL BARRIERS
1
5
All of these barriers, plus the tactical and operational
barriers, can be readily identified and addressed in the BI
strategy. Furthermore, a pragmatic BI strategy helps build
buy-in from business and IT leaders, a key prerequisite
for funding and BI success. Of these barriers, the lack of
an explicit BI mission that’s accepted by top management
may be the most damaging. If the company hasn’t determined how strategically important BI is, it’s difficult to
establish a burning platform; decide what level of investment BI merits; and determine what degree of change to
IT policies, methods, and processes is in order. Moreover,
it’s hard to define a BI strategy that’s suitable given the BI
mission.
Looking back at Figure 2 for a moment, the investment
pattern and pace when the BI mission is to be Stage 1
(Internally Neutral) is quite different from when the BI
mission is to be Stage 4 (Competitive Advantage). Companies tend to manage change effectively if they under-
IMPACT
stand the importance of changing, and the other strategic
barriers are more readily overcome if BI has a defined
mission. Financial professionals, including management
accountants, can intercede on behalf of executives and
the IT team to align their goals while overcoming the
barriers to effective business intelligence and improving
results. SF
Steve Williams, president of DecisionPath Consulting, is a
strategy consultant and thought leader in the fields of business intelligence, analytics, and performance management.
He has written for many business journals and magazines,
including Strategic Finance, Business Trends Quarterly,
Business Intelligence Journal, and Information Management (previously, DM Review). With Nancy Williams, he is
coauthor of The Profit Impact of Business Intelligence.
You can reach Steve at (301) 926-2452 or
[email protected].
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