Harnessing the Power of Business Intelligence
Business intelligence software can translate masses of data into insights that drive better decisions—if you do it right.
November 12 2013 by CJ Prince
Technology also has grown more and more user–friendly; with the ubiquity of mobile devices, smartphones and web-based computing, business heads formerly phobic of technology no longer see data as a four-letter word. “BI is about creating automated machines that churn out business-relevant information that you can use to drive decisions,” says Peters. “That’s been around a long time, but what’s different this time is that it’s come out of the closet to some extent.” Peters says that back when he attended Harvard Business School, if anyone had talked about slicing and dicing data as a business tool, there would have been a revolt. “CEOs don’t do that. People who live in caves, in dark corners, do that. It was, ‘you give me the data; and at the end of the day, I’ll make a decision.’ Data analysis was seen as more of an actuarial task than a strategic differentiator.”
To be fair, these tools were once only comprehensible to the “dataheads” in those dark corners. Today, user-friendly interfaces are making it possible for C-level executives on the business side, who have no background in technology, to explore the data, play with the numbers, create their own reports and make smarter decisions more quickly and efficiently. With new dashboarding technology, a CEO can quickly pull up regional sales data, rendered on a geographic map with visualization technology, and see anomalies and areas for potential growth, says Dwight deVera, senior vice president at arcplan, a BI solutions provider. The CEO might, for example, notice that the highest sales tend to be clustered in parts of the country that have regional distribution sites and can see that this trend has been going on for several years.
“If you know your product would have appeal in the Pacific Northwest, but you don’t yet have a physical site there, you may be able to quickly rationalize the decision to build one,” he notes. Alternatively, BI tools would allow the executive to see which 20 percent of the products are generating 80 percent of the sales and then which of those products falling outside the 20 percent are generating an outsized direct cost, as well. “The decision to sunset that one product ultimately comes from the top, and it’s one that can be made fairly quickly,” he says.
Because of the speed with which decisions can be made, the potential for cost control is considerable, even when the percentages saved appear small or incremental. Kevin O’Rourke, director and BI Solutions practice leader with tech consultancy TriCore Solutions, recently worked with a medical-device maker that manufacturers defibrillators. The executives had decent insight into the revenue of a particular product set, but they did not have as clear a handle on its cost—and those costs seemed to be rising 4 percent year over year. Their new BI solution allowed them to do ad hoc analysis on both the revenue and cost sides to see cause and effect.
“They had, in near real time, daily or hourly, a view into which product costs were going into particular items and were better able to make changes from a supply chain or vendor relationship, based on an understanding of these costs and of margins going up and down,” says O’Rourke. For example, when the cost of oil was at an all-time high, they were quickly able to see that fuel costs (needed to ship from a manufacturing facility in the Middle East) were driving up the expense side. The billion-dollar company was able to save $7 million over a six-month period. “You could do all that in an Excel-based world, but it takes so much time and energy. Your time to market is not going to be as useful,” says O’Rourke.
Being able to compare cost or revenue per employee to the ratios of competitors is another benefit of new data analysis. By comparing your company’s ratio to that of your nearest competitor, you can better see where you’re coming out, says deVera. “You could also be a small company and compare yourself to General Electric, if you’re in the same industry. Even if they’re bigger, you can see their ratios and yours and it’s an apples-to-apples comparison.”
One company has even dedicated itself to turning BI technology outward and mining the public Web for just such valuable content. “There is a lot of garbage out there, that’s for sure, but there is so much gold out there that you never had access to, as a company. Now is the time to pay attention to that data outside the firewall, as it relates to your business,” says Keith Cooper, CEO of Connotate. He recently worked with a large brand-name hotel that was getting negative feedback from guests, saying the rooms in its brand-new wing were too noisy. Management had determined that they would have to spend several million dollars to soundproof the walls and ceilings of the entire wing. Connotate mined the web for all reviews and customer comments from dozens of review sites, presented by topic and date. “In the next 60 days, they discovered that several guests had figured out the problem for them. The doors to the rooms were missing the rubber bottoms that keep out noise and light. The $5-per-room solution was all that was needed.”
On the revenue side, CEOs can use BI analysis to spot new opportunities that would require minimal capital investment to realize. “It takes [bits of] information that are typically scattered around the company and brings them together to reveal opportunities,” explains Wayne Simmons, CEO of The Growth Strategy Company. Simmons worked with a high-tech client that discovered a new niche in an emerging market for a legacy product they’d had for years but that had leveled off sales in the U.S. “They were able to connect the product portfolio with the market analysis, so they had a finished product they could get to market very quickly.”