The heavy merger and acquisition activity of the 1980s presented management with one of the great paradoxes of business. As you succeed you grow in size and complexity. As you grow in size and complexity it becomes significantly harder to quickly and easily discover changing circumstances affecting corporate performance. Increased size and complexity also brings added difficulty in effectively reacting to those changing circumstances if and when they are identified. How unwieldy is this problem? Even in moderate size companies, data bases in the many billions of numbers is the rule, not the exception. In large companies the amount of data is staggering. In this environment, can computers really be the tool that advertisements would lead us to believe will help the chief executive and his team effectively manage the enterprise?
PREPACKED EIS BECOMES AVAILABLE
The need for top management to better understand their increasingly complex businesses with the attendant problem of runaway data proliferation occurred at the same time that end user computing finally evolved enough to broadly reach chief executives and senior managers. In the mid 1980s the era of commercial executive information systems (EIS) was born. It was a conscious effort to emulate a handful of pioneering CEOs whose personal efforts and results had been profiled in the early 80s, by taking advantage of the new power of microcomputing.
The executive information systems of 1985 electronically reported summary data from existing information systems. Compared with previously available paper reports, the EIS speed and ease of distribution-coupled with the ability to generate user-specified custom perspectives and simple analyses-offered clear advantages.
Technically, these systems were a pioneering development because of their easy-to-use and visually attractive graphical user interfaces. More than anything else, EIS systems set high user expectations and brought chief executives and senior managers solidly into the ranks of the end user community.
As a data “briefing book,” EIS offered the rapid electronic delivery of the traditional summary-level paper reports with which executives were already familiar. EIS also added basic exception reporting and the ability to “drill down” to look at more detailed layers of supporting schedules of data. However, all the data seen by the executive user had to be preplanned and prearranged by supporting staff.
MANY EARLY COMMERCIAL EIS EFFORTS FALTER
Referred to by some as “executive dashboards,” these systems were to provide essential information for senior decision makers. The dashboard analogy also helps explain what brought many of these systems into disrepute. They were isolated systems intended only for the executive-a dashboard for a single driver. The EIS was neither distributed for collective insight building nor powerful enough to create insights by itself. Its simple analyses were often displayed in color reports with a “stoplight” format: green for acceptable results, yellow for marginal, and red for trouble areas, with no real backup or ability to interact and ask follow-up questions. Some frustrated users began calling these reports “idiot lights” because they told you too little, too late, with no understanding of why. The content was historical data accessed through the rearview mirror of a computer display.
Most of these EIS systems were a product of their times-special IS projects developed with the limitations of the hardware and communications technology that was available almost a decade ago. Pushed to their limit for further performance, these early efforts were unable to respond. Fixed screens, fixed reports, and fixed hierarchies of data allowed little or no deviation from the system design. Small implementations, rigid platform dependence, and the high cost-per-user associated with the extensive maintenance to support a limited group all took their toll. Ultimately, the nominal added value of electronic delivery of the same data executives formerly received was not enough to keep them alive. Furthermore, experience also revealed that an EIS could not be totally preplanned. Instead, it was a process that reflected management’s ongoing interests, work style, and values.
EXPERIENCE AND NEW TECHNOLOGY YIELD EIS II
These lessons, coupled with newer more powerful hardware and software technology, serve as the foundation for enterprise intelligence systems or EIS II, the next generation of EIS. These distributed, data-driven systems contrast greatly with their static report-driven ancestors. EIS II users can work with less structured data to track, analyze, communicate, and respond to topical as well as the scheduled issues that cross an executive’s desk. EIS II offers serious manipulation and analysis of the enterprise’s “live” data while maintaining the ease of use of the pioneering EIS. This added functionality meets the needs of executive users as well as those of the larger user community.
EIS II goes beyond mere rearview performance tracking. It can support the chief executive’s efforts in “issues management,” becoming an effective tool to address the daily problem-solving process based upon individuals and teams accessing, organizing, analyzing, and exchanging information interactively on a large, distributed scale-across functional boundaries.
Because all reports and analyses do not need to be preplanned and prearranged by supporting staff, EIS II has a low support cost per user. This cost factor becomes critical when considering an enterprise-wide implementation. Features such as “intelligent” drill down allow users to dynamically navigate through the underlying data, guided by user-specified criteria. Advances in “expert system” technology have extended this functionality to go so far as to automatically identify and highlight the “news in the data” customized to each user’s requirements. With this scope of capabilities, EIS II is the logical basis for broad organizational implementation-both top-to-bottom as well as laterally throughout functional areas.
So what are chief executives achieving through the use of EIS II? Many believe that their use of this new information technology is strategic to their enterprises’ success. These chief executives have satisfied themselves that EIS II will serve most knowledge workers, integrate their organization, people, and functions, and allow for more informed decision making at many levels while reducing the “time float” associated with those decisions. Rapid, informed decision making coupled with team building and mistakes-not-made are the measures these chief executives are developing. Because of this perceived strategic importance, many executives are very restrictive when it comes to sharing the details of what they are doing and the results they are achieving. This pattern is strongest in industries hard-hit by offshore competition, time sensitivity, and focus on small changes in market share.
Others are willing to share some details. Here are some representative examples:
- · The EIS at a fast food chain allows the chief executive to examine actual performance versus plan and to project that into the future by comparing the results against several key performance indicators. Further, the CEO directly looks at marketing results and calculates, among other things, the cannibalization effect that a new product will have on existing menu items, thus quantifying net new business. The system is also used to model the many variables that impact each restaurant’s operating and financial performance. Individual menu item sales can even be tracked to see when to change or delete an item in response to market demand.
- The EIS at a leading consumer packaged goods company allows the chief executive to integrate data from all points of operations, identifying problems and responding while intervention can still make a difference. Data from thousands of sales people report on all product lines across several hundred thousand retail outlets. Using the EIS to navigate through the data, problem areas are discovered, solutions proposed and simulated, consequences evaluated, and finally implemented. Sales routes were consolidated, staff head count was reduced, distribution centers consolidated, and sales increased.
- The EIS at Montana Power Company, a large regional power company, allows the chief executive to monitor regulatory issues and their impacts upon rates and revenues for the billion dollar corporation’s diversified businesses-utilities, natural resources, and waste management. Rate and financial analysis helps executives devise a strategy for incorporating new plants into a rate base that is acceptable to both government regulators and the consuming public. Executives track all of their business segments and operating strategies and quickly forecast production and revenues as far as ten years into the future. They attribute much of their success to one enterprise-encompassing system that allows them to see where their business has been, is now, and the impact of alternative management decisions on corporate performance.
As one executive put it, “It is easy to see how these information systems lead to increased sales, increased market share, and significant cost savings. Those are easy to measure because of the outcome. For me the real value is knowing what is going on, where we are relative to plan, and my ability to make sound, informed decisions quickly.”
The mission of the chief executive has not changed. The pressure for corporate performance is greater than ever. Witness Fortune’s reporting of their 1990 top 500 industrial corporations. This selected group deployed 12.5 million workers, assets of $2.5 trillion, and sales of $2.3 trillion to achieve $93 billion in profit. The bad news was that profits were down almost 12 percent from 1989. It was the second year in a row with declining profits.
In this increasingly complex and highly competitive world, the chief executive needs the ability to know what is happening, evaluate alternative courses of action, and implement the right decision in a timely manner. Despite the obstacles, a chief executive leading his organization with the help of a broad-based EIS II implementation will be in a significantly better position to do just that.
Jeffrey P. Stamen is president of the Waltham, MA-based Software Products Group, Information Resources Inc. (IRI), where he has worldwide responsibility for the development, marketing, sales, and support for IRI’s software products. He was formerly president of IRI’s Data Systems Division, responsible for all IRI technology and development. A graduate of MIT, he lectures on data analysis and serves as an internal consultant on the applications of computer technology to social and management science projects.