Smart company

Utilising business intelligence to achieve better performance is nothing new, but are organisations getting the basics wrong? CXO spoke with KPMG’s Herman Heyns to find out how organisations should be using BI more intelligently.

“Although first devised as long ago as 1958, it was not until the late 1990s that the term ‘business intelligence’ was widely used.”
-Fast fact

To shamelessly borrow a catchphrase from a well-known woodstain manufacturer, business intelligence 'does exactly what it says on the tin' - it provides intelligent solutions and strategies for your business, implemented via a series of tools, systems, processes and planning. Adopting a strategy that can work for your particular business can be tricky; there are so many variables, techniques and approaches that can be employed to help your business better understand its productivity, efficiency and data. But the end-goal is always the same - to add to the bottom line and grow your business.

This is always the danger with broad and sweeping industries such as business intelligence. It sounds a captivating proposal - to employ intelligent business strategies to produce better performance results, but there are dangers in trying to tackle something so potentially sensitive without a clear approach strategy in mind. As the financial constraints of the recession leave ever-diminishing room for error, more and more companies are looking to business intelligence to help identify areas of weakness or inefficiency within, so it is little wonder that interest in this sector is currently greater than it has been for many years.

"The big organisations spend upwards of €40 billion a year on business intelligence and, in terms of their total expenditure, it is quite a significant chunk of money of these organisations' overall spend, but the majority of executives feel that they are not getting massive value or competitive advantage over the intelligence they already have about their business," says Herman Heyns, Partner of Business Intelligence at KPMG. "Conversely, there are a small percentage of companies that actually use business intelligence smartly, gaining a competitive advantage. The companies that do this well tend to do some really basic things that are executed well. This is the context - what do they do differently that proves so successful that other business fail to grasp?"

Retrieving something quantifiable, usable and tangible from the masses of data and information a company works with on a daily basis is the Holy Grail for most businesses, and the purpose driver behind the employment of business intelligence techniques and processes. Actually obtaining satisfactory results, though, has often proved elusive for even the most sophisticated of enterprises.

"What our research has found is that the real leaders in this space understand the value of information in terms of making better decisions that drive value for the organisation," explains Heyns. "On the other hand, the losers in this field spend vast amounts on solutions, often technology solutions, without actually knowing where they want to go with this. So what we see are vast sums spent on producing more reports, putting in new data warehouses, putting in new analytical tools etc., and you can fast-forward five or seven years later and you can bet that they have no better insight into the decisions they need to make.

"So the challenge for many companies is breaking that habit of applying the same recipe over and again and expecting different results. Companies with a vague idea of what they need to achieve from a business perspective spend time and money in all the wrong places."

Business inhibitors

Spending large sums of money on business intelligence is no guarantee for success, and is often seen as one of its main inhibitors - if higher spend does not yield better results, then what is the point of business intelligence? "There are two things that really limit the success of some companies' business intelligence strategies," says Heyns. "The first one is not being clear about what information you need in order to make the business successful. So many organisations that try to get better business information say 'what can we get easily? Well that's what we'll invest in,' rather than identifying what is most valuable to their business. Most companies would love to get into the minds of their customers to really understand what services would make them even more valuable, but actually most business intelligence projects try to tackle things like how much of a particular stock they have, which is a completely different theme and not actually that valuable."

Companies that are unclear about what parts of their organisation are the most valuable often find that their business intelligence strategies prove unfruitful, and this, argues Heyns, stems from a lack of clear understanding at executive level about exactly what business intelligence is and how it can be most effectively applied to their company. "Certain organisational structures are not aligned in a way that is conducive to getting the information they seek," says Heyns. "A typical organisation will have a CEO, then the CFO and COO, plus an operations director and marketing director. They all have specific roles, but the information that is valuable to them actually cuts across all silos and sectors, and so the governing structure in organisations such as these doesn't allow people to execute decisions in that lateral way. The problem is that somebody in an organisation is going to take the responsibility for executing a business intelligence project and it is going to sit within one of those silos, and that person is not going to challenge the silo that they are sitting in."

Rational organisational heads would obviously be able to identify if and when these structural inhibitors were affecting the company's ability to glean better results from its business intelligence approach, but often the value in the information they require is not so clear-cut. "If the value in the information is clear enough, then it's at least a rational decision that the organisation can take to say that it is worth changing structures to deliver results," says Heyns. "But most organisations don't actually take this step because they don't understand the value that they are leaving on the table. And for that reason, they are often not even willing to contemplate changing the organisational structure."

Understanding information

Failure to grasp the value of the information at a business' disposal is more commonplace than one might think. It is often not an easy task to identify where a company can streamline, cut costs, invest or provide better service: institutionalised business methods, rigid structures and general misunderstanding of where to look combine to produce inefficiencies in a number of companies.

"Mobile phone companies are a good example here," says Heyns. "These companies see themselves as sellers of airtime and data, and they are in a commodity space where they compete fiercely with other providers without ever realising how to offer true value. But if they really understood what it costs them to deliver a package of data, voice service, and really understood what their customers valued - whether they use the phone as a web-browsing device for example - they are then able to price accordingly. So they can approach certain customers with a package that might be more expensive for them, but completely meets their needs. It's simple, but most mobile phone companies are so focused on trying to compete that they don't actually know the real value of their service, and so they might well be making losses without knowing why.

"This approach leaves significant value on the table, often as much as 30 percent of margin with every contract they issue. But the key thing is, if an organisation doesn't even know that it is leaving this money on the table, they are not going to make any changes."

Companies that are looking to implement better business intelligence have, therefore, to understand the value of better decision-making and understanding of the information at their disposal. When they are able to do this, then business intelligence will show its true worth. "If a company can grasp the fundamentals of their business," says Heyns, "then it can begin working out how its structure might be inhibiting their delivery targets. This is super-simple stuff - having something more than a vague idea of what they want can make all the difference. At senior level in many organisations I speak to, most guys get it. But if you talk at a mid-management level, you find that many managers don't actually realise the context in which they are trying to solve the problem is, in fact, already part of the problem. The fact that they are sitting in an organisation such as finance or marketing or production is the reason why they cannot see the real problem."

Some companies are better than others at seeking to understand what their customers value and then actually producing products that possess the key attributes identified in their business intelligence feedback. Positive outcomes such as this confirm to business leaders the value in business intelligence, and it has become increasingly clear that information is now one of the most important assets for any organisation, if not the most. "I think there is a change happening where people are starting to realise that technology has not delivered on its own," says Heyns. "It is a management issue that dictates how information is stored and analysed, and some businesses are so fragmented that they are unable to provide a singular view of their products or their customers. Companies have become unable to predictably get an insight around the core elements of their business because their information is stored in disparate silos scattered all across the organisation.

"And this is where the real issue is for many organisations - they cannot get insight into the stuff that they should, ideally, have complete control over."

The evolution of BI

The inherent vagueness in and around the world of business intelligence stems from the fact that experts within its field - the analysts, researchers, strategists and technicians - are constantly able to redefine what the category actually is. To the layman, business intelligence is converting vast quantities of data into something that is visually useful, such as flowcharts, graphs and statistics, but it is more open-ended than that.

Business intelligence is nothing new, but always reappears as a new industry exciter because of its fluidity and ability to adapt to ever-changing markets. BI is, though, whatever works for your business: it can be something as simple as a bakery wafting aromas on to the street so more passers-by are enticed inside, to a large multinational analysing millions of streams of data in order to better maximise profit on a particular service or product.