The value of business intelligence is more than information dissemination. As Gartner's business intelligence (BI) research director, Neil McMurchy, notes, BI is "an umbrella term for applications, infrastructure, platforms, tools and best practices, which enable the analysis of information to optimise decisions and performance". Gartner backed this up with a survey that showed BI was clearly at the top of CIOs' technology priorities during 2007 (see table below). "We believe that BI capabilities will become more pervasive in operational and workplace applications as organisations seek to use BI to lead, support decisions, explore, measure, manage and optimise their businesses and thereby drive business transformation," McMurchy said in a recent presentation.
For this approach to be effective, however, there must be a degree of change in the way BI is integrated into business processes and in how companies analyse information.
And again, Gartner says, as companies put a more strategic focus on BI, they are also taking steps to reduce the number of vendors and tools their organisations deploy. In the past, each department bought its own BI solutions, resulting in an explosion of different instruments across the business. Today, organisations are looking to use the same systems across the business to ensure a standardised and rational way of analysing and measuring the same data, and to increase impact and operational efficiency.
One organisation that has taken this approach to heart is online mortgage provider ING Direct, which hired Steve Bennett a year ago as its business intelligence and analytics manager, a position that reports directly to the chief financial officer. Bennett is there to oversee a total revamp of the fast-growing organisation's BI system.
Developing systems that work
"The bank is growing at a phenomenal rate, at double-digit figures every year. It's quite different from all the other banks," Bennett says. "It's gone from nothing eight years ago to a $50 billion portfolio and well over a million customers."
Yet ING Direct's processes and ability to use the various systems weren't keeping up with this growth. The decision was made before Bennett joined last year to replace the entire business intelligence platform.
"It was a brave decision to make, but I think the right one," he says. "I've done a few of these [projects] and delivering something new is a helluva lot easier than tweaking."
Among the most emphatic lessons learned in several such projects, Bennett says, is that to make major changes there must be "very, very clear business support", which generally translates into strong backing from at least two C-level executives. At ING, Bennett works for the CFO, while the chief executive is also very much behind the concept of "competing on analytics".
Bennett explains that this means developing as a core competency not only the clean numbers that every CFO wants, but numbers that are understood and can be trusted.
One of the first things to do is achieve agreement from all areas that every piece of information for the BI system has a clear definition.
There also must be an agreed upon and consistent way of interpreting the numbers, in a way that does not descend into an argument over semantics. "A classic measure is new business, 'How much did we sign up last quarter?' Your definition of that term depends on your role in the company," he says.
This often brings the CFO and finance team into conflict with managers who work on gut feeling, or experience, to put it more politely. "Gut feeling is a great way of managing, but it's not perfect," Bennett says. "If you want to improve your performance to be right more often or wrong less often, this is where you can get those few percentage points that give you the edge over your competitors."
It would seem that buy-in from the CFO and the finance team is crucial. Once there is agreement on how the information is defined, the next logical step is establishing how these numbers relate to remuneration and rewards for all areas. "You're talking about performance management, you're talking about bonuses," Bennett notes. "At ING, we have a performance management framework and one of the main things I do is to ensure that the way we're tracking and measuring everything is consistent."
Otherwise there will be disjunction and conflict. "For example, when can you attribute new business? If it's new mortgage business, it can't be attributed until the mortgage is actually written," Bennett says. "For revenue recognition, there are very widely accepted financial rules by which you can accept income. What we're doing is driving those across into other areas of the bank."
Yet, as Bennett says, all the strategic thinking in the world is "worth exactly zip" until it's been driven down to the lowest-level transaction.
"That's why analytics, business intelligence and performance management fit well under the CFO umbrella - because they get it, accountants get it: you cannot measure things precisely until you've tied down the lowest common denominator, which in a bank is every single transaction you execute.
"That provides a way of understanding every single component of every single transaction. Then the trick is to make that into actionable intelligence and make a decision on it.
"We expect to see trends, and the numbers will change - quite significantly. This feeds into difficulties in measuring the net worth of business, particularly when there is so much invested in intangibles," Bennett says.
Although being able to work out where the best margins are being earned is an important part of BI, Bennett suggests that finding out what's not there is just as important. For example, getting a whole-of-customer view that leads to a better understanding of why certain clients who, by all other measures should have mortgages, don't. This way, you're bringing in all other factors to market to customers better.
Using a BI system as a way of putting your own information in the hands of customers is also a powerful business technique.
In Bennett's previous role at a large insurance firm, Bennett says he had customers at large industrial companies with policies valued in the tens of millions, who kept calling up to get an idea of how much workers' compensation had been paid out, and what their future exposures were likely to be.
"The insurance company used to provide them with a disk. Our BI systems provider gave us the ability to push an analytic application out over the web with information that they could use to manage claims, and the practices that gave rise to them, 24 hours a day."
Quickly delivering a value-added service was a great way of preventing customers from going to the competition, and even more, attracting new business from them.
For companies big and small
Having consistency across all systems and call centres is an important objective of BI but it needs to be balanced. The degree of independence that you allow people when they interact with the information - while maintaining proper data privacy, and so on - is also important, especially for an online business, such as ING Direct. It's then getting it out to the people on the front lines, as a BI system is useless if it's not supporting their decisions.
With the BI platforms getting bigger and more complex, there is every possibility that users will not be employing the systems to their maximum effectiveness. It comes down to knowing the product well, or getting in experts who understand the tool much better than in-house staff. In this instance, Bennett has hired a team of Business Objects specialists. "It's usually not the limitation of the tool, it's the limitation in how you're thinking about what you can do with it," he says.
The approach works at a much smaller and more specific level as well, as the financial controller at Viridis Clean Energy Group, Tim Sayers, can attest.
His company, while listed on the Australian Stock Exchange, has accumulated a portfolio of overseas interests in a wide range of clean-energy assets, including landfill gas in Britain and the United States, and wind in Britain and Germany. He notes that the company is interested in all types of renewable energy, and manages risks by focusing on proven technologies and operating in countries with stable political climates.
Sayers says when he arrived, each part of the Viridis operations around the world had a different accounting system, and results were reduced to spreadsheets that were then consolidated, a time-consuming and uncertain process. He is in the process of changing that.
"We previously had an external provider who supplied us with spreadsheets, but basing your reporting systems, and therefore decisions, on spreadsheets leaves you prone to errors," Sayers says. "We decided to bring the process of consolidating our reports in-house, to make it more cost-effective and efficient."
At this stage, Sayers is going through the "clean numbers" exercise with a low-level BI system from Cognos in place. However, for him it's more about getting the processes in place that will align all reports. He notes that there is a general misconception that BI tools are only for the big operators, yet even with a basic system, differences are already becoming apparent, and it's a change for the better.
"For us, it's more around the timing, by using a BI system, the time scale for consolidation was reduced to a 10-day period and the quality of information was increased. I've been quite surprised," Sayers says.
TOP 10 TECHNOLOGY PRIORITIES IN 2007
Rank Initiative
1 Business intelligence applications
2 Enterprise applications (ERP, CRM and others)
3 Legacy application modernisation
4 Networking, voice and data communications
5 Servers and storage technologies (virtualisation)
6 Security technologies
7 Service-oriented architectures
8 Technical infrastructure management
9 Document management
10 Collaboration technologies
Source: Gartner (February 2007)
CFO Magazine
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