Because BI deals with “analysis,” many believe it is only applicable to the upper levels in an organization or isolated to a single, focused, data-intensive area. To realize the full value of a BI investment, however, it must be pervasive throughout an organization, provide information that is “actionable” and be usable by staff at all levels.
BI normally starts off as more of a passive, opportunistic activity, concentrated on the delivering information through analytic applications used by specialists or subject matter experts. After producing reports identifying high-level problems, these analysts focus on a specific problem to provide more insight. The reports are provided to senior managers who are expected to take corrective action. With this type of BI, the focus is generally more on maximizing efficiency and reducing cost. Analyses also tend to look at either one department or one problem at a time, relying on historical data and trend analysis techniques.
As senior managers start being held accountable for meeting prescribed performance targets, they, in turn, drive this initiative requirement down to middle managers who are expected to “make sure we look good.” At this point, more detailed information and timely analysis is needed, and a distinct cultural shift starts taking place. Instead of being reactive (get the report, then take action), users start wanting to be more proactive, asking questions such as, “What do I need to do to not have the report show bad numbers?”
To meet those needs, BI activities start becoming integrated into tactical planning and operations management. As middle managers use the “intelligence” provided to modify or adapt the processes they are responsible for, the focus now shifts to process effectiveness within, and among, departments.
Business strategy and execution is often defined at a very high level using end-point metrics, such as total sales and cost of goods sold, normally because this is the only level of information easily available. As greater insight into the business becomes available, metrics can be defined and gathered down to the operational level, business activities also can be modeled, and business assumptions and scenarios tested, to determine the impact of a high-level strategy to downstream processes and resources.
Consider the scenario of a company with the goal: “to increase sales of Product A by 15 percent.” Instead of merely having a one-dimensional view of the information, a comprehensive activity model can help do a “what if” analysis and determine the goal’s impact on many areas, including parts inventory, manufacturing capacity and activity levels, warehouse storage, distribution channels, and customer support. By entering different assumptions into the model – such as “increase price by 10 percent” or “increase units sold by 20 percent” – an organization can analyze the resulting data to determine what financial or operational impact different assumptions will have on the organization as a whole.
At this point, BI is now pervasive in the enterprise and provides a more holistic view of the organization and the interrelation of its activities.
The extended enterprise also can be included in a BI initiative by gathering data from customers, suppliers, business partners and other external sources. The data is used in the activity models to validate strategic assumptions and drive tactical planning. Think of this as a BI “nirvana.” Internally, the organization is working proactively and collaboratively. Externally, it is working with its value network and partners, constantly using “business intelligence” to manage the processes and optimize performance.