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Originally published 16 April 2009
Business intelligence (BI) implementations can provide great insight and bring enormous benefits, like sales enhancements or cost reductions, to companies during harsh economic conditions. However, most organizations are only focused on finding solutions to help them get through the immediate business pain rather than working toward the future. Organizations are rightfully so focused on short-term improvements that they don’t think strategically about potential long-term benefits enabled by a business intelligence implementation.
Organizations need to establish a long-term road map that can help not only get them through the rough period and deliver a quick return on investment, but also put them in a better position when the market picks up again. Without a road map that enables capabilities with associated ROI, the organization cannot realize the benefit derived by creating a pervasive BI strategy. So, the question is: how do organizations implement a long-term BI solution that delivers ROI earlier in the development life cycle?
To achieve short-term success with a business intelligence implementation, organizations need to understand the business drivers with expected ROI and associated value chains to identify those that can provide a quick return. For example, in the telecommunication industry, the churn of customers can severely impact revenue. With consumers looking to save money wherever possible, users may explore alternatives based upon a negative experience with the hope of finding lower cost services. Acquiring new customers to replace them can be expensive. Understanding the elements that can create a negative experience for customers and developing monitoring touch points with processes to handle these situations could preempt the customer from looking for alternatives. In addition, a long-term solution could involve predictive analytics that can help identify customers who may leave based upon characteristics of previously lost customers.
Achieving short-term success, while enabling long-term growth, requires a balanced approach. This means cutting the right cost to create a lean and capable organization. Naturally, staffs are minimized and resources are stretched, so ensuring employees’ well-being and that resources are focused appropriately are essential for long-term growth. For example, examining the customer base to identify the most profitable customers will ensure that resources are dedicated to maintain these relationships. Maintaining these relationships is essential to providing a strong base on which to grow when the economy begins to rebound.
Additionally, implementing process efficiency improvements will ensure that cost is squeezed out of business operations. With more efficient processes, an organization can expand with only marginally increasing costs. Teams will learn how to do more with less and be primed to expand efficiently.
Most business drivers that provide short-term ROI results will be financial, operations or customer impacting. But, to ensure an organization remains positioned for long-term growth, metrics that gauge human resources need to be monitored as well. After all, these are the people that have been selected to guide the organization into the future economic expansion.
Let’s look at an example about customer profitability. If metrics indicate that a significant customer is unprofitable, then evaluating how the customer consumes services or products will provide insight into possible actions. If the customer constantly requires special delivery that is provided at no cost, then providing financial incentive to the customer to order on a regular schedule and over the Internet will lower “cost to serve” while also providing a benefit to the customer. By establishing key metrics that drive an organization and monitoring them against targets, one can identify data points that are below target. Having this information, like which customers are unprofitable, enables an organization to examine the specifics and formulate an action plan to correct the situation, providing a valuable return on investment.
However, growing an implementation that was designed to achieve near-term results into a long-term strategic value can be challenging. These challenges can be both external and internal to an organization. For example, changing economic conditions can immediately alter the effort just completed. This refocuses an organization’s leadership on reacting to the changed environment versus looking to execute the next stage of the implementation plan. Changes in consumer patterns impacts existing customer awareness and requires re-examination of the data to determine how to adjust previous strategies, which makes the organization reactive instead of proactive. These are just some examples – not all challenges will be external. Pressure internally to address just short-term objectives will mount as external pressures build. Focusing on those short-term initiatives will take valuable resources away from these priorities, thus derailing long-term initiatives. External and internal pressures will continually jeopardize the effort to move short-term success into long-term value.
Business leaders always struggle with converting short-term objectives into long-term value. This is even more difficult in challenging economic times. The guiding principle is to have a plan that identifies the path from start to finish.
By understanding an organization’s current situation, risk aversion and long-term goals, businesses can outline a road map that details when capabilities will be enabled, what tangible or intangible benefits will be achieved and what costs it will incur over time. Developing a road map illustrating the organization’s current position and where it will be at the end is critical. And, creating milestones that show the key deliverables and the capabilities that will be enabled with each step demonstrates when key functionality will be available.
For each milestone, documenting the business significance, the manner in which it will be addressed and the anticipated return is essential to gaining executive sponsorship. Always ensure flexibility is considered within the road map to adjust to changing business needs and that there are short-term successes built into the road map to meet the immediate needs of the business. Transitioning these projects into long-term value programs is possible by planning, adapting and diligently ensuring a “results-driven” organization. Also, it’s important to be diligent and consider risks and create risk mitigation plans to ensure that implementations are successful.
Depending upon the current situation and the planned road map, investments will be required in information architecture to ensure data is delivered to the right people, at the right time and in the right format. Determining the right information is defined by identifying the critical value drivers of the business, such as “cost to serve.” For example, a “cost to serve” metric can help the finance people monitor costs and allow the shipping department to drill into detail to isolate causes of below target performance and take the right steps to correct problems for future shipments. Averting a potential negative outcome is a clear value as a result of providing the right information, to the right person, at the right time and in the right format.
Enabling access to this information for those that can impact business outcomes positively influences an organization’s long-term viability. Providing this insight to as many people as possible increases this impact and makes business intelligence and performance management tools pervasive. Investments in information architecture support this type of pervasiveness and extend the insightful analysis to overcome other challenges presented by the current economic condition.
Once the right drivers have been identified within the various departments, organizations need to determine the following to establish long-term value from its BI solution:
Business intelligence can be used for both strategic and tactical initiatives that can support a business during an economic downturn and position it for strong growth after the economy recovers. As a long-term value, these technologies can enable organizations to discover relationships about their data, connect with internal resources to collaborate on problem resolution, and monitor the pulse of their organization. With the right value drivers identified and the proper processes and tools in place, an organization can identify changes or challenges in the near-term and create a balanced business that can adapt and stay resilient during chaotic economic conditions.
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