Have we really understood what Business Intelligence means?

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Everyone wants ‘business intelligence’ (BI) but have we failed to grasp the gap between what the business managers want and what conventional BI reporting delivers? I was ‘socialising’ this point with a former colleague whose views are always interesting (as is his blog) and he came up with a really simple way to express this point. In the true nature of collaboration I added some further thinking to build on his point. As Peter lives in Australia this immediately adds two facts; first externalisation of information / intelligence and second, distance is no longer a barrier to the use of good practice.

You could build on this still further by saying that Peter’s views may be known and successfully applied locally, but in this blog I am gaining the benefit in a market at the other end of the world in which they are still offering unique value. The core of the view, expressed simply, is that the older and more internally focussed information is the less competitive value it provides, and that the term business intelligence today really means ‘the focus on current and external information that affects our business and its opportunities’. You can see his original post here from which the following diagram comes:

Now before I explain this I would like to point out that, as with much else of the existing IT estate, conventional BI remains extremely important, BUT it is primarily there to help establish how well the enterprise is achieving the goals that it has set itself already. Or to put it another way, it is driving forward along the road that we have already built by looking out the back window of the car to see that we are on track as we move forward! That’s a pretty important aspect of business success, but it most decidedly doesn’t help in the identification of any market opportunities that could impact positively or negatively the business plan and budget in current operation.

So in a relatively steady and unchanging market, BI assures success by measuring what needs to be measured and reported in order to ensure the success of the defined goals. I have referred to this as ‘focussed and strong signals’ because the focus and use is clear to all concerned. It’s reporting on what we have decided that we need to know about our internal operations. Unfortunately stability and lack of change are two elements that are conspicuously lacking in the global markets of today. Added to which, social and technology changes are creating new ideas, waves, and markets – almost overnight in some cases.

These are the ‘opportunities’ to achieve ‘stretch targets’, or even to adjust positioning and the current business plan and budget. But the information is difficult to understand and use, as it is comprised of ‘mixed and weak signals’. As an example, we can look to what signals did the rise of the iPod and iTunes send to the music industry. There were definite signals in the market that change was occurring, but the BI of the music industry was monitoring its sales of CDs and didn’t react until these were impacted, by which point it was probably too late. Too late meaning the market had chosen to change and the new arrival had the strength to fight off the late actions of the previous established players.

That’s an example of a big change, but for most, the business intelligence they really want is much more tactically based around identifying and seizing opportunities which are part of their current activities to win more revenue, market share, etc. If we follow the cycle in the diagram from the external side that means being able to harvest weak signals, make operational decisions on choices, and build wining sales responses. All of this occurs before the shift into the book-to-bill cycle to fulfil and at the end the BI report on how the enterprise is performing against budgets.

This requirement has not gone unnoticed by the vendor side, with the snapping up of various BI vendors to add tools to support their new business ‘services’ products that are focussing on the operational element of the cycle. And that’s before we move to the huge number of new players entering the market around the ‘new’ external BI capabilities.

All of this is a far cry from BI reporting, even if it has got more sophisticated in forms and formats over the years. But it is what every business manager dreams of getting to help them through in the volatile, difficult and fickle global markets they have to compete in. The point is that once again it’s moving away from the role of centralised IT and reporting, to de-centralised and specialised edge based business technology. It also means using new products and skills to deliver what is required on one side and supporting flexibility in working practice on the other side to ensure that the business managers can really ‘book’ that extra revenue!

Posted by Andy Mulholland on August 20, 2009 | Digg this | Seed Newsvine

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Comments

# on August 20, 2009 1:14 PM, Renjish Kumar said:

Andy,
By "new" external BI, you mean Customer Intelligence? and the insights that adding CI to purely operational data in traditional BI could bring to decision making?

This indeed is being taken up seriously by traditional BI vendors with product offerings rolled out in the market....Question is in the current maturity levels of those products and the willingness of enterprise customers to invest in this transformation (ability to clearly see the benefits vs. cost....)...

Wouldn't it be a challenge quantifying the potential "extra" revenue earned from such solutions to justify the investments? Similar to most such transformations that involve leveraging customer intelligence?

-Renjish

# on August 20, 2009 5:13 PM, andy mulholland said:

yes you are quite right in the general direction the BI vendors are moving and in some cases even acquiring other companies to accelorate these moves. actually you do need to build this off a firm base of traditional BI and CRM in my opinion to successfully manage and measure the ultimate outcomes.

But you are right to pick up the question of justification and it certainly has not been based on the usaual IT cost terms. Instead it is the sales and marketing depts driving this and contracting for 'services' externally quite often with their business case being built on market shares, additional product revenues, etc

# on August 21, 2009 4:30 AM, Peter Evans-Greenwood said:

BI does seem to be moving in this direction, but still has a long way to go and is too internally focused. Customer Intelligence is moving the enterprise boundary out a little, and does not really address the challenge of integrating external information to create new insight. What about local events, weather, the memes from the social media community, the memes from our competitors customers, or anything else we can think of? The challenge is to fuse internal, customer, competitor, market and even environmental data to create new insight.

For example, consider current approaches to S&OP (sales and operations planning). We've take what is an inherently unstructured and collaborative activity and shoved it through the process and business intelligence meat grinder to create yet-another enterprise application. It's no surprise that S&OP is a challenge to deploy, with few companies realizing (let alone capturing) the promised value. Customer Intelligence adds little to the benefit side of this this equation; it would seem impossible to justify CI in terms of cost saving, and challenging to justify it in terms of creating new business.

Imaging a world where we have our S&OP team focused on information synthesis rather than the planning process. They might pluck weather data (it's going to be hot in St Kilda) and couple it with an event (the St Kilda festival), memes from their customers (and their competitor's customers) plucked from hootsuite, and decide only 24 hours before the event to rapidly deploy a pop-up store. It's this sort of sense-and-respond ability http://peter.evans-greenwood.com/2009/07/21/accelerate-along-the-road-to-happiness/ that will drive us to the next level of performance.

One of the best real world examples of this transition from internal-cost-control to external-value-capture has happened around the hand-held stock management devices used in retail. Initial deployed as a cost control measure (i.e. better information on what's on the shelves) they have now become a tool for capturing value. Walmart has been using these devices for some time, devolving buying decisions to the team walking the shop floor and providing them with the information they need to make good buying decisions. As one reporter found:

"We received an inspirational talk on this subject, from an employee who reacted after the store test-marketed tents that could protect cars for people who didn’t have enough garage space. They sold out quickly, and several customers came in asking for more. Clearly this was a singular, exceptional case of word-of-mouth, so he ordered literally a truckload of tent-garages, “Which I shouldn’t have done really without asking someone,” he said with a shrug, “because I hadn’t been working at the store for long.” But the item was a huge success. His VPI was the biggest in store history—and that kind of thing doesn’t go unnoticed in Arkansas."

http://www.nypost.com/seven/02072009/postopinion/opedcolumnists/fly_on_the_wal_154007.htm?page=0

In BI terms, we're moving from large, centralized solutions used to drive planning, to distributed peer-to-peer networks focused on supporting local decisions. While corporate data stores will still play an important role, the advantage is moving to our ability to fuse multiple data sources, some which we do not own and some which only have local relevance. The right information, at the right time, in the right place, to empower knowledge workers to make the best possible decisions. Local Intelligence, rather than Business Intelligence.

# on August 21, 2009 11:15 AM, Max said:

Andy, a curiosity, why the diagram in your post is slightly different from Peter's?

# on August 21, 2009 1:40 PM, andy mulholland said:

firstly a thnaks to peter for a very detailed post the builds on and develops the point. Secondly to Max - there are two major changes - the first is purely cosmetic in the reversing the high end of the curve to be on the right merely because when used with some other material it makes for a consistancy about moving the focus to the top right. The second was my build on Peter's original work to try to seperate the 'strong' clear and well focussed informaiton flow from traditional BI from what we need to see which is a clarification and consolidation of a lot of chaotic and different 'weak' signals.

# on August 21, 2009 5:02 PM, Phil Dean said:

Andy - interesting thoughts as always. It seems to me that we're talking about three aspects of BI. Firstly the more mundane aspect of using historic data to fine tune a business plan (your example of steering a car by looking out of the back window). Secondly, linking this to future external external events (eg weather forecasts, competitive shifts, legislation etc) to 'coarse-tune' the plan for an existing business model - which is where current BI practice is heading. This can drive planning shifts of a more significant nature than the fine-tuning in the first category but which are still an extension of existing behaviour. But I think your CDs to iTunes example falls into a third category of a fundamental discontinuity to a business model - and perhaps this is happening again in the music industry with the likes of Spotify or Deezer. This is where there are correlations between seemingly disconnected changes in markets, technology, individual behaviour etc. Or it could be where a number of market transitions (to use John Chambers' terminology) coincide to reinforce each other resulting in a megatransition. Do we see the opportunity for a capability where knowledge gathering continues in an apparently unstructured way but can then identify correlations and hence future disruptions. I can envisage a parallel with Internet search engines which are continually hunting for new data ; but taken to a new level where there is interpretation of this data to identify meaningful intersections. Or perhaps this is already happening in BI - perhaps one of the other people in this thread have far more BI knowledge than I and can enlighten me !
Phil

# on August 21, 2009 7:04 PM, andy mulholland said:

Hi Phil - i think you have done a nice build to again develop this thought, and yes the big challenge is now the unstructured, and chaotic, data that needs to be transformed into a coherent and relevant set of 'truths'. this has of course been the goal of the 'intelligence services' for quite a few years and yes they are products that they are using.

However what we are all looking for is to find real shipping products and cabilities that can be implemented to manage this.

What an opportunity for those startups out there to come forward now!

# on August 23, 2009 8:00 PM, Ron Dimon said:

Gents,
What you’re talking about here is currently called Enterprise Performance Management (EPM) by Oracle, SAP, and others (it has been called Business Performance Mgt, Corporate Performance Mgt, Integrated Performance Mgt, and so on) – Lee Geishecker (then of Gartner) used CPM to help define this umbrella term to mean “the methodologies, metrics, processes and systems used to monitor and manage an enterprise's business performance."

It’s the notion of bringing together BI with enterprise planning, analytics, modeling and scorecarding not just to monitor (the hindsight) but also to manage (the foresight) through fact-based debate and decision-making support.

Some will argue that BI is a subset of EPM and others say that EPM is BI “with a purpose” (eg: Howard Dresner). To me, the labels don’t matter as much as what’s available to the business by connecting these technologies and processes to support management’s own “operating system.”

The real take-away from your conversation is in the access to and inclusion of the ‘external’ data (and processes). By including customers, channels, vendors (and so on) in your performance management ecosystem (eg: not just data *about* them, but also including them in the planning process), you improve visibility into drivers, assumptions, constraints, and so on. And beyond that, including market, regulatory, and competitive data only improves visibility into scenarios, models, plans, variance, predictive analytics, and so forth.

# on August 23, 2009 10:33 PM, andy mulholland said:

your starting point with the different names captures the challange! ie currently this is a key area for all enterprises and yet currently the tech industry is still experimenting with what exactly can be done with a varity of tools. The result is no real agreement on a single approach yet! anyone got a clear list of tools at the moment?

# on August 24, 2009 8:25 AM, Renjish Kumar said:

IBM is yet another vendor who has taken this task seriously.... It's Entity Analytic Solutions promises to achieve a whole host of correlation and resolution to connect the fragmented dots, creating a single view....They also seem to be aggressively acquiring smaller firms in this area... Again, the maturity of these products needs to be tested and verified,in my opinion, as is the case for most other vendors....

These analytics platform can be leveraged not only for BI purposes, but also other revenue generating activities such as targeted advertising, semantic search. Therefore, one way to sell these products, in my opinion, would be to draw operators' attention to the economies of scale (buy-once-use-it-in-many-ways)....

# on August 24, 2009 9:39 AM, andy mulholland said:

hi renjish

you make an interesting point which is the over lap between these new tools to see externally what is happening and the their use in an unstructured manner by people through collaborative working to decide on the implications and their operational reactions.

Its again the exact reverse of the formal BI structure and use we are used to! If you play this back with the post i made on 'really understanding collaboration' then you can see how the two posts intersect!

# on August 24, 2009 1:33 PM, Renjish Kumar said:

Andy, I had missed that post of yours.. Read now...and if I understood that correctly, I suppose from these two posts you are driving the point that both back and front office need to adapt to the changing needs of business managers, i.e., to capture the chaos and make sense out of it....in short, an end-to-end change....

Companies (in the context of telcos) are moving in this direction with their web-based self care options and the application of social media in this..... At the back end, I suppose it's a bit more tricky/slow to change, especially for those with the burden of legacy.....but yes, that's the ideal goal...to move from the traditionally static to the on-the-fly type of processess...

I realize that you are quite critical of standardization in your first post... Rightly so in the case of front office, where we should utilize every emerging technology to capture the chaos...

But, I believe, in the back end, we still need some degree of standardization.... to quote from mother nature, shouldn't there be an order (structure) underneath the chaos (unstructured)?

common data models, since we are no longer living in a silo.... and at the process level, shouldn't we standardize sub-processes and activities, and their interfaces so that there is indeed seamless on-the-fly interplay?

So, I believe over-standardization is the culprit, not standardization per se....

# on August 24, 2009 4:12 PM, andy mulholland said:

hi Renjish
A usefull set of observations that allows me to do some building on your points!
I dont mean to under mine the importance of the Back Office, and IT as the transactional heart of an enterprise in anyway. In fact if you truely have nothing to compare the external state with internally then you have no basis for making an informed judgement !
BUT this does deliberately introduce a reversal of the focus and maybe the operational model, or at least the way of working. the focus in the nineties on the IT model was to ensure reduction in wastefull activities and to replace this with an opimised set of procedures at the centre of the business. The business model then built out from this set of capabilities.
Now the point being made by many is that success is the extent to which externally you can see, grasp and execute on opportunties and events.
That doesnt mean abandoning the value of the back office optimisation and standardisation, but it does mean that incremental improvement in IT and the Back Office can only produce a small degree of improvement for the enterprise in its overall business. by contrast externally focused improvement currently offers able scope for real beneficial gains in terms of revenues and margins.
AS with all things its a case of grasping how to do more whilst not letting go of what you have got !!!

andy

# on August 24, 2009 6:33 PM, Ron Dimon said:

Andy (re: 'clear list of tools'), I think Hyperion had it right just before the Oracle acquisition (Oracle has since de-coupled BI & Essbase - at least from how they sell). The list includes:
1. What do we want to happen in the business?
- Financial modeling & scenario planning (eg: Enterprise Planning)
- Strategic Finance (like the old Alcar product)
- Operational modeling (like ABC, ABM)
- Scorecards, strategy maps
2. How do we want it to happen?
- Enterprise budgeting, planning & forecasting
- Workforce/Rescource planning, project planning, capEx planning
- Operational Planning (Eg: Interlace)
3. What actually happened in the business?
- Financial reporting
- Operational reporting
- Management reporting
- Statutory consolidation & reporting
- Dashboards, Scorecards
4. Why did it happen?
- Financial & operational analytics
- profitability analytics
- predictive analytics
And then a way to bring the data & relationships together in a meaningful way:
- Master Data management
- Data Quality management

We have a number of articles, blogs & whitepapers on this topic, and we also put together a generic 'information architecture' based on how some companies who have embraced these ideas are proceeding.
See: http://businessfoundation.typepad.com/bf_blog/2008/11/world-class-information-architecture.html
-Ron

# on August 24, 2009 6:59 PM, andy mulholland said:

Hi Ron
thanks for coming back with a further excellent build and took a loo at the url and its a good and interesting site - thanks. Well worth going to and taking a closer look at the contents around the topic
andy

# on August 25, 2009 12:02 PM, Nigel Walsh said:

To Renjish's point - "shouldn't there be an order (structure) underneath the chaos (unstructured)?" - absolutely I agree - but as the old joke goes - "God only built the world in 7 days because he didn't have a user base to contend with".

Isn't the same true in this sense? We don't have standardization because we have evolved over time, we don't often get greenfield sites to start off with and even when we do, the company itself is changing (new products, services, customers, M&A...) meaning there is no stationary target. The MI/BI/CI/CPM space needs to be adapt to this constant change.

Is this just looking at the scene from a different perspective. Using Andy's analogy - Business are sitting in the car, looking out the back window and IT are outside looking at the window to see how they can make it fit better, streamline it or the road to make sure its smooth?

There is another interesting angle here that is being discussed by Forrester, "Mighty Mashups: Do-It-Yourself Business Intelligence for the New Economy" and discussed well over here on Jim's blog: http://jkobielus.blogspot.com/2009/06/forrester-blog-repost-bi-mashup.html

Certainly another interesting perspective that address both the lack of standardization of data and I believe some of the challenges of the new economy.

Nigel

# on August 25, 2009 11:58 PM, andy mulholland said:

the chaalenge is to combine or compare the well understood structured data with chaos unstructured information flow to understand the gaps and what they actually mean.

# on August 30, 2009 2:12 AM, C said:

Business intelligence is also about having the right information at the right time and in the right format. It really is a necessary technology in a changing economy for that reason alone.

# on August 31, 2009 2:59 AM, Peter Evans-Greenwood said:

I agree with C; BI should be focused ensuring that stakeholders have the right information, at the right time in the right format to drive the best possible outcome. The challenge we're facing is that more internal information, or the development of increasing complex predictive models based on internal information, has hit the law of diminishing returns. We need to start fusing external and internal information to create the new insights we need to achieve the next level of business performance.

I remember watching a cross-docking operation back in my DHL days. There was a bunch of planes lined up on one side of the tarmac with their cargo doors open and their bellies full of parcels. On the other side was a line of empty aircraft. Package handlers were standing around with the radio on sorting which package should go into which aircraft. This might seem a bit ad hoc, bit it works quite well. The workers have the radio on, with the news popping up every 15 minutes or so, and have probably read and discussed the morning paper before they started today; they're well armed with a lot of knowledge not just about the package they're currently handling, but the broader business context which will drive their decision on which plane to load the parcel into. Most of the time--say 80%--this has no impact. However, it's very resilient in the face of business disruption. If the workers hear of a war, terrorist incident, or even a natural tragedy, the instantly change their decisions and start routing around the disruption. This makes this "next hop" routing approach more agile than a operationally efficient, but brittle, hub-and-spoke approach.

All these comments have got me thinking again, and I've popped out another interruption of the figure. Since it's too hard to slot it into this comment, you'll need to check out my blog post http://peter.evans-greenwood.com/2009/08/31/inside-vs-outside/

PEG

# on August 31, 2009 5:25 PM, andy mulholland said:

I discussed a further take on this 'timeliness' view with Peter. My point was the need to recognise in a broader sense than usual relevenace; ie a reasonable guide to consumer behaviour in most markets for the rest of the year is what happened in the first part of the year.

But stretch the data analysed to five years and its largely going to be irrelevant as the ecconomic background will have changed from boom to bust during this period.

Its not more data that needs to be anlysed its better isolation of the elements that truly affect the issue and the resulting model that we need to be addressing.

# on September 1, 2009 5:14 AM, Peter Evans-Greenwood said:

... as John Boyd pointed out: this is the challenge of data analysis and synthesis. Or as he more pithily put it, the challenge of creating snowmobiles http://www.lesc.net/node/105

# on September 1, 2009 8:50 PM, andy mulholland said:

one of the questions that this shift from traditional BI reporting to market / opportunity focus introduces is who is the sponser of the project to bring these capabilities into use. The presentation and some other materials Peter and i have shared deals with something that SAP's CEO put into his Sapphire presentation this year.

the need to lay out the strategy of an enterprise and then make judgements or operational decisions on how well this is being achieved against the market opportunties and/or using this as input in how operational tactical decisions are made in a model

# on October 7, 2009 2:04 AM, Peter Evans-Greenwood said:

An solution architect weighs in over at Omitted for Clarity (http://omittedforclarity.blogspot.com/2009/10/what-next.html), starting a much needed discussion on what it means to realise some of the ideas that are cropping up in the this thread.

# on October 7, 2009 6:36 AM, andy mulholland said:

thanks Peter
A url to a good further build on Peter's original point of view that started this discusson, definately urge any one interested in this topic to go and read it
andy

# on December 9, 2009 1:21 AM, cheap Gucci Shoes said:

I don't believe personnaly that the success relies on governments and the private sector. I've been at W3C since 1995, prehistoric time of the Web, and i witnessed this history. The success of the Web today is based on contributions made by people for their communities or friends. If the Web would have rely on gov. and corporation, it would not be what it is today.
So the key point imho is to empower people, and the non-profit/grass root sector.
How to do that is the challenge. We have first to understand the barriers and issues: what are missing expertise,... and then identify which actions can make an impact. This is the mission of MW4D. I cannot yet provide response, but i hope that by the end of the group life, may 2009, we would have a better picture on the potential instrument that could be useful.
Stephane

# on September 9, 2008 11:24 AM, andy mulholland said:

i agree about the people driven issue, the government point was really just the climate that they can create for this, ie encouraging investment in the telecomms sector for infrastructure and 'controlling' the web for policitcal ends etc.

Seems to me that this brings us back to 'mashups' and 'hackdays' to give the local community the opportunty to tell local technical savvy people what they want that makes it 'their web'.

# on December 9, 2009 9:35 AM, andy mulholland said:

Its a pretty good observation that the web has been driven by people adoption and not government but my point is that we are moving into a period when the web impacts many and most aspects of our lives and that includes our working lives. Hence questioning how business and government are using the web and the shift towards clouds is important.

i have let your post stand as its quite a good observation but suspicious about your motives given you user tag!