Many executives think of business intelligence (BI) merely as a software solution that needs to be bought and installed, a reporting tool for serving up data on a convenient “dashboard.” As a result of this misperception — and despite the significant procurement, installation, and maintenance costs — BI systems often generate inaccurate data or distract employees by delving too deeply into corporate minutiae. Gartner Inc., an IT research and advisory firm, predicts that through 2012, 35 percent of the top 5,000 global companies will regularly fail to make insightful decisions because they lack the right information, processes, and tools.
A fairly small number of executives and companies, in contrast, have discovered that true business intelligence is the key to running a performance-oriented organization. They use their systems to home in on a selected group of key performance indicators, often custom-crafted, that help them define corporate strategy and drive profitability. They have found that the data they receive gives them the ability to make sense of markets; to identify strengths and weaknesses; to measure the progress of the company against its goals; and to employ the skills, processes, technologies, applications, and practices that support good decision making.
We’ve witnessed these business intelligence success stories firsthand. One leading global logistics provider, for example, which had grown to more than 470,000 employees in 220 countries, recognized its need to reduce complexity, improve transparency, and transition from intuition-based to fact-based decision making. The company designed a new common reporting system that consolidated four business units and more than 3,000 reporting entities worldwide. And the key performance indicators that emerged as a result enabled the management team to improve financial reporting capabilities, increase financial control and transparency throughout the company, and harmonize the financial systems — and saved more than €1 billion (approximately US$1.4 billion).
In another example of a best-in-class BI implementation, a global software company worked to align its strategy by measuring the relative value of growth — an assessment of the strength the market places on revenue growth relative to margin growth — across its entire product portfolio, helping management balance the portfolio with corporate strategy. From the beginning, the company developed a clear message about its goal of improving top-line growth and share price, and built a strong case for change internally and externally. As a result, the company drove annual top-line growth from 4 percent to 7 percent and nearly doubled its stock price in two years.
The reason that most companies aren’t getting the most out of their business intelligence has nothing to do with the software itself. Most off-the-shelf BI products are easy to implement and incredibly powerful; they are rich with features and capable of aggregating, integrating, and analyzing data from nearly any part of the organization. The reason BI seems to be failing companies is that many of them have stumbled in their early attempts to leverage this performance-driven approach to running a business. Very few companies have the discipline to focus their operations in every business unit and product line on the things they do best. Those that do are the companies that identify their strongest internal capabilities; set thoughtful, strategic goals for them; and then constantly — almost obsessively — measure their performance against those goals.
When deployed properly, business intelligence should help define strategy, drive profitability, and develop a performance-oriented culture throughout an organization. It is much more than a reporting tool. Using BI is a way of doing business. Conceiving of metrics that will measure progress toward specific goals is critical. Once the right metrics have been identified, executives should focus on gaining the support of key stakeholders and the cooperation of their employees and partners to ensure smooth implementation.