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 / Summer 2011 / Issue 63(originally published by Booz & Company)


Crafting Best-in-Class Business Intelligence

Even if your company isn’t planning a new installation or a major overhaul, studying the following three steps can help you see your business intelligence from a new perspective. It will help you understand the pitfalls you may face and the steps you can take to tap into its true value.

Strategy: Choosing Metrics

The key to designing a successful business intelligence strategy is metrics. They should be closely aligned with a company’s strategy and essential capabilities, include both internal and external inputs, and encompass a balanced set of leading and lagging indicators. Perhaps no aspect of a BI implementation is more important — or more difficult — than choosing metrics that are strategically and mathematically sound.

Metrics must be crafted and customized to fit a company’s specific goals. Rather than collecting thousands of arcane metrics, such as head count, new product launches per year, and average handle time, companies should focus on the ones that really matter, such as tenure-weighted employee attrition, percentage of development programs that are on track, and median time to relief for customer support issues. Another example of a metric that matters is return on innovation investment (ROI²). A series of Booz & Company studies conducted over the past seven years statistically correlates ROI² with organic growth, and links innovation spending with financial performance in ways that can lead decision makers to generate higher, more reliable returns on innovation and research and development. The statistical validity of ROI² bolsters its value as a metric, but so does the fact that it functions as a leading indicator, helping decision makers anticipate what their product portfolio will look like in the future. Too often, companies rely solely on lagging indicators that accurately report past performance while giving no hint of what lies around the next bend.

Good metrics have other temporal considerations. Some, such as ROI², guide strategic decision making over the longer term, perhaps for the coming year. Others, such as the sales win rate, can help monitor weekly or monthly performance. A daily dashboard may report essential metrics, such as client issue escalations, that are important to manage on a day-to-day basis. Each type has a role to play as part of an effective BI strategy.

Performance metrics and incentives must be continually revisited to ensure they are aligned with strategy. That’s why companies should employ a continuous metrics-improvement process to manage and govern the use of metrics to drive value, and implement a flexible architecture as well as processes that can accommodate routine upgrades and adjustments. It is important to balance thoughtful updates with a stable core of metrics that allow long-term trend analysis.

Operations: Planning the Rollout

None of the value of business intelligence is gained without the support and leadership of key stakeholders. The roles that employees assume can be just as important as the metrics themselves. That’s why some forward-thinking organizations such as the NEC Corporation and Yahoo Inc. have assigned chief performance officers (CPOs). The rise of the CPO role tells us something important about business intelligence and the culture of performance that a BI system encourages. Metrics must be overseen by the highest executive ranks, and managed by the executives most directly responsible for the performance they reflect. In the case of finance-oriented dashboards, that is likely to be the chief financial officer; operations-focused dashboard initiatives may fall under the control of the chief operating officer; in other cases, the right manager may be the head of a business unit.

At the same time, the chief information officer plays a critical role in selecting, implementing, and managing business intelligence. In fact, the CIO should lead the technology design effort, as well as the selection of the software provider and systems integrator. The CIO should also manage the data quality and the build-out of the system.

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