Barometer BI leads to strategic success

A while back I looked at the difference between two approaches to business intelligence (BI) as embodied by a thermometer and thermostat: a thermometer simply provides unidirectional information, while a thermostat gathers information and acts upon it.

There is a further possibility when it comes to using instruments as metaphors for BI, and that is the barometer.

Barometers have been in use for more than 366 years, having been invented by Evangelista Torricelli in 1643. Rene Descartes, the great philosopher and scientist famed for his postulation, "Cogito, ergo sum", or "I think therefore I am", described such a device as early as 1631, but failed to develop it, so to Torricelli goes the honour.

The principle behind the barometer is relatively simple: "Decreasing atmospheric pressure predicts stormy weather," paving the way for a weather prediction device initially called a "storm glass" or "Goethe barometer". It was made of a glass container with a sealed body, half filled with water. A narrow spout connects to the body below water level and rises above the level, where it is open to the atmosphere. When the air pressure drops below that when the glass body was sealed, the water in the spout rises above the body's water level; when the air pressure rises, the water in the spout drops below the water level in the body.

Subsequent barometers grew in sensitivity and accuracy, using mercury, until 2007, when directives were passed to restrict the sale of mercury; then there are aneroid barometers, which measure atmospheric pressure through the use of a tiny, flexible metal box known as an aneroid cell, and barographs, which use an aneroid barometer and record a graph of atmospheric pressure by moving a pen on paper.

The barometer is particularly useful when compared to the thermometer and thermostat. To understand why, one needs to have a look at the nature of information.

Review information - the type of information provided by a thermometer or a thermostat, or static reporting systems - has no active value. In business terms, knowing what happened yesterday, last week, last month, has no active financial value: it cannot on its own lead to any revenue generation.

This is the kind of information being generated by all accounting and ERP and many MIS and BI systems: they are telling you what has happened. While this is important, especially in terms of reporting and regulatory compliance, it cannot be over-emphasised that review information cannot on its own have any influence on strategy or revenue generation.

There is only one category of information that can have a bearing on future strategy, and thereby positively influence revenue generation, and that is synoptic information. Just as the invention of the barometer gave people, for the first time, an accurate understanding of what the weather was likely to do - and thereby to dress appropriately, plough their land or hold off on putting out to sea, so a synoptic information capability permits an organisation to understand what is coming, not just what has happened.

Derived from the Greek word synoptikos, the word synoptic means "affording a general view of a whole" or "manifesting or characterised by comprehensiveness or breadth of view". In other words, synoptic information allows you to see the whole picture, not just the immediate past.

Taken in this context, the barometer now slots in alongside the other two instruments, each in its proper context:

* The thermometer allows you to review the current state and record it, but on its own its display of information does not give you much: you need to know how to act on the information. From a BI perspective, here we would be talking about management information systems and management reports. Ninety percent of companies have this in place.

* The thermostat uses the reading taken from the thermometer to effect operational changes, such as warming water or cooling the air. From a BI perspective, here we are talking about financial planning, real-time operations management, stock replenishment/management and the balanced scorecard. Thirty percent of companies have this in place.

* The barometer allows you to understand the likely events of the near future and plan appropriately for them. Do note, though, that the barometer on its own also has limited value: it needs to be combined with other factors, such as wind observations. And just as you don't use one barometer on its own, but rather use a number of barometers in a network of weather stations to build maps of air pressure, so you need to gather synoptic data from multiple points so as to determine trends. Drawing a parallel with BI, we are talking here about predictive analytics and what-if analytics, and no more than 10% of companies have gone this route.

So, with only a fraction of companies using a barometer BI approach, it represents a serious competitive advantage.