Use BI to determine the future rather than review the past

By Keith Jones, MD, Harvey Jones Systems

Despite a maturing in the business intelligence market, the attitude of the business community is still predominantly defined by the need to come to grips with their information before moving on to address operational reporting and business intelligence.

This is indicative of organisations still approaching business intelligence from a technology perspective, rather than determining ways to improve the value of their business decisions. After all, the most important decisions made in a business, and the ones that bear the most fruit, are those that look forward. Improving how you perform tomorrow, next week, next month or next year cannot depend solely on looking at past performances.

However, making and applying a good business decision is as valuable as any other asset in the business, and spend and return on investment should be measured and analysed just as would be done for other assets. Spending money on an asset that will deliver significant benefit, whether this asset is a traditional asset, intelligence or a good decision, should not be a difficult course to follow. Executives and managers of large organisations are strategic investments and are significant assets in themselves. Good executives make good decisions. However, they could make better decisions if given the right tools to do so.

Certainly, a good view of your past performances and an understanding of your business is imperative, but this information is often only delivered at the end of the reporting period, where it becomes informative rather than strategic. Seeing how you did may deliver insight into what you should do, but it will provide no benefits to the period it reflects on. Such lagging indicators do not provide information on how to run your business better now; they tell you how you did.

Lead indicators, however, are those that are difficult to quantify but are crucial to improving business performance through improved business intelligence.

Customer satisfaction, customer loyalty, staff satisfaction, market penetration, the competitive landscape, brand awareness, the political and economic climate, or new product launches are all factors that will define how you are likely to do going forward. These are the factors executives and managers take into account when making decisions and the challenge is to leverage these elements into financial returns.

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Taking all market forces into account and using what information you can glean from your internal processes to build flexible and robust business models that proactively drive the business forward is predictive intelligence.

Many executives consider as many factors as possible when making decisions, capturing these into the ubiquitous spreadsheet for scenario creation. However, as the factors influencing the market are numerous, multidimensional and fluid, this single, linear model becomes wholly inadequate and assumptions made from it are inflexible and unreliable. To make matters worse, these assumptions are usually not recorded so there is no possibility of corrective modelling going forward.

Compounding the problem, information is often unavailable so decisions are made based on experience and gut instinct rather than a scientific approach.

Moving up the information pyramid, the external drivers that managers need to take into account increase exponentially. At an operational level these factors are less important. The strategy is set at board level and then executed as efficiently as possible. However, as the decisions become more tactical, the external drivers become the prevalent influencing factors.

The value of information is directly related to its latency. While seeing how the business did is useful, it is not how things should be run. Seeing how the business is doing right now, and how you think the business will perform in the future, is where the real value lies because this is information you can act on.

Having useful information, and being able to mine it, will offer managers better insights into their business and enable better understandings of the soft factors driving their market. More importantly, it will force them to ask how they can leverage this information going forward.