There is a lot of talk these days about business analytics. Starting with publication of books such as Competing on Analytics (2006), more and more companies are getting serious about business intelligence in general and business analytics in particular. In our book, The Profit Impact of Business Intelligence (2006), we identify dozens of ways that companies are using business intelligence – which includes business analytics – to increase revenues and/or reduce costs.
Although we’ve seen a number of companies achieving greater profitability through BI, it is no secret that many companies continue to struggle with BI and analytics, for strategic reasons we describe in our Strategic Finance article – “5 Strategic Barriers to BI Success.” Based on our experience as business intelligence consultants, we are convinced that one strategic barrier is the lack of a defined and widely-understood strategic mission for BI and business analytics. And as a point of clarification before we get started, we define business intelligence to include business analytics – along with reporting, as hoc querying, parameterized querying, and multi-dimensional analysis/OLAP.
Strategic Importance of Business Analytics and Business Intelligence determines BI Mission
At the most strategic level, companies need to determine how important BI is to their ability to execute their business strategy and effectively compete. We can refer to this as the strategic importance of BI, which then determines the appropriate mission for BI. The graphic below (click to enlarge) shows four stages of BI capabilities in relation to the strategic importance of BI.
Simply put, industries where the strategic importance of BI is high require at least Stage 3 capabilities, and a given company may decide to go for competitive advantage based on Stage 4 business intelligence and business analytics capabilities. There are systematic ways to determine the strategic importance of business intelligence and business analytics to industries and companies competing within those industries, and making this determination should be an integral part of formulating an enterprise business intelligence and business analytics strategy.
A Clear BI Mission Provides Context for Business Intelligence and Business Analytics Strategy
Consider the example of a hypothetical packaged food company that makes and distributes thousands of products to hundreds of retail customers who operate thousands of stores across the country, and who operate in different distribution channels. Further, end-consumer demand patterns are not completely visible to the manufacturer, making it difficult to optimize inventory, replenishment, and customer service. All these moving parts create a complex business environment generating an incredible amount of transactional data.
Making sense of all this information, through business intelligence and business analytics becomes strategically important, which is a motivation for the company to achieve at least competitive parity via Stage 3 BI and analytics capabilities. Taking advantage of available research about best practices BI for the food/CPG industry, this company could then focus its strategy on delivering business intelligence and business analytics such as:
- Performance scorecards and dashboards
- Trade spending analytics
- Customer service analytics
- Inventory analytics
- Financial and cost analysis capabilities
- Supply chain and operations analytics
- Purchasing analytics
The link between strategic importance and business intelligence and business analytics strategy sets the stage for productive discussions within the executive suite.
A Clear BI Mission Builds Executive Buy-In and Momentum for Funding
Once executives understand how important business intelligence and business analytics are for successfully competing, and once they see that there is a rationale for a stated BI mission and strategy, they are much more likely to move beyond considering BI an “IT initiative” and embrace sponsorship.
Absent a clear understanding of the strategic importance of BI, it is difficult to get business executives to move much past the lip service stage of BI – the stage where you hear such statements as “we know we need BI, but the time is not right.” Once they see that BI can make a difference in future profit streams, they are much more likely to fund BI at a level that is commensurate with its importance.