I read a great TDWI Flashpoint article by Dave Wells the other day about BI requirements. It is a key subject, and one that I have given a lot of thought to over the past 10 years. The process Dave recommends is a good one in my view, and one that I would build on by emphasizing a concrete linkage to business processes that impact profits. Here’s what I mean.
At the end of the day, if a BI application (report, scorecard, analysis, predictive model, or the like) doesn’t get used to change a business process that impacts profit, there can’t be an ROI. So we need to get at the following key questions:
- What business information do we need?
- For what business analysis?
- In the context of what core business process that impacts revenues, costs or both?
- To create how much business value?
- Via what changes to people and business process?
A great example is improving customer segmentation, in which many of our clients are keenly interested. Basically:
- we need basic information like customer purchase histories, web-browing behavior (where applicable), call-center information, customer reference data, and other information to complete the 360° view of the customer;
- we use that information for clustering, collaborative filtering, RFM analysis, and so forth;
- we use the segmentation analysis to improve our ability to create more targeted sales campaigns – which increases revenues and reduces costs – and to measure the ROI and learn from the actual campaign performance;
- this will create incremental profit in amounts that are industry and company specific; and
- to achieve this we will have to work with our marketing people to inject the use of the customer segmentation BI application into their segmentation, campaign formulation, offer formulation, campaign targeting, and campaign performance measurement processes.
More broadly, this same logic can be applied to each key profit-impacting business process within the organization, resulting in explicit linkages between potential BI applications (requirements) and incremental profit. This can be the basis for prioritizing BI application development projects as well as for establishing a contract between IT and the business community with regard to what will be built and delivered. The approach also serves as a way to garner business commitment, which is key because the business users are the only people who can actually use BI to create business value.
By Steve Williams, DecisionPath President
© 2011 DecisionPath Consulting