What’s your company’s IQ? Featured

7:00pm EDT February 23, 2010

Every business needs a brain. This brain — or business intelligence — needs to gather data such as customer, product and organizational information, then process, categorize and act upon it to make successful business decisions. The data also must be stored and used properly to help businesses obtain and maintain a competitive advantage in the market.

But many businesses are unable to move from gathering data to translating it into information and knowledge. The amount of data on corporate hard drives doubles every six months, and much of it is not easily accessible or tied together, resulting in a confused organizational brain.

“It takes hard work to build and maintain business intelligence,” says Charles E. Downing, Ph.D., Walmart Professor in Enterprise Technology Innovation in the Department of Operations Management & Information Systems at Northern Illinois University. “A full cooperation of people, processes and technology is necessary for success.”

Smart Business spoke with Downing about the risks and benefits of business intelligence, and how to incorporate the business intelligence process into your company strategy.

What are the risks and benefits of business intelligence?

The benefit is getting faster and better answers to business questions, which saves time and money. The biggest risk is undertaking the process halfway. Many executives believe that they can simply install a piece of software or push a button to have business intelligence. But getting data in a format that can be used for business intelligence is hard and challenging work. Large data warehouses can also be very expensive and take years to build. Every dollar spent on technology may lead to spending $5 to $7 more on consulting and other services. A halfway commitment and effort could lead to wasted money and disappointment.

What steps are involved in the business intelligence process?

The first is building the brain, which includes planning, analysis and design of what the business intelligence needs are. Next is obtaining knowledge, which involves deciding what data is being captured and stored, when this happens in the business process and by whom, and how it is organized. The last is using that knowledge to make strategic decisions that enhance your competitive advantage. The long-term objective is to build a data warehouse that is clean and current, and that can be used for analysis leading to business intelligence. The warehouse needs to stay current because it won’t be useful if it contains stale data.

How can a company incorporate these steps into its business strategy?

1. Identify a business intelligence champion. This person should understand the need, believe in the promise, and have organizational power and decision-making authority.

2. Demonstrate proof of concept. Pick a small, achievable and visible business intelligence prototype project to undertake. Often it is completed on the side with a small team and the champion prior to unveiling it to appropriate senior management and users.

3. Commit to centralized, anytime, anyplace data. Make sure the data is stored in a manner that allows for real-time, as-needed questioning by appropriate employees anywhere.

4. Spread the business intelligence culture. Work with people, processes and technology to achieve business intelligence success. Demonstrate and promote successes from step No. 2 to build momentum for business intelligence.

5. Obtain resources for larger and more sophisticated projects. Champion the construction of a centralized data warehouse and the usage of more sophisticated analytics tools.

6. Maintain and motivate the culture. Make analytics tools accessible to all, and demonstrate to management and users how to get answers to business questions more quickly and easily. Emphasize the need to keep the warehouse current, and incorporate this into the culture and processes.

How can you involve employees in this process?

You have to identify processes in which employees participate that generate and/or capture important information. Identify which technologies employees have mastered and are comfortable with and, if necessary, retrain employees.

You need to make information-capturing technologies available at the point in the process where information needs to be captured. You also need to show employees how this makes them more efficient and their jobs easier. Convince employees that business intelligence makes their lives better, because this will have employees pushing to stay involved.

How can you use this information to help make future decisions?

One business edict has been that the customer is always right. But business intelligence has shown some companies that 20 percent of their customers account for 80 percent of sales. So clearly, those customers would be more right than others.

In another example, one supermarket carried more than two dozen brands of orange juice until it identified the eight best-selling juices through business intelligence. The store now benefits from increased sales, as well as reduced floor space, which creates room for other products.

And in a third example, Walmart keeps cash register, or point-of-sale, data for more than two years. It combined that information with weather data to learn that Pop Tart sales increased during severe weather events. The store now loads trucks with this and other comfort foods when it sees severe weather approaching a certain area, which increases sales. Clearly, a smart brain can benefit companies in numerous ways.

Charles E. Downing, Ph.D., is the Walmart Professor in Enterprise Technology Innovation in the Department of Operations Management & Information Systems at Northern Illinois University. Reach him at (815) 753-6381 or cdowning@niu.edu.