The following excerpt from The profit impact of business intelligence is printed with permission from Morgan Kaufmann,...
a division of Elsevier. Copyright 2007. Click here to access the complete list of common BI mistakes in Chapter 8.
"The structure that a mature enterprise takes on at any point in time essentially represents the accumulation of a long series of prior resource allocation decisions... . If these decisions are made without a coherent guiding philosophy or strategy, the organization that results will be like a stalagmite: shapeless, inefficient, and of little usefulness."
--Robert Hayes, Steven Wheelwright, and Kim Clark, Dynamic Manufacturing
It can be argued that the emergence of the term "business intelligence" (BI) within the data warehousing (DW) industry was spawned largely as a result of the many mistakes that organizations unwittingly made as they pursued DW initiatives. Those mistakes were often costly, resulting in the implementation of large unused data warehouses that represented significant wasted investments.
With the arrival of the new BI buzz, the discussion turned away from how to build large data warehouses toward the acknowledgement that the data warehouse was only a means to an end. What was really needed was BI: the ability to identify and deliver actionable information that could be used within the organization to improve bottom-line business performance. Data warehouses would be repositioned as the technical means to achieve BI.
Once management's eyes turned toward BI, their interest in identifying return on investment (ROI) associated with BI/ DW investments also resurfaced. Unfortunately, much of the BI discussion is still relegated to buzz and has not been truly embraced and adopted by organizations. With new BI vendor offerings in the areas of analytical applications, scorecards, and dashboards, many organizations are faced with even more choices, which heightens the potential for chaos.
This problem is illustrated by a recent discussion we had with a student of ours. As an exercise, the student had been assigned to determine which key process indicators (KPIs) from the plethora of choices offered within his company's new BI vendor tool should be used by their organization to measure business performance. The tool had clearly been purchased to address information requirements that had not yet been defined. Without a sound framework to sift through all the possibilities that are offered in the BI/DW arena, there is a very real risk that organizations will repeat history and make more costly mistakes. Instead of improving the informational capabilities of an organization, BI initiatives, just like DW initiatives, can have the opposite effect. Several years ago one of our clients, a vice president of marketing, said it well: the problem used to be that there was too little information; now the problem is that there is too much information. It's like being a child in the F.A.O. Schwarz toy store in Manhattan: you don't know which way to turn.
Back to what we are trying to achieve. The BI ideal would be to make optimal use of information within the organization to achieve measurable improvement in business performance. It would be to have exactly the right information at the right time to make the business decision and take the actions needed to achieve optimal business performance. Although this is the ideal, very few organizations have come close to achieving it. Advances in technology offer the promise of BI, but achieving incremental improvements in information usage within organizations has proven to be difficult. The following section outlines the most common and damaging mistakes that managers make within the context of critical BI success factors. The BI Pathway approach was developed to address these critical success factors and to avoid those mistakes. Although much of this information is covered obliquely in other sections of this book, this section is meant to distill the most common mistakes we've seen that have thwarted BI success.
8.1 Critical success factor: Establishing the value proposition
The first step to BI success is to establish a clear understanding of how business performance can be improved by investing in a BI program and to define the scope of the BI initiative. You can define scope as enterprise-wide, limited to a single line of business, limited to a single function, or limited to a group of users. Define scope any way that makes sense, but define it you must. Until you know what you're not going to do, it's very hard to speak with confidence about what you are going to do. Establishing the scope of the BI initiative is a vital first step and prerequisite for defining the value proposition. These activities set the foundation for everything to follow.
Once you've set the scope, focusing on how a BI program can improve business performance explicitly addresses the ROI issue: Why should we embark upon a BI initiative? What business problems exist and how will a BI program address these problems? What will a BI investment give us that we can't already get? Is the investment worth the potential business value? How will having this information translate into bottom-line results? Why should we fund the BI initiative instead of another potential IT capital investment? Why should organizational stakeholders support the BI initiative?
8.1.1 Common BI Mistake #1: No explicit alignment between business intelligence strategy and business strategy
In their quoted statement at the beginning of this chapter, Hayes et al. (1988) were concerned about manufacturing strategy and competitiveness. It is clear that aligning resource allocation decisions with business strategy is just as important for BI competitiveness. In our experience, one of the most common and critical mistakes is the lack of explicit alignment between BI strategy and business strategy (Figure 8.1). Accordingly, BI investments are made without a coherent guiding philosophy, and the organizational result is an inability to fully leverage BI as a profit-improvement tool.
Clearly, organizations would never develop business processes such as order processing and inventory management without knowing the purpose of the processes and how they contribute to achieving business results. It is common, however, that organizations invest in BI/DW initiatives without having a clear understanding of what informational capabilities they are building, why they need those capabilities, and how they will contribute to achieving business goals and objectives.
This problem is illustrated by a conversation we had recently with a company in the midst of a major undertaking to integrate customer information across all lines of business. When asked why the company needed this capability and how this information would be used to support business goals and improve business performance, managers had no answer. Clearly, this linkage had not been explicitly discussed and communicated within the organization. If BI capabilities are to be optimized, the business needs a clear understanding of the opportunities that exist to deliver and use information in support of the business strategy. It provides the critical foundation for all that is to follow. Companies that think about how they use information to improve strategic results will be ahead of companies that don't.
8.1.2 Common BI Mistake #2: Not knowing how to define information requirements
Once you have a well-reasoned understanding of the relationship between BI strategy and business strategy, it is critical to understand the details of the information requirements and how they relate back to supporting the business. Because business users have been trained over the years by information technology (IT) departments to provide reporting specifications for operational system reporting, these business users reasonably think that information requirements should be defined as reporting requirements. IT departments also tend to resort to this seemingly logical approach. As a result, it's common for all concerned to specify requirements as data elements rather than as true information needs associated with a clear business purpose. Accustomed to not having information, business users often request the ability to have lots of data so that they can do ad hoc reporting. This approach has typically lead to expensive, monster-sized databases that are not designed for a specific purpose and do not perform well. Because they tend to be large, unwieldy, and confusing, containing "everything and the kitchen sink," they often end up not being used by the business.
Because of this approach to defining requirements, it is very common for information requirements to exist with little if any business context. Why particular information is needed, how it will be used, and how the intended use would contribute to improved business performance are not clearly understood or articulated. Based on conversations with many people from many organizations over the past years, we've concluded that this problem has been a major contributor to many failed DW efforts. A recurring theme that we have heard from IT staff is that "we built what they asked for and they aren't using it." Companies that both align BI strategy with business strategy and explicitly link how information can be used for competitive advantage by enabling and/or supporting business strategies will be ahead of companies that don't. By putting analytical rigor into "connecting the dots" to clearly understand what information is needed by the business, why it is needed, and how it will be used to improve performance, they are providing a solid foundation for achieving both business and technical BI program success.
8.1.3 Common BI Mistake #3: Not marketing the vision to obtain organizational support
Many organizations are surprised to discover that it's not good enough merely to develop a BI/DW application and train business users—not if they want to ensure that the application will be used. This approach, which is common for operational systems, does not always work. One reason for its failure is that many organizations consider BI/DW applications to be optional. Unlike most other IT operational applications that replace existing applications and have to be used by the business, BI/DW applications often exist in parallel with old reporting
capabilities. As a result, business users who are uncomfortable with the new BI/DW capabilities can frequently fall back on using their old reports to get their jobs done. This makes it harder to ensure that business users will use the new BI/DW capability and that the benefit of this investment will be realized.
By definition, embarking on a BI initiative changes how the organization accesses and uses information. For that reason, it is important that the organizational stakeholders are "on board" with the vision. This should not be a daunting task if
- Key business stakeholders have been actively involved in defining and linking the BI strategy and the business strategy
- Information requirements have been developed so that they clearly outline what new information will be available, why it is needed, and how it will be used to improve performance
Providing a clear articulation of the "current state" of information availability and usage, as well as the vision for the "future state" and how it is better, sets the stage for organizational buy-in and support. Organizations that explicitly embark on a marketing program to obtain organizational buy-in for their BI initiative actively communicate the value proposition to key organizational stakeholders, thereby setting the stage for BI success.
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