In our present society and economy, change has become a constant factor. Everything changes and few things are predictable. The only certainty we have is the knowledge that uncertainty is an increasingly important phenomenon. Company executives need to realize that in these uncertain times and environments, managing an organization necessitates different ways of thinking, doing business, organizing, informing and reporting.
Management of uncertainty
“The message is clear. We are moving fast from managing what we know to the management of uncertainty. To deal with this, management must understand the concept of Business Intelligence.” (Rodenberg, 1999) Techniques such as extrapolation and moving averages have less and less predictive value regarding future organizational performance. Traditional planning is pointless when organizations are being confronted with many major uncertainties (Haeckel, 1999).
We simply need more and better information
Everything may be different tomorrow because of the dynamics. Uncertainty is the difference between the amount of information required to execute a task (or a policy) and the amount of information one already possesses (Galbraith, 1973; Schoderbek, 1967). At first glance, we could state that we simply need more and better information to eliminate uncertainty. Business Intelligence and more specifically its application
Competitive Intelligence (CI) then plays an important role by offering internal and external information that is as complete and as relevant as possible, directed at the relevant person. An organization could also restrict the need for information, for example by influencing the environment (e.g. imposing more stringent demands regarding delivery, quality etc.), by lowering targets and ambitions or through creating tasks that are more autonomous. The latter is only possible when employees receive access to the relevant information required to execute tasks autonomously.
This article describes the importance of Business Intelligence software from the Environment Perspective and outlines the main developments that cause organizations to work with uncertainties and under increasing pressure.
Globalization and liberalization lead to more competition
Boundaries are fading. We “swarm around the entire world” and the government withdraws increasingly from facilitating organizations and executive bodies, even though its influence will, to a certain extent, always remain. The trend of globalization is largely responsible for the growing importance of knowledge within organizations (Weggeman, 1997). At the same time, an increasingly high level of knowledge creates continuous advances in technology, which allow boundaries to fade more and more. This self-reinforcing spiral should encourage organizations to increasingly incorporate knowledge and the associated information as an integral part of business and to develop new policies accordingly.
One does not just drive a car based on dashboard information alone
In relation to increasing market forces, it is worth bearing in mind that the organization not only operates in a transaction environment but also within a contextual environment (Emery and Trist, 1969). For that reason information about market developments, competition, technology, government and society – so-called contextual information – should also reach the organization or, even better, be actively acquired. After all, one does not just drive a car based on dashboard information alone but also through using the information gained when looking through the windows.
Gain insight into the ‘fit’ between the organization and its environment
That information is just as important as transactional information and Business Intelligence helps to combine these two streams of information to gain insight into the ‘fit’ between the organization and its environment. Research shows that organizations that manage to achieve the most optimal ‘fit’ with their environment produce the best results (Lawrence and Lorsch, 1970). Business Intelligence supports the structural process of acquiring information from outside the organization and connecting it to both internal information and the state of the organization itself. This creates the opportunity for senior executives to make efficient decisions more quickly and to perceive and act upon opportunities and threats faster than their competitors. Read also: Making better decisions with Analytics.