Business Intelligence offers organizations numerous opportunities but not until we begin to measure the critical factors for achieving greater performance. The act of measuring at all already improves the situation, assuming that the correct aspects are being measured. In response managers tend to work harder and that has little to do with the actual information.
For that reason measuring alone is not sufficient in the long term. The measurement and control system should integrate thoroughly with the organization and employees will need to understand the philosophy – enhancing performance through actively using and applying information – behind it.
Improve organizational performance through learning
This means a continuous focus on improving the organizational performance through learning from data and subsequently using the knowledge gained for targeted actions. It also requires enhancing renewal of competences, performance-oriented behavior and an analytical culture. Business Intelligence enables organizations to face future challenges and to capitalize on upcoming opportunities.
Selling more with improved customer knowledge
In this area, Business Intelligence offers organizations key information, which allows better insight into, for instance, their customer ordering and payment behavior or customer preferences. The better an organization knows its customers, the better it is able to respond to the customer needs. Customer loyalty generally leads to improved commercial performance and an increase in sales. With Business Intelligence, Sales Managers are better equipped to substantially increase revenue with existing customers or to attract new customers.
Make better use of market information
Additionally, making better use of customer and market information may prevent customers from switching to a competitor. Almost all the Business Intelligence tools can provide organizations quickly with insight into whether certain product-market combinations are actually still profitable and successful. This way, Business Intelligence encourages organizations to contemplate new strategies and innovations in order to improve performance.
Anticipate and avoid surprises
organizations that closely monitor their business processes on a specific and regular basis are less likely to encounter both pleasant and unpleasant surprises. As a result, they can anticipate positive or negative developments within the organization or in the current market, sooner. Effective Business Intelligence looks for the optimal refresh rate and the timing of reports. These should be perfectly aligned with the frequency and duration of the events that take place within the business processes in order to avoid surprises.
It is also wise to focus Business Intelligence on non-financial information relating to marketing, sales, production and product development processes and the associated KPIs. This non-financial information is often an indicator of future (financial) performance as opposed to financial information, which primarily tells something about past performances. When we use Business Intelligence to define measuring points, firstly in the primary processes, then in the secondary, we gain insight into potential problems sooner, and we can exploit possible opportunities at the same time. We can also look ahead in the process – from lagging to leading indicators – and discover the driving forces behind financial performance.
Driving forces that affect cross selling
The following sequence is often used as an example: more customer visits » more cross selling » increase of revenue per costumer » higher profits. It is understood that this example requires selling several products, since cross selling measures the number of products sold per customer. This means that innovation and product development could also be (driving) forces that affect cross selling.
In that case an additional set of indicators is required: number of new products » more cross selling » increase of revenue per customer » higher profits. There is always a set of several predictive indicators, never just one. This is what makes managing an organization so complex and is where Business Intelligence comes in handy.
Incentive for effective strategic management
Business Intelligence stimulates organizations to develop better strategic management. On the one hand because managers and knowledge workers can make better decisions faster and spend less time on collecting information, and on the other hand because Business Intelligence may bring to light all sorts of relationships between strategies. This results in, both managers and employees, at all levels, having more time and capacity to engage in strategy.
BI plays an important role in strategy execution
This strategy can be formulated and executed much more explicitly and in a more focused manner. In practice, we see that the adoption of Business Intelligence plays an important role in propagating the vision and strategy of an organization. Furthermore, Business Intelligence is useful when linking and communicating strategic aims with KPIs or aligning the budgeting process with strategic objectives.
Lastly, Business Intelligence enables organizations to obtain feedback on whether or not their strategy actually works (Kaplan and Norton, 1998). The latter may well be the most important contribution of Business Intelligence – testing the strategy of an organization by making the connections visible.
Business Intelligence aims to involve employees in the activities of an organization and its strategy. Employees adjust more rapidly to the process of change that lead to the realization of strategic objectives, when specific information and knowledge is shared, simply because they become more involved. In his article about Business Intelligence classics, Kahaner (1996) states that the personal involvement of employees is a key success factor.
Employees at all levels should use management information
Kaplan and Norton emphasize that it is of utmost importance that employees at all levels within the organization should be able to use management information (Kaplan and Norton, 1998). In this way an organization’s strategy can be translated into action in the workplace more rapidly. Employees then realize what the organization stands for, what its mission is, what the key objectives are and how these relate to the departmental objectives as well as personal aims. Developing a strategy is not that difficult, executing a strategy is (Meijers, 2002).
Pivoting the organization and flexibility
Previously on this website, we discussed the need for flexible organizational structures, which allow organizations to adapt faster to their environment. Business Intelligence enables us to get an complete picture of the customer, as well as of operational management, which paves the way for the organization becoming process and market-driven. This is what we call ‘pivoting’ the organization. Through pivoting, we create more flexibility.
Integrate your business on three levels
The Intelligent organization will have to integrate its business on three levels:
- create an integrated picture of the customer and business operations (knowledge and information)
- make sure that processes can be controlled in an integrated fashion (processes and action)
- ensure that data is integrated and entered just once and also beyond the boundaries of the organization. Enterprise portals play a crucial role in this.
The above-mentioned levels of integration correspond with the three basic generic processes from the Business Intelligence Cycle. This article further elaborates the idea of pivoting the organization, including the associated concepts and technologies.