How will BI be profitable?
It is important to determine whether and how Business Intelligence can be profitable within the organization and in which way we can achieve lasting success. In other words: what is the business case (for BI)?
The benefits of BI
The benefits of Business Intelligence can be split into four categories (Liautaud and Hammond, 2001):
- immediately apparent;
- indirectly visible;
- not immediately apparent;
Saving the costs of reporting
Immediately apparent advantages may be, for example, savings on the costs of creating and maintaining reports. Also the benefits of sharing information with business partners. Indirectly visible benefits could be: increased customer satisfaction, more revenue, increased market share, less returned goods. The not immediately apparent benefits include, for example, increased employee satisfaction and better managers who take reasoned decisions faster. Lastly, the unpredictable benefits of Business Intelligence are: discovering fraud or finding out that clients ‘secretly’ buy from competitors.
Useful for each type of business
Although Business Intelligence can be useful for many (types) of organizations, we see in practice that it is best known and most successfully established in certain organizations and industries, such as: wholesalers, retail, telecom, finance, insurance companies, publishers and, to a lesser extent at pension funds, in the industrial branches and at transport and production companies.
Gaining a firmer foothold in public sector
Currently, Business Intelligence is also gaining firmer foothold in governmental organizations, universities, hospitals and other health care institutions. The potential benefit of Business Intelligence always depends on a number of internal and external factors that may indicate the level of return on BI systems and applications. These are:
- the degree of competition and market forces;
- the size of the organization;
- the degree of compartmentalization (of the organization);
- the amount of available data;
- the dynamics in the organization’s environment;
- the history and culture of the organization, its employees and its management.
Bigger need for BI in competitive markets
Free markets, in which data and information can flow freely, have a greater need for information than protected markets. Large organizations are often more difficult to manage than small organizations. They are, by definition, less well organized and often generate a lot more data. The degree of market dynamics and the intensity of contact with customers, suppliers and other stakeholders also partly determines whether Business Intelligence fulfils an essential need or not.
The culture of the organization
Lastly, both the culture and the history of an organization are of great importance. An organization that has operated within a protected market will need some time to change over and adjust. In such cases, Business Intelligence may indeed be used as a tool to change the culture however it will use a lot less energy if the organization and its management are already aware of the necessity of Business Intelligence and improved performance.
Determine the first scope of BI
Basically, what we need to do when we first consider Business Intelligence is to determine a scope which allows us to create a business case after the first or the second increment is completed and put into use. In most cases, such a scope should contain roughly 20% of the total information needs of the organization. This is shown in the following figure.
Figure: The first scope of the BI system needs to be about 20% of the total information requirement in order to design a future proof architecture.
Relatively large scope
This relatively large scope ensures that many of the possible types of transformations, calculations and wishes will become apparent which enables us to both design a robust and future proof architecture and determine the content of successive increments. In some cases, we may choose existing reports as a starting point and release these during the first increment. In other cases, we may search – together with the directors and managers – for actual KPIs on which we do not yet (or barely) have information.
Start picking low hanging fruit
When we specify our information requirements in more generic terms and we link these to our business processes, and when we prepare our indicators in the data warehouse, we can start picking the so-called ‘low hanging fruit’ in the second increment. These are easy to realize, new reports, which can provide interesting insights into the business operations. Worth taking into consideration is the fact that a data warehouse is not sacred.
BI without a data warehouse
Organizations may also choose initially to produce a number of information cubes with reports or dashboards (thus without a data warehouse). In this way, we do not immediately need to invest in a mature Business Intelligence architecture that may turn out to be a heavy burden on the organization simply because managers do not use the information in their analysis or actions. It is thus wise always to check in advance whether managers do in fact use the information for managing processes, people and their performance.
Drawing up a business case
For several reasons, both drawing up a business case and determining the scope are not easy tasks. Firstly because the blueprint – which we need in order to start with Business Intelligence – does not deliver any tangible business results and secondly because it often happens that users withhold information that is vital for the preparation of the business case. Hence, organizations often leave out the blueprint and business case altogether.
Capitalize Business Intelligence
The costs sometimes outweigh the returns of the sub-projects that might have been used to capitalize the Business Intelligence project. (It is in fact difficult enough to estimate how many sub-projects we need to create and what they will contain.) With respect to users withholding information: this is often information about the number of hours that employees – from different departments – actually spend on doing reports and analysis. It often happens that users present these in a positive light in the sense that they claim that their reporting hardly takes any time.