1. Article: 'Value of BI in a weak economy' from http://www.tdwi.org/News/display.aspx?id=9231
2. LogiXML Whitepaper: 'BI in Recession: How to Gain Market Share' from http://www.b-eye-network.com/view/9452
Value of BI in times of Recession
On Monday December 1, 2008, the National Bureau of Economic Research declared that the economy has been in retreat for a year, namely since December 2007, when mass selling on Wall Street pushed the S&P 500 index down by almost nine points. On December 5, 2008, President Bush officially announced to the nation that the United States are in a recession.
Even optimistic forecasts predict that the dire times are here to stay for at least two quarters, and that companies won’t start ramping up until well into the second half of 2009. Also, as we know by observing overseas stock-indexes, the recession is not limited to the USA but is rather a global phenomenon.
During times such as this, most companies fall within two categories. There are those who play defensively--cutting staff, cutting costs, concentrating on the highest-revenue product lines and customers, and hoping for the bad times to go away. Smarter companies, however, realize that the time when their competitors are hurting may be the most opportune moment to go on the offense and gain market share.
The second kind of company is the company that will not only perform better during the recession, but come out of it as a leader in their market. How does this kind of company go about such strategy?
The first thing is to aggressively identify areas of improvement, as well as redefine and strengthen one’s positioning. Then, corrective measures must be put in place to both eliminate inefficiencies and exploit untapped potential, aiming for excellence rather than for sufficiency. To do this, a strong command of data is essential, which is where BI becomes a necessity rather than a luxury.
Role of BI in a recession
Both zoologically and economically, the law of survival of the fittest works most transparently during lean times. Scarce resources force competitors to sharpen their skills, to know each other and their turf better and to acquire a precise understanding of where the resources can be found, as well as what and what not to do to capture them.
For companies, this means primarily making the best-possible use of data through BI. Competitive data helps organizations reposition themselves in their attempt to jockey for a better advantage. Customer data tells them of important buying patterns that--if correctly predicted--can be exploited to increase market-share. Operational data identifies areas of inefficiency and can help companies achieve more with fewer resources. Without this insight, it is virtually impossible to remain competitive: if you don’t make the effort, rest assured one of your competitors will.
At the same time, however, companies must realize that more data and a greater investment on BI are not necessarily better--as in a straight-line equation. Just like all resources, data must be handled efficiently and should provide a good value to the organization; there is a point past which the marginal return of analyzing more data or investing more in BI rapidly tapers off.
The key in this regard is finding that point and operating as close to it as possible. When every decision-maker in an organization has access to meaningful data through an efficient BI solution that fits the company’s budget, the amount of leverage that BI brings will be near optimal.
Blue-print for Optimal BI
The first thing we must remember is what data is for. What is the “greater good” of BI--meaning the goal to which all other goals are subordinated? In a time of recession, it is to gain market share. The pie is finite, and if you want your piece to grow, you must encroach in your competitor’s. So, every piece of data being analyzed and every piece of information being acted upon should be knowingly aimed towards this goal. Anything too indirect will result in costly inefficiencies.
In particular, recession-time BI needs to have the following characteristics: be consolidated and reliable, be delivered efficiently, empowering as many employees as realistically possible within the organization--and provide a good value.
Consolidated & Reliable Data
Everyone who’s worked in an organization has experienced the opposite of efficient data consolidation. Marketing has its own numbers, which don’t quite match sales’--and are nowhere near finance’s. While never optimal, this situation can yield good-enough results during normal times. But during a recession, accuracy becomes paramount because even small miscalculations can lead to inefficiency, lost opportunity and unnecessary expense. Data from different sources must be consolidated into a reliable set of unique numbers, which mean the same thing to all functions within the organization.
Efficient Data Delivery
Once again, let’s remember what data is for: it is to help increase market share by offering decision-makers a clearer understanding of their business and operations. To do this, data must be both easily accessible and delivered in a timely and efficient manner.
Easily accessible data means primarily two things:
1. Being Web-based. A Web-based solution is easier to access from virtually anywhere without lengthy downloads, to share with others and to navigate easily along the familiar pathways of the Internet. But today, with different data sources being used and with cloud-computing being increasingly popular, the benefits of a Web-based application are even stronger and more varied.
2. Offering automation, scheduling and alerts, especially if actionable. The decision-maker should not have to prepare or refresh his report every day. Especially in a recession, when even the smallest delay or misstep can cause the loss of a precious opportunity, it is essential that data and information find the decision-maker, not the other way around. Automated report scheduling and business alerts perform this function in a very efficient manner.
The Employee as Entrepreneur: In a time of recession, most companies operate on a bare-bone crew. This means that virtually every employee must own his piece of the business and think and act like an entrepreneur in his area—and often beyond.
Before empowering employees to make critical decisions, it is vital to give them access to meaningful data and information, and to train them to analyze and act on it pointedly to achieve the common strategic goals. This means that employees of all levels should be given access to BI, and that they should become familiar with the tools and interfaces so that they may find the key pieces of information on which to base their decisions.
Investing Smartly: There are three main costs associated with BI. These are:1. Upfront costs, or the cost of purchase of the main BI application, including the maintenance and upgrade licenses.2. Licensing, or the cost per user. Especially when it comes to end-users, this is one of the most expensive components of BI deployment.3. IT resources, or the amount of personnel and man-hours required to set up, deploy and maintain the BI application (including training time for technical as well as nontechnical personnel).
The ideal model for a BI solution in a time of recession is one that provides the right amount of features required to make the business more competitive while not presenting a substantial cost. This means especially a solution that can be deployed to an unlimited amount of users without paying additional fees, and one that is quick to set up, easy to maintain and intuitive to use.
Examples to illustrate value of BI in a weak Economy
As the companies profiled here illustrate, BI helps an enterprise maximize revenue, manage employeeperformance, reduce costs, and increase profits. BI also makes business processes more efficient andinformation-management processes less complicated.
Using Employee Metrics to Motivate Performance
One way to motivate positive performance is to make employees aware of how they compare to their peers. This information helps these workers make better decisions, and encourages them to work harder to improve their standing in the organization.
SwiftTrade, a financial services firm operating in the North American, European, and Asian markets,reveals how BI holds the key to productivity in lean times. Benson Chung, a member of SwiftTrade’s business process management team, created a BI system that automatically updates a reporting database whenever designated revenue and trading milestones are reached. Additionally, using BI technology, he has created several dynamic reports to motivate trader performance.
For example, the Top 5 Traders report reveals which traders are bringing in the most revenue; the Top 5 Branches ranking system encourages healthy competition among offices. These daily ranking systems, along with a cumulative Book of Records report, continually acquaint each trader, manager, and executive with the company’s progress in this dynamic industry.
Using BI to Identify Cost-Saving Opportunities
One of the ways BI reduces costs is by shortening the time it takes people to get information. At the Hillman Group in Cincinnati, Ohio, a BI application is shrinking that process from weeks to minutes. Nearly 600 sales representatives use BI software to track sales transactions and see if they’re meeting quotas.
Hillman’s BI journey began with an important realization. As a top supplier of hardware items and a manufacturer and distributor of key duplication and engraving systems, the company determined that future revenue and product growth would be driven by acquisitions. To prepare for this growth and improve information delivery, Hillman used BI software in conjunction with a geographic information system to display activities at 12 distribution centers, including UPS zone maps and product shipment data.
Its BI applications have sped up decision-making for more than 800 users, including 500 remote employees, who can easily conduct queries and create reports to detect problems with orders and shipments. In one instance, Hillman used its fill-rate reporting system to analyze instances and prove that it had not short-shipped a customer, saving $131,000 in fines.
Hillman Group is now using its BI software to analyze revenue, orders, and freight costs. As it refines its predictive analysis capabilities, the manufacturer is better able to react to leading indicators such as raw-material costs before they impact product margins. The company is also expanding its GIS-based analysis and reporting system to help its field service team minimize drive time and fuel costs.
Helping a Dealer Network Reduce Costs
Few markets are experiencing economic doldrums like the U.S. automotive industry. As the industry expands to include new Chinese exporters, along with established players from Japan, Germany, and South Korea, one U.S. auto manufacturer used BI technology to create a dealer reporting system that saves $60 million each year. The system identifies excessive repair costs by monitoring how much each dealer’s warranty performance varies from the average performance of other dealers in the same geographic region. More than 10,000 dealers rely on the BI environment. Helping dealers keep costs down and comply with regional averages contributes to the company’s bottom line.
Using BI as a Profit Center
BI can also uncover previously untapped revenue. The genesis of these initiatives is often a desire to fully analyze data about customers, products, and sales. Consider the Commercial branch of Air Canada, which is chartered with understanding how revenue is generated for Canada’s largest commercial airline. To do its job more effectively, managers created an Advance Booking Report (ABR) that calculates revenue and yield for each of the airline’s major markets, sorted by week and month.
Air Canada used this report to answers questions such as the following: Do declines in bookings indicate a trend (such as a mitigating issue with one of the international markets)? Do we have excess capacity, or are the flights likely to be overbooked? Should our sales force investigate a bookings problem?
The ABR is useful to people familiar with the information, but it was difficult for revenue management and sales personnel to spot problems, drill down into the data, and take decisive action in time to improve bookings for the months ahead. Now, thanks to data visualization software, they can drill down just by highlighting a field.
Air Canada’s data visualization software uses geographic displays to reveal point-of-sale data on a world map. Multiple views are just a click away simply by highlighting a specific data element. Linking interactive graphs makes it easier to detect correlations in the data.
Many business leaders are looking to BI for near-term solutions, but BI delivers high-value returns onmany levels. BI enables companies to work smarter, even when tight financial times mean smaller ITbudgets and leaner staffs. Market-leading companies in every industry are turning to this software tostay ahead. When the economy turns—as it inevitably will—these are the firms that will be in the bestposition to seize the next wave of opportunities.