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October 3, 2013
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CONTENTS
Economic Principles for BI Programs
Dynamic Pricing: The Future of Customer-Centric Retail
Mistake: Having “Solution Envy”
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Economic Principles for BI Programs
Mangesh Mharolkar
XTIVIA, Inc.
Topics:
Business Intelligence, Data Management, Program Management
Economic considerations are at the heart of any business decision. They not only affect how we implement business intelligence (BI) solutions but also what we can do--and we give up other opportunities in the process of doing so.
Here are three principles I have discovered during my work in the BI space.
1. Trade-offs (and opportunity costs) are everywhere. Organizations face many decisions associated with various strategic or tactical goals. It is usually unrealistic to expect that all of these goals can be accomplished at the same time.
Within the context of a BI program, these trade-offs are even more pronounced. A small group of users may want self service and control over the report creation process, while another group wants nicely formatted reports, preferably in Excel and received via e-mail. Aligning the technical tools with these requirements is usually at cross-purposes.
Another trade-off happens along the lines of efficiency and equity. An efficient BI program will maximize the benefits realized by the user community, but an equitable program will fairly distribute resources among the users.
Recommendation: I have always found it useful to educate the user community continuously and clarify that the resources at the disposal of a program are limited (even scarce). Identify all the user needs, catalog them, and show continuous progress in terms of building blocks for the solution. We must do this often enough so the user community stays engaged with the program.
2. Marginal thinking is important, as is providing incentives. Decisions are rarely black and white, especially when it comes to a BI program. Move the program forward and implement the technical architecture in such a way that users can maximize the benefits they derive from the solution.
If a report or dashboard is going to reduce several operational cycles for many end users, it needs to be given higher priority and resources. The tangible benefits, such as reduction in cycles, also result in solidifying the return on investment for the BI program. Rational decisions are almost always successful if the marginal benefit from the decision exceeds the marginal costs. This holds true, especially for capital investments and the agility with which these decisions have to be made. Purchasing an enterprise-level BI tool set may not be necessary at any given point in the program cycle, yet you may feel compelled to consider it. The noise created by marketing efforts can, at times, be overwhelming, and can cloud the decision-making process. Remember, it’s the benefits and the costs that drive the process, not the marketing promotions.
Incentives, such as reduction in cycles spent, data quality, and higher grade of dependable data, all affect how end users derive benefits from the program. Agility in delivering smaller projects (one- to three-month cycles) that further the strategic goals of the program should also be viewed as an incentive.
Recommendation: Involve the user community in the decision-making process early and often. Clarifying strategic as well as tactical goals is important. Ensure that work streams are smaller and can be built into “products in use” in smaller cycles. Educate the user community about the tangible and intangible benefits they will derive when the project is complete.
3. Data governance, especially a steering committee, holds the master key. Data governance (both people and processes) are an important--yet often ignored--factor. Some entity has to provide a platform for a variety of communities to come together and enforce the rules that these user communities should follow.
With a strong governing council and steering committee, a BI program can promote efficiency and equity. This is especially important for a large BI program that intends to bring a variety of organizations together.
The platform provided by the governing council and/or steering committee also provides concrete, actionable direction to the BI program. The data governing/steering committee will not always solve the efficiency and equity problems, but the forum helps every stakeholder stay engaged.
Recommendation: Make judicious use of the governance framework and the steering committee to promote efficiency and equity. Use these mechanisms to foster acceptance and use of the solution(s) already built and drive consensus for future projects.
Mangesh Mharolkar has worked for over 17 years with information systems and currently heads the BI practice at XTIVIA, Inc. He has worked in various roles for client firms of all sizes, including Fortune 500 companies, building industry-leading data warehousing and BI solutions. He practices a hands-on, practical approach to both strategic and tactical decision making with BI initiatives.
Dynamic Pricing: The Future of Customer-Centric Retail
Troy Hiltbrand
At its core, dynamic pricing is a problem of customer behavior. If the price of a good or service changes, will the consumer react in a desired manner? When profits are on the line, dynamic pricing is not only about dynamic discounting, but also emphasizes the escalation of prices to meet environmental factors.
To implement dynamic pricing, enterprises must leverage modern technological platforms that enable large-scale, advanced analytics, and understand and address the behavioral sciences facets of the challenge. As with any successful business analytics project, the first step is to understand the business objectives of the initiative and determine what impact the technology implementation will have on achieving success. This step is independent of the technology implementation and must be done first, or the project has a significantly higher likelihood of failure. Other key considerations are customer perceptions, data accuracy, and the potential risks of algorithm mishaps.
Dynamic pricing is inherently a human behavior problem, and human behavior is fundamentally sporadic and hard to predict.
Read the full article and more: Download Business Intelligence Journal, Vol. 18, No. 3
Highlight of key findings from TDWI's wide variety of research
BI Benchmark Report: Budget
Capital budgets. Thirty-nine percent of organizations increased their BI capital budgets in 2013, a pace on par with recent years. Many of those increases were substantial--capital budgets rose 10 percent or more at 20 percent of our respondent organizations. However, organizations at which capital budgets were reduced compared to 2012 rose to 26 percent, suggesting that some organizations are being asked to “do more with less.” Meanwhile, the median capital budget rose to $325,000 from $250,000 in 2012, indicating overall a fairly robust investment in the infrastructure and licensing needed for BI programs.
Well over half (62 percent) of organizations have BI capital budget funding of $500,000 or less in 2013, up notably from 51 percent in 2011 and suggesting a curtailment in capital expenditures at some enterprises. Overall, it’s unusual for the BI capital budget to exceed 10 percent of the overall IT capital budget, which is the case at 28 percent of respondent organizations.
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Read the full report: Download 2013 TDWI BI Benchmark Report: Organizational and Performance Metrics for Business Intelligence Teams
FlashPoint Rx prescribes a "Mistake to Avoid" for business intelligence and data warehousing professionals.
Mistake: Having “Solution Envy”
Laura Reeves
BI solutions are everywhere. BI vendors tout their latest success stories. Take a look online--there are many impressive examples. You even see them on TV: financial services organizations offer analytics to individual investors to better manage their portfolios. It can feel like everyone has something better. However, it is a mistake to think you must have a _______ (fill in the blank: dashboard, colorful report, ad hoc interface) just because everyone else seems to have one.
It is easier than ever before to grab data from any source and present it in a visually pleasing manner. Resist the temptation to toss some data around just so you can have a state-of-the-art screen to brag about. Work together (IT staff and business users) to figure out what will help your organization, then invest the time and energy to find and prepare data that will feed a sustainable BI solution that aids the organization. Rather than feeling bad about seeing what others have, use this as inspiration to build solutions that meet the specific needs of your organization.
Read the full issue: Download Ten Mistakes to Avoid When Delivering Business-Driven BI (Q3 2013)
