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Business Intelligence Impact: the Assimilation of Business Intelligence into Core Business Processes

Leading proponents of business-driven business intelligence (BI) design and development methods have recognized that the BI payoff is created through improved or reengineered core business processes from BI investments (Williams and Williams, 2006), but until now there has been no rigorous empirical data to validate that perspective. As a result, companies in a wide range of industries have struggled to make the business case for BI, and have failed to drive BI use into the core business processes that help create business value.

• By Mohamed Elbashir, Steve Williams
• December 13, 2007

Abstract

Leading proponents of business-driven business intelligence (BI) design and development methods have recognized that the BI payoff is created through improved or reengineered core business processes from BI investments (Williams and Williams, 2006), but until now there has been no rigorous empirical data to validate that perspective. As a result, companies in a wide range of industries have struggled to make the business case for BI, and have failed to drive BI use into the core business processes that help create business value.

Two empirical studies were conducted at the University of Melbourne (Elbashir, 2007; Elbashir, Collier, and Davern, 2007) that broaden our understanding of how BI creates business value. The studies found that:

• The assimilation of business intelligence systems (BIS) into business strategies and activities of organizations delivers business benefits, or BI impact.
• Improved business process performance, enabled by BIS, can improve organizational performance.

We call these improvements in business process performance and organizational performance BI impact. In this article, we examine the management implications of BI impact on how BI is designed, justified, and managed.

Introduction

Organizations around the world are exhibiting a keen interest in BI, as is clearly reflected in their increased spending to acquire the enabling technologies. Despite large investments in BI and the potential benefits to organizations, there is a distinct lack of rigorous, cross-industry empirical evidence that demonstrates just how BI creates business value. As a result, BI teams struggle to make the business case for BI to business executives, and they struggle to drive the use of BI down into core business processes. They struggle to explain and achieve BI impact.

A recent empirical study of 347 organizations conducted at the University of Melbourne provides insight into how BI creates business value and how to measure that business value (Elbashir 2007; Elbashir, Collier, and Davern, 2007). The study found that BI enables organizations to generate business value at both the business process level (customer-related processes, internal operations, and supplier-related processes) and at the organizational level.

The study also reported that organizations will be able to generate business value from their BI investments only when they use these tools to support their business strategies and value chain activities. We refer to this process as BIS assimilation. While the need for BIS assimilation might seem obvious, we find in practice that many organizations do not take the steps necessary to ensure that BI is leveraged within the business processes that make a difference.

These findings raise an important question. How can organizations that are successful with business intelligence assimilate BIS into their business strategies and activities? To begin to address this question, this article will:

1. Describe a comprehensive measure of BIS assimilation that captures the deployment of BIS in organizations that have used BIS to achieve business benefits.
2. Explore the practical implications regarding how BI is designed, justified, and managed.

We define BIS as “interactive, computer-based systems for data analysis and reporting which support business analysis and decision-making.†After a brief description of the research, we will explain the impact of BIS assimilation on business value creation.

The Research

The research findings confirm that BIS assimilation is a high-order performance outcome—meaning the effects occur within the core business processes. We identified three dimensions of BIS assimilation: (1) business production and operations, (2) customer relations, and (3) marketing and sales. Together with the measurement items used to capture each dimension, each of these dimensions includes measurement items that represent generic strategies and related business activities. For instance, items used to measure the “customer relations†dimension of BIS assimilation include delivery of products/services (business activity) and providing value-added goods/services to customers (business strategy). The complete list of these activities can be found in the following list:

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BIS Assimilation Measures for Three Dimensions

1. Customer Relations

• Customer services (e.g., improving customer satisfaction)
• Delivery of products/services
• Enhancing customer relations
• Enhancing existing products/services
• Providing value-added goods/services to customers
• Creating new products/services

2. Business Operation

• Supplier management (e.g., inbound logistics or purchasing)
• Manufacturing and/or internal operations
• Being a low-cost producer/provider
• Creating flexible manufacturing/operations processes

3. Marketing and Sales

• Marketing (e.g., targeting customers and tailoring offers)
• Sales (e.g., sales-force automation, revenue management)
• Entering new markets

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The research also found that BI used in core value-adding processes can directly improve business performance and value creation. This is a far stronger foundation for making the business case for BI than general assertions about “making better decisions.†In practice, business leaders have a hard time using “better business decisions†to justify large BI investments. How does one measure whether better business decisions are being made?

The research results allow us to move beyond weak business cases and imprecise or nonexistent measures for BI assimilation/deployment. We can define BI investments as business process improvement investments, and we can measure current and projected improvements in business process performance and organizational performance. Further, the research makes it clear that we have to manage BIS assimilation in order to achieve BI impact. The practical implications of these findings are presented in the following sections.

Managing for BI Impact

To achieve BI impact, the BIS components must be aligned with, and integrated into, an organization’s business strategies and core value-adding processes. In effect, BI and BI-driven improvements to targeted business processes must be managed holistically. This has specific implications for the requirements, design, business justification, program/project management, development, and the locus of implementation responsibility.

More generally, we must manage BI and business process convergence—or BI assimilation—which requires an effective partnership between the business and IT. This too has specific implications.

From a lifecycle perspective, the key tasks that must be accomplished to achieve BI assimilation are illustrated in Figure 1.

Figure 1. Managing for BI impact across the system development lifecycle

Essentially, achieving BI impact requires the effective management of BI assimilation across the systems development lifecycle. This conclusion was borne out by our survey results. There are other prerequisites, such as deployment of appropriate and specialized IT infrastructure, but the focus here is on managing the key steps and tasks required to integrate BI into core business processes that impact organizational performance.

Accordingly, Figure 1 shows six lifecycle steps and the key tasks to be accomplished. At each step, achieving BI assimilation as a means to realize BI impact requires explicit consideration of business process as a central focus for management attention.

Step 1: Define the Business Requirements

The first step in a business-driven approach to BI is to develop a comprehensive and concrete understanding of the business opportunities to leverage BI within core business processes that make a difference in organizational performance. In addition to using appropriate BI opportunity analysis and portfolio management techniques, we must give explicit and detailed attention to current-state and target-state business processes and associated process performance metrics and goals. Essentially, we need to answer four key questions at this stage:

• What business information do we need?
• To perform what business analyses?
• In support of which decisions?
• In the context of what business processes?

An overview of the basic analytical flow for identifying BI-driven business process improvement opportunities is presented in Figure 2.

Figure 2. Business requirements analysis—BI assimilation into business processes

In addition to identifying BI-driven opportunities to improve process and organizational performance via analysis of the factors in Figure 2, we need to capture the specific BI requirements. This can be done using proven BI requirements-gathering methods.

In the context of business-driven BI design and development methods, BI requirements are specified in terms of analytical subject areas, the business case for the specific analyses, business questions, a fact-qualifier matrix, and a definition of terms.

Building on the BI-driven process improvement opportunities identified above and the specific BI requirements, we also need to characterize the current state and target state of the business processes that are targeted for BI-driven improvement or reengineering. For example, a leading financial services firm in the U.S. has launched a major effort to improve its ability to cross-sell and up-sell to the millions of individuals who are participants in employer-sponsored benefit plans. By applying business-driven requirements analysis techniques, this firm identified BI-driven process improvement opportunities in the areas of market segmentation, campaign management, customer service, distribution, and cross-channel/cross-segment message coordination.

The targeted processes reflected a typical mix of manual processes, custom data extracts, spreadsheet applications, desktop databases, and coordination via ad hoc e-mails. The vision was to combine BI, an enterprise data warehouse, business process management technology, campaign management applications, improved and/or reengineered business processes, and measurable process performance improvement goals. This comprehensive and concrete view of business requirements provides a solid foundation for BI assimilation and for making the business case for investment.

Step 2: Make the Business Case

As the findings reported in Elbashir (2006) demonstrate, BI impact requires BI assimilation, which means that BI must be integrated into organizational business strategies and business processes.

The practical importance of this is clear: business managers—not IT managers—should accept responsibility for defining a BI-driven concept of operations for the targeted business processes, developing business process change plans and cost estimates, and developing ROI and sensitivity analyses. IT can provide cost estimates for the BI portion of the business case, but BI impact can be achieved only via business process change, which can be driven only by business managers. Accordingly, it makes sense that business managers should lead the charge for building the business case.

The difference between having IT develop a BI-centric business case around “better decision-making†and having the business develop a process-centric business case around leveraging BI is potentially profound on several levels. First, it would reverse a common approach to BI capital budgeting, whereby IT takes the lead on developing a business case with input from the business about its requirements. The result is an IT-centric business case where the nature and extent of business process change is not fully explored.

Now that we have empirical data linking BI assimilation to business-value creation, we have a defensible, nonpolitical argument for developing business cases that are driven by a process-centric view.

The process-centric business case has several benefits, aside from the obvious benefit of ensuring tighter linkage between targeted business processes and the BI to improve or reengineer those processes. By requiring a process-centric business case, organizations increase the likelihood of substantial business involvement in the process. In effect, the business would own the process improvement project from the outset, and the effort required to develop the business case would leave the organization in a much better position to:

• Build consensus around the need for process change
• Build business buy-in for the targeted, BI-driven changes
• Identify a process performance baseline and/or process performance benchmarks
• Establish process performance goals
• Build ROI analyses that business leaders believe

Step 3: Design the Business Process

For traditional BI projects, the design step of the systems development lifecycle is well characterized and widely understood. A range of options, methods, and tools are available for focusing on data architecture, data models, data presentation, and metadata.

With the exception of business-driven design methods, most of these legacy BI design methods pay inadequate attention to BI assimilation and the business-value capture mechanism by which an investment in BI will result in a payoff for the company. The findings reported in Elbashir (2006) suggest that this omission is a potentially fatal flaw. If we don’t know up front how BI is going to improve process performance or how we would measure such improvement, how can we justify the investment?

A key implication of Elbashir’s results is that legacy BI design methods need to be improved to incorporate business-driven methods that explicitly consider business process design. Specifically, the design stage of the lifecycle must focus on the envisioned target state of the business process to be improved or reengineered, including specifications for:

• The organizations that will be involved in the target process and the associated upstream and downstream interfaces
• The process roles that are needed and the departments or individuals to whom they will be assigned
• The envisioned steps and activities within the process, such as the horizontal and vertical work flows
• The BI elements needed by the process, including business information, analytical tools and applications, and structured decision processes
• The content needed by the process, including reports, documents, e-mails, forms, and so forth
• The business rules for the process
• Process control flows and process BI
• User interfaces and screen paths

The effort that must go into business-process design depends on the specific BI-driven business-process improvement opportunity. In some cases, an existing process may stay largely unchanged with the exception of adding BI at a specific step. In other cases, a process must be designed from scratch. To illustrate, we revisit the case of the leading financial services firm that has launched a major effort to improve its ability to cross-sell and up-sell to the millions of individuals who are participants in employer-sponsored benefit plans. As noted, the firm used business-driven techniques to identify the need to improve:

• Market segmentation
• Customer service
• Campaign management
• Distribution
• Cross-channel, cross-segment message coordination

For the market segmentation process, only a handful of people are involved, and they already have sophisticated data analysis software. The primary process change required to leverage new BI is to have the same analysts point their tools at a dependent data mart off of an enterprise data warehouse—instead of using a hodgepodge of custom data extracts. In this situation, the business process design effort is minimal.

At the other end of the spectrum, the process change associated with campaign management will be substantial, and thus the process-design effort will be more extensive. The firm currently operates on a business-to-business model, selling benefit plans through distributors to businesses in a range of industries. Accordingly, they conduct few direct marketing campaigns aimed at individuals, and the current business processes are largely manual and based on custom data extraction per selection criteria specified by marketing. As a result, campaigns take weeks to plan, coordinate, and execute, and campaign performance measurement requires time-consuming ad hoc analysis of custom data sets.

In the future, data about individual benefit-plan participants and their actions will be integrated from multiple touchpoints into the enterprise data warehouse, pushed to campaign-management applications, and then pushed out to a campaign-analytics data mart. Accordingly, the process of selecting campaign lists will be entirely different and highly automated, eliminating the need for custom data extraction and ad hoc, cross-departmental coordination. Further, standard campaign performance metrics will be delivered via the campaign-analytics data mart, eliminating the need for ad hoc analysis of custom data sets.

These changes will require a comprehensive business process design with careful attention given to all of the fundamental process design factors, including the need for BI in the form of business information and analytical applications. The effort will ensure that BI assimilation occurs.

Step 4: Develop the Business Process

For traditional BI projects, the development step within the systems development lifecycle is well defined and widely understood. A wide selection of books, educational opportunities, and proven methods cover development tasks such as source-to-target mapping, data acquisition, data profiling, data transformation and integration, data movement, data quality, metadata acquisition and movement, and data delivery.

While new tools come into play from time to time— such as master data management tools used to enhance data quality—the basics of BI development have been encapsulated within mature technical processes. That being said, we need to extend traditional BI development methods to include the technical and non-technical methods associated with business process development if we are to achieve BI assimilation and BI impact.

When we consider development in the business-process world, the scope and meaning of the term depends on the approach being used to achieve business process improvement and/or business process reengineering. For our purposes, we can characterize the approaches along two key dimensions: (1) the degree of business process change and (2) the degree of process automation. The process change approach selected by a given company determines where it is positioned on these dimensions, which then drives the key development tasks. This is depicted in Figure 3.

Figure 3. Business process development tasks depend on the scope of change and degree of automation.

As a general framework, the matrix in Figure 3 presents a simplified view of what are actually complex trade-offs, the results of which can place organizations in differing positions within the four quadrants. (The quadrants “define†basic strategies that dictate the key business process development tasks that must be accomplished in the context of achieving BI assimilation.) We will use an example to explore the development implications of the four strategies.

Business Process Change at a Federal Government Agency

By law, by policy, and/or by choice, a federal government agency we’ll call FGA enters agreements with external entities for which it provides and/or receives certain business services. Within this general context, approximately 2,500 agreements have been made, some dating back to the 1970s. These agreements define the business and economic terms under which services are to be provided. They fall into four primary categories:

• Programmatic agreements—free exchanges of information, often initiated by FGA to serve its operational and/or statutory purposes
• Reimbursable agreements, where FGA provides services for monetary compensation
• Interagency agreements, whereby FGA pays for services received, such as payroll services received from the Department of the Interior
• Quid pro quo agreements, which are essentially barter agreements with external parties

Today, these agreements are managed and executed via business and IT processes that FGA has determined are insufficient to meet its business requirements. To rectify this situation, FGA developed a comprehensive program plan for reengineering the legacy agreements management business processes into a modernized agreement process, or MAP. The plan incorporates the use of all four strategies to accommodate the highly autonomous operations of the various organizational units that interact within the current agreement management processes and that will continue to interact under the MAP.

Strategy #1: Aggressive Leveraging of Business Process Management
At the agency level, the MAP must achieve a higher degree of process control and status visibility, and it must capture and deliver a richer selection of process BI for regulatory compliance and process-improvement purposes. Given the scope and complexity of the process, the FGA plan is to aggressively leverage modern business process management (BPM) technology and methods at the agency level.

The implications of this approach for business process development are that (1) process design will be done in a process modeling environment; (2) business rules are specified and managed within the business rules engine; and (3) process development occurs simultaneously with process design because the process modeling tools automatically generate executable processes. In the BPM environment, BI needs are specified within the flow of the process model, thus ensuring effective BI assimilation. Overall, leveraging BPM in the context of BI-driven business process improvement or reengineering is an excellent way to achieve the convergence of BI and business processes that is necessary for BI impact.

Strategy #2: Incremental Leveraging of Business Process Management
At the organizational unit level, aggressive leveraging of BPM does not make sense for certain units. This is because those units already have effective business processes to perform their role within the larger MAP. Accordingly, those units will incrementally leverage BPM where it is necessary to interface with the agency-level MAP and where they can benefit from improved BI regarding process costs and cycle times.

They will interface their workflow control points with the MAP as the means of receiving work assignments and passing back status information. They will also be the beneficiaries of the process performance BI that will be generated by the agency-level MAP. Given this incremental leveraging of BPM, the business-process development tasks are less extensive, though they will still take place within the BPM technical environment.

Strategy #3: Incremental Improvement with Traditional Tools
For those organizational units where aggressive leveraging of BPM does not make sense, there are also opportunities for incremental process improvement using traditional tools. Such opportunities include:

• Business process improvement techniques such as Six Sigma, Lean, and Quality Circles
• Standardized spreadsheet templates for financial estimating
• Standardized agreement forms
• Improved communication of process steps and responsibilities using tools such as Visio
• Improved training
• Proven change management techniques

Under this strategy, the business process development tasks are driven by the mix of tools used. In general, development consists of preparing documents, spreadsheets, process maps, standard e-mail notifications, approval forms, policy amendments, and so forth.

Strategy #4: Radical Improvement with Traditional Tools
For some of the organizational units at FGA, current business processes under the broader agreement-management process will require a comprehensive overhaul, but given the nature of their part of the work, such an investment in BPM does not make sense. Rather, they will radically improve the business process by using traditional tools. From a development perspective, the tasks are the same as for the incremental improvement strategy.

Regardless of which business process change strategies are used, the development stage of the BI-driven process improvement lifecycle requires attention to both BI development and business process development. This is different than traditional BI development projects where IT does the technical BI work and it is assumed that the business will figure out the business process part. This is another instance where business-driven design and development methods transcend the more limited traditional methods.

Steps 5 and 6: Implementation and Continuous Improvement

During the implementation and continuous improvement phases of the systems development lifecycle, BI assimilation again requires moving beyond the scope of traditional BI lifecycle methods. In addition to the usual BI tasks, implementation and continuous improvement of the improved and/or reengineered target business processes must be aggressively managed. At this stage, business value will be created from the BI and business process change investments. This is also the stage where collecting process performance data is critical so that actual performance can be compared with baseline performance, benchmark performance, and/or process performance targets.

Summary

Achieving BI assimilation as a means to BI impact requires explicit consideration of business process as a central management focus. Our discussion has illustrated how the integration of BI and business process can be managed at each stage of the systems development lifecycle. This approach means that those who manage BI-driven process and profit improvement programs must expand the scope of their management attention beyond traditional BI design and development concerns.

It is also clear that many of the key tasks within stages and across the lifecycle can be performed only by business people. More broadly, the task of managing BI assimilation across the lifecycle has implications for the composition and skills of the management team, the methods used, and the business and technical skills required for success.

Traditional BI approaches have long argued for “business involvement†but have stopped short of defining what that means. We believe that the findings reported in Elbashir (2006) provide convincing empirical evidence that we need more than “business involvement†if BI investments are to pay off. Rather, we need BI-driven process improvement initiatives to be owned and driven by the operational managers who own the critical customerfacing, operational, and supplier-oriented processes that are the key value-added processes of the firm.

Only these managers have the power and influence to drive new ways of doing business that leverage BI. Only these managers can change the culture of information usage within their units. Accordingly, these are the people who need to be held accountable for the business value of business intelligence.

References

Elbashir, M. [2007]. Strategic Information Systems and Organizational Performance: Exploring the role of Assimilation and IT infrastructure, 3rd Asia/Pacific Research Symposium on Accounting Information Systems, Brisbane.

Elbashir, M., M. Davern, and P. Collier [2007]. “Business Process Versus Organizational Performance Effects of Business Intelligence Systems,†International Journal of Accounting Information Systems, forthcoming.

Williams, Steve, and Nancy Williams [2006]. The Profit Impact of Business Intelligence, Morgan Kaufmann.

This article originally appeared in the issue of TDWI.