The Value of Business Intelligence in a Weak Economy
When times are tight, BI can actually save you money.
- By Michael Corcoran
- December 3, 2008
by Michael Corcoran
The problems facing the U.S. financial industry have a ripple effect throughout the entire world economy. Few companies are immune to this dramatic downturn, and every business leader is forced to react to the credit crisis at some level.
IT leaders are no exception. As credit tightens and IT budgets are squeezed, CIOs must control spending. Many of them are turning to business intelligence (BI) to derive maximum value from their existing assets.
In this article, I’ll offer several examples that demonstrate why BI is so valuable in a weak economy. As the companies profiled here illustrate, BI helps an enterprise maximize revenue, manage employee performance, reduce costs, and increase profits. BI also makes business processes more efficient and information-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. Data visualization software can help
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. For example, they can select a time period and display a scatter plot of routes clustered according to profitability (low bookings with low fares). One more click produces a report that instantly identifies the issue in a single page. This leads to more productive meetings, better understanding of the issues, and more clearly defined follow-up activities.
“It’s the same data but it is interactive, so users can isolate a certain aspect of the data, drill-down, and spot problems with bookings and sales,” says Chantal Berthiaume, director of network optimization at Air Canada.
According to Berthiaume, this type of analysis is better than data mining because it allows users to drill down on the fly, rather than simply run predefined algorithms from a data-mining program. “With this much data, it is easy to overlook anomalies and discrepancies without a visualization tool,” she explains. “If you know you have a problem in a particular market, you can drill down into that data, but if you don’t know there is a problem, you might miss it.”
For example, if Air Canada detects a downward trend in revenue from the French market, the branch can ask the sales staff to investigate. They might decide to offer an incentive, or contact the major travel agencies to propose a new offer.
Positioned for Growth
Many business leaders are looking to BI for near-term solutions, but BI delivers high-value returns on many levels. BI enables companies to work smarter, even when tight financial times mean smaller IT budgets and leaner staffs. Market-leading companies in every industry are turning to this software to stay ahead. When the economy turns—as it inevitably will—these are the firms that will be in the best position to seize the next wave of opportunities.
Michael Corcoran is chief marketing officer at Information Builders, a BI solutions provider with more than 12,000 customers around the world. You can contact the author at Michael_corcoran@ibi.com