Business Intelligence or Bust Study Highlights Best Practices for a Tough Economy
By James E. Powell
Using BI as a tool for surviving the recession requires a combination of "strategic actions, organizational capabilities, and enabling technologies," according to the latest survey from Aberdeen Group. The firm's latest report examines how businesses have been able to "insulate themselves from the effects of the economic recession" using insights from BI. The survey is based on responses from 259 participants actively using BI technology.
Companies are clearly under pressure. Of the 330 organizations participating, 39 percent have seen sales revenue fall, and are feeling pressure to align costs with their falling revenue forecast. (Pricing pressures from customers and increased output to meet customer demand rounded out the top business pressures.)
The researchers used three performance criteria to identify Best-in-Class companies—the top 20 percent of performers in the group. The companies excelled in several metrics, including an 11 percent increase in operating profit since September 2008, a customer retention rate of 96 percent, and providing access to BI software to 56 percent of its workforce.
What do these companies have in common when it comes to BI? More than three-quarters (82 percent) monitor their receivables performance, identifying slow payers and following up; only 72 percent of all other companies did so. The companies also are more likely to monitor the sales pipeline (79 percent versus 66 percent of all others). Almost two-thirds (61 percent) can track sales back to marketing leads; only 43 percent of the lowest group ("Laggard" companies) can do this.
No matter what class an enterprise is in—Laggard, Industry Average, or Best-in-Class—the top two strategic actions are the same: "analyzing sales and focus on the strongest markets" and "optimize for growth without adding capital," the report points out. "The Best-in-Class are under pressure to increase demand while countering pricing pressure from their customers. So, the intent of the Best-in-Class is to focus on the strongest market segments where there is less pricing pressure, less competition, and sustainable profit margins," David White, the report's author, explains.
The report advises enterprises to "closely monitor receivables performance and take action against late paying customers in order to keep cash-flow strong." They should "improve their insight into the sales pipeline and marketing performance, [and] consider whether it is appropriate to establish a Business Intelligence Competency Center." Best-in-Class companies should consider using "corporate performance management to enhance planning, budgeting, and forecasting capabilities."
BI investment remains strong. Aberdeen found that 64 percent of respondents indicated their enterprise will invest in new or upgraded BI applications for sales and marketing in the next year. Those plans span companies of all sizes: Of the 24 percent of respondents who say they'll deploy advanced analytics within the next 12 months, 38 percent are small companies (with revenues of no more than $50 million), 36 percent are midsize enterprises (from $50 million to $100 billion in annual revenues), and 45 percent are organizations with revenues of $1 billion or more. Twenty-three percent of respondents plan to adopt dashboards in the next 12 months, and 22 percent are planning to implement real-time BI.
James E. Powell is the editorial director at TDWI.
This article appeared in BI This Week e-newsletter August 26,2009. For more information or to subscribe, visit tdwi.org/pages/publications/newsletters.