Putting Business Back in Business Intelligence
Managing big-picture BI is a challenge that demands clear relationships between business impact and information services. We must actively manage BI in three dimensions that drive business alignment: management, motivation, and measurement.
[Editor's note: Dave Wells will discuss how to apply a new framework for project scopiong, requirements gathering, BI assets inventory, and BI portfolio management in his session Putting the Business Back in BI at the TDWI World Conference in Chicago (May 11-16, 2014). Here's a preview of that framework.]
By Dave Wells
BI means "business intelligence," yet it sometimes seems as though the technology interests supersede those of business. When a BI program gives more attention to dashboards, scorecards, OLAP, and data warehouses than to finance, R&D, marketing, operations, and customer support, then it is time to put the business back in BI.
The purpose of business intelligence is to deliver information that makes a difference -- substantial bottom-line business impact that is achieved through increased revenue, reduced expense, and avoided risks. The challenge of BI lies in making the connection between these business goals and the information that is actually delivered. All too often, BI delivers metrics that are available, obvious, and easy while missing opportunities to deliver high-impact information.
Managing big-picture BI is a challenge that demands clear relationships between business impact and information services. To step up to the challenge, we must actively manage BI in three dimensions that drive business alignment: management, motivation, and measurement.
Management focus aligns BI with business functions. Motivation aligns BI with business goals. Measurement provides ability to quantify outcomes at each intersection of management and motivation. Combining the three dimensions creates a framework for business-focused BI illustrated in Figure 1.
Figure 1. A business-focused BI framework.
The Management Dimension
The management dimension describes what we manage -- the things or functions for which managers are responsible. Virtually every business has processes, functions, and organizations with responsibility for each of eight business management areas:
- Strategy and planning include business goals, strategy to achieve the goals, and the process, functions, and plans to meet goals
- Financial management with all of its many sub-functions -- budgeting, cash management, credit and debt, revenue and expense, fixed assets, general ledger accounting, and more -- is central to every business
- Research and development are essential to build, sustain, and manage a competitive pipeline of new and exciting offerings to customers.
- Marketing defines the market position of a company, its products, and its services with functions such as branding, market segmentation, pricing, partners, and channels
- Sales, customer support, operations, and human resource management round out the eight common areas of business management with the processes and functions that translate strategy and position into actions and results
Beyond these eight management areas, it is likely you'll find several that are unique to your particular industry. Insurance, for example, should include underwriting and actuarial; financial services includes lending and investing.
The Motivation Dimension
The motivation dimension describes why we manage -- the results and outcomes for which managers are accountable. These motivators often have specific and measurable goals with direct connection to managers' performance reviews and compensation programs. Typical management motivations include:
- Performance -- the ability to translate strategy into action; it is often quantified as degree of goal achievement
- Profit in commercial enterprise is financial gain quantified as the difference between revenue and expense
- Benefit is an alternative to profit motive that is common in not-for-profit enterprises; benefit is achievement of gains such as increased graduation rates, reduced frequency of cancers, etc.
- Opportunity recognizes and capitalizes on circumstances that make it practical to introduce new products, enter new markets, outpace competition, or otherwise expand range, reach, and scope of business
- Growth expands volume of business, most commonly through increased market share and new-customer acquisition
- Compliance is conformance to laws, regulations, and rules governing operational transparency, financial disclosure, privacy, data protection, and many other aspects of business
- Governance, Risk, Legal and Ethics, and Values round out the list of common management motivators with attention to the behavioral, cultural, and human aspects of business
In addition to these common motivators, you may find a few that are unique to your culture, company, or industry. Don't hesitate to add new motivators to the list.
The Measurement Dimension
The measurement dimension describes how we manage in a world of data-informed decision processes. Quantifying business results and evaluating them against goals and trends is fundamental to business performance management. The measurement components include:
- Indexes communicate in a single number the overall position of a specific management area. Each intersection of management and motivation may be indexed -- a sales performance index, for example, at the intersection of sales and performance. An index is typically an aggregate of several indicators.
- Indicators are metrics that present evidence related to a specific area of business performance. Indicators may be leading (i.e., sales force readiness as an indicator of future sales performance) or lagging (i.e., lead-to-close ratio as an indicator of past sales performance).
- Metrics aggregate multiple measures to quantify an aspect of a specific business process or activity. To calculate the lead-to-close ratio, for example, you'll need measures of both leads and closed sales. Analysis dimensions add context to increase value and usefulness of metrics.
- Measures are single, quantitative data points. Number of leads is a measure, and number of closed sales is a measure. Time stamps and related contextual data are needed to turn measures into metrics.
- References are the comparative basis by which measures and metrics gain meaning. Any quantitative value may be compared with a previous value, a target value, an industry benchmark, etc.
Measurement is central to business intelligence and to performance management. Four of the measurement components illustrate a progression -- from measures to metrics, metrics to indicators, and indicators to indexes. The fifth component -- references -- is essential to find meaning in the numbers. Unlike the management and motivation dimensions, it is unlikely that you'll need to modify or adapt the measurement dimension.
Putting the Pieces Together
Intersecting the management, motivation, and measurement dimensions builds a framework to manage business-aligned BI. Join me at the TDWI World Conference in Chicago for a full day of Putting the Business Back in BI education, where you'll learn how to apply the framework for project scoping, requirements gathering, BI assets inventory, and BI portfolio management.