Value Generation with Business Intelligence
Part 2: The Role of a Sound BI Strategy
Welcome back to my short blog series about value generation with BI. As you might remember, in part 1 I explained why I think that business intelligence can and must be (perceived as) a value generator for companies rather than merely a cost driver.
Yesterday, I had a good conversation here at SAP Germany. After part 1 of this blog series, we discussed in how far BI can generate any value at all by itself, while it can only ever support the business earning money. I think: Yes, it can. Remember my small business case in part 1? Did BI earn any money? No. Did it help the company earn a lot more money? Yes. Would it have been possible to do so without BI? No. So did BI generate value to the business? Yes!
I then came up with the idea that it might help to distinguish between money and business value. It sounds strange, I know. Earning money is the ultimate goal of almost every company. I look at it this way: Everything that helps the company earn (more) money, generates business value. In other words: Business value for me means that I help the company fulfil its strategic objectives. In the end, that should lead to earning money.
At the end of that discussion we came to a very nice comparison with another discussion point: The good old question if employees generate value. Sure, with the exception of a few roles, employees rarely earn the company any money directly. So in that sense, they are only cost drivers, no value generators. But if you take them all away, how much money would the company earn then? Well, probably none. So do employees have business value? Of course they do! Because they help the company fulfil its strategic objectives.
The importance of the business strategy
You may wonder why I am stressing this term of strategic business objectives so much. Sounds like a rather boring topic… Please raise your hands: Who here knows the business strategy of his or her company? So few? 😉
Well, I think the business strategy is really the key to everything! Imagine the following entirely fictional example: A company has a perfectly running analytical solution. Every report runs smoothly, people get information quickly. Everyone is happy. The reporting tells everything about the company’s cost structures in detail, including cost influencers, deviations, margins etc. In short: It is the dream of every cost-oriented company. Unfortunately, a while back the company changed its strategy from a cost-driven low-cost product policy towards a high-price, high-quality, marketing-driven producer. You see what happened? The whole analytical solution was more or less rendered worthless.
Not an entirely realistic scenario, I know. But I guess it shows what I mean: If my BI is good or bad does not only depend on how I do reporting (you may call that the technical side of it) but also – and I think mostly – on what I report. That is the business side of it. And in the long run, the only real guideline for what to report on must come from the business strategy. If my company has a cost-driven strategy, I need to provide a good cost information system. If the strategy is about market share, brand value etc, I need to provide a very different type of information system.
Saying that, I would like to comment on something that I think is a common misunderstanding: Very often, I hear discussions that sound very much like “Let’s increase the value of our BI by using the new feature A, B or C.” I know from my own experience how tempting that is. I now believe that it is a misleading perspective on value. Technology is necessary but it should not be the starting point when thinking about value. Let me put it like this: If I go in the wrong direction, I will never reach my destination. Any newer, better, fancier, sturdier shoes will not help me. If, however, I get the direction right, then those new shoes will definitely help reaching my destination sooner. So what I recommend is: First get the business context right and then roll-out the right tools.
Let me leave it at that. I hope I could convince you a little bit that the business strategy is something to consider when working in the BI area. Let me focus more on the actual topic of this part, the BI strategy.
What is the BI strategy?
So, all this means that to generate value, BI needs to align to the strategic business objectives of the corporation. This is where the BI strategy fits in:
The BI strategy consists of all the fields of activity that I need to manage so that BI adds value to my company by helping it reach its strategic business objectives.
As in part 1, I would like to stress some key points of this definition:
- A BI strategy is not project-specific. Instead, a proper BI strategy ensures the right framework for successful projects- also after their go-live.
- The BI strategy is the key to BI value generation.
- The key for value generation is hidden in the strategic business objectives of the company.
I already stated that the BI strategy consists of everything that makes sure that business intelligence generates added value. That comes as no big surprise of course, since any strategy is about long-term value generation. That is also why a sound BI strategy is the answer to many discussions around cost efficiency and funding. If the question is “where does all this money go?” then the BI strategy can show where it goes (or should go) – and why.
As you surely guess by now, a proper BI strategy will consist of more than technology. It will contain organizational aspects as well as standards and guidelines, the right architecture and infrastructure, good tools and documentation. I will write more about the elements of a successful BI strategy in the next part of this series.
What must be clear, however, is that a BI strategy is not subject of a single project like “now we make our BI strategy”. Like any other strategy, the BI strategy must undergo the constant cycle of building, applying and reviewing. That is a management exercise. The three elements of that cycle can of course be subject to single projects (otherwise, what would we strategy consultants do all day…) but again, those would be management projects. And what’s important: A BI strategy will never be really finished, just like any other strategy.
I see the BI strategy more like a framework for all my BI activities: For planning new implementations, for placing new tools or upgrades, for delivering good support to the user community and for smooth system operations. So it will contain a lot of guidelines, standards, best practices and so on. It will also describe the various governance processes that you need to maintain all those standards. The BI strategy must make sure that all my BI activities run as smoothly as possible and that they are aligned with the business strategy. Another good aspect is that it makes the lives of all BI team members a lot easier because it avoids reinventing all the wheels.
To sum it up: A sound BI strategy…
- … makes sure that my BI generates business value.
- … is aligned with the business strategy.
- … increases the efficiency of my BI budget by focussing on what’s best for mycompany.
- … is the framework for the successful planning, building and running of my BI.
Doesn’t look so bad, does it? 😉 I hope I could deliver good arguments why having a BI strategy is really a good idea. What would interest me: Do you think that your company has a (good) BI strategy? If not: would you say it should have? Please feel free to comment!
Knowing that there needs to be a BI strategy in place is of course nice. Now, however, is the time to look more closely at the elements (fields of activity) that hide behind this vague term. And that will be the task of the next part.