Value Generation with Business Intelligence
Part 3: Elements of a Successful BI Strategy
Looking back once again
Welcome back to this short series about value generation with business intelligence. To get an easy start into this third part, let me quickly sum up the key points of the last two parts:
- A BI strategy is a good thing to have. At least I hope that by now you agree to this.
- The BI strategy’s task is to make sure that all BI tools, projects, people and processes help the company fulfil its strategic objectives. It is the framework for all the above. It therefore makes sure that BI generates added value to the company.
- Maintaining a successful BI strategy requires starting with business aspects and aligning the technology to them.
- Building a BI strategy is a repetitive management task.
So now the time has come to look more closely at the elements of a BI strategy. In other words: What do I need to take care of to build and maintain a successful BI strategy.
The Single Elements
- First and foremost, to build a successful BI strategy you will need to identify the business strategy of the company. What are the strategic objectives? Does it follow a low-cost or a high-quality strategy? Is it more dependent on quick business decisions or on precise forecasts? Is the organization centralized or decentralized?
These things will have a clear impact on the priorities for KPIs, which also means priorities for projects and budgets. It will also influence the portfolio of tools: Is the focus on tools for controllers or on management dashboards? Even the technical infrastructure depends on the business strategy: A strongly decentralized corporation will hardly be happy with one central data warehouse. So the business strategy influences all of the other elements, therefore it should be the starting point of every BI strategy. Surprisingly, this is what is usually forgotten when talking about BI strategy.
- Based on the business strategy, the next part to think about is what needs to be reported on. This simply is about a) which are my most important KPIs and b) which are my most important business processes that need to be supported? The principle here is that BI is about supporting the business. So any reporting system will be of higher value the closer it is to the real business issues of the company.
A quick word about KPIs: I am a big fan of the definition that states that a KPI is a metric together with a target value and a time frame. So when I take the metric “market share” then the statement “I want to increase my market share from 7% to 8% within the next 12 months” is something that I can really manage my performance with. Therefore it is a KPI.
Building KPIs is a difficult task, especially when it comes to breaking down top-level KPIs into more operational indicators. Really good KPI systems are hard to find. A more pragmatic approach is to go via the business processes. It is usually not so hard to say which processes are most important for a company. Which processes are decisive for earning or losing money? Is it research? Or purchasing? Or sales? When you identify and describe those processes then it is fairly easy to say which information is required to support them in an optimal way. This does not really fully replace the need for KPIs but it can help bridge the gap between high-level strategic and operational reporting.
- The next element is about people and processes that are necessary to keep your BI alive. It is one thing to set up a team to define priorities, standards for design, developments or tests and to roll them out. The really difficult part is to maintain and develop them further. That requires that the original team has to keep working on your BI. That means that they need to make sure that people work according to the defined standards and standards are being updated over time. They also maintain the BI strategy itself, defining priorities, KPIs etc. It is important that this team does not consist only of technical people. It needs to be a mix of business and technology members. So far we always just said that BI is something that requires cooperation between technical and business people. This is where this really becomes tangible.
This element is the most difficult one to achieve. The reason for this is that it requires assigning people to the job – meaning it costs a lot of money. Companies often shy away from that, especially when it comes to assigning business resources. That is why it is so very important to come up with business cases to demonstrate where business intelligence can bring added value to the business. As soon as BI uses considerable time from members of the business community, it will no longer be sufficient to come up with something fancy or cool. It needs to promise real added value to the business. This is another reason why a discussion about BI cannot start with technical aspects.
- Now we quickly come to the more technical elements of a BI strategy. This fourth element is about the applications that are to be used. So it’s about the tool decisions. As you all know, there is not one tool that works for all users. So in this element you define which user group will be provided which report formats with which tools. On top of that, there are of course other tool decisions to make: About ETL tools, data mining applications, scheduling tools etc. This element will be influenced by the outcome of phases 1 and 2.
- All the above needs the proper infrastructure to run on. This is the focus of the last element. All other elements influence what will be the right infrastructure. As mentioned before, even the first element will have a strong influence by defining if the BI strategy needs to be centralized or decentralized. That will define the topology of the overall system landscape. This element also includes the definition of the proper data warehouse architecture.
Please keep in mind that these elements do not form a pyramid. There is no hierarchy of elements – all of them are equally important. In spite of that, however, there is a sequence between them: Every element influences the following ones. For example, the first element (alignment to the business strategy) influences the list of KPIs of a company (element 2). It will also define how BI needs to be integrated into the organization of a company (element 3). It will also influence the choice of applications (element 4): Do I need more IT-driven or user-driven applications, for example? And it clearly defines the infrastructure and architecture for my overall BI / data warehouse (element 5). You can do this exercise for all elements.
The individual elements also differ in how far they are business related or technology related. You will notice that the “upper” elements are more business related, whereas the “bottom” ones are technology related. Both aspects meet in the “middle” – the third element, where business and technology physically come together as the BI team.
So there we are. That’s the scope of what I see as a BI strategy. So what do we do with this?
Quo Vadis BI?
Let me sum up what happened so far: To have a BI program that generates added business value, you will need to have a proper BI strategy in place. To put one into place, you will need to take care of the above elements.
So let’s imagine you want to do that. The typical questions to answer at that point are: “Where am I currently with my BI strategy?” and “how do I reach the next level?” At SAP Germany, we happen to have a service to approach those two questions. It is called the “BI Business Assessment”. With a set of questions and rankings we assess how “mature” the individual elements are and we help to define a transformation target plus roadmap. That way our customers plan activities to improve chosen elements within a certain time frame. As you remember, that is something that you can use as a KPI. This even offers the opportunity for proper progress monitoring.
This concludes the third part of my blog series. I hope you found it interesting. Please let me know your comments and questions. There will be one last part. In that, I will try to demonstrate how all this high-level theoretical value stuff has very practical influence on technical every-day issues. I hope you will stay tuned!