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Driving value from your BI program – Define, Track and Measure Success

Previously, we covered the importance of a BI strategy and how BICC becomes a key element of your organization. This time, I will cover details on the other critical factors to make your BI program successful.

Companies need to recognize that data is “gold”.  To mine this gold, you have to turn data into insight, which leads to positive impacts on your business, such as increased revenues, reduced costs, managed risks and capital so your business will have a better competitive advantage.  But you won’t need to go panning in a river – to turn data into insight, companies need a good Business Intelligence (BI) program in place.  As you may have read in the earlier articles, the key critical success factor for any BI program is the alignment between IT and Business.  The philosophy of, “if we will build it, they will come” is no longer a viable option. 

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As a first step, it is extremely important to get buy-in from Line of Business (LOB) executives.  Per IDC’s 2013 predictions: 

By 2016, 80% of new IT investments will directly involve LOB executives, with LOBs taking the lead decision-maker role in half or more of those investments. 

This means that IT leaders have to build offerings and establish relationships with these influential stakeholders.  To gain LOB executive buy-in, the IT team needs to take the BI program beyond simple reporting and dashboards, and use proof of concepts to demonstrate business value and relevance. Identify areas that would deliver immediate value to your business, which could be tackling real business issues such as: customer retention, improving sales performance, managing complex supply chain networks and demand forecasting. It is important to identify areas that are well aligned with your overall corporate strategy and other important initiatives.  Prioritize 2-3 areas and demonstrate the value of business analytics to the senior leadership team.  You must keep the selection of the priorities transparent and agreed upon by Business Intelligence leaders and key stakeholders.   

Defining the value of BI, i.e. assigning a dollar value to BI, is often challenging, as this could be mostly qualitative. Therefore, it is better to define these benefits ahead of time for the stakeholders to review.   You should also identify business key performance indicators (KPIs) and expected future value of these KPIs.

Here are some examples:

Qualitative Benefits:

  • The BI program could reduce lost sales from significantly increasing transparency in Sales and reducing customer defection. 
  • The Finance Department could reduce the amount of working capital due to improved collections management.

Quantitative Benefits:

  • Implementing a BI solution will help reduce lost sales by 1.5% or $10M per year, while increasing margins by 3% or $1M per year.
  • The Marketing department is expecting customer churn to reduce by 5% every year.

Future State KPIs:

  • Measuring the new sales KPIs around customer defection will help the company reduce customer churn.

o   Current Customer Churn as of 01/30/2013 = 5%.

o   Future State Customer Churn as of 8/1/2013 = 3%

  • Measuring receivables more accurately and in more detail will help the company reduce receivables and bad debt, and better predict which customers are likely to become problems.

o   Current Receivables Level as of 01/30/2013 = 12%

o   Future State Receivables Level as of 8/1/2013 = 9%

As Mico Yuk rightfully pointed out in her article earlier this year, user adoption is the number one KPI to measure success of your BI program. It is extremely important to track % increase in number of customers (or end users) over a period (often 6 months).  It is also important to validate the relevance of the content that’s out there on a regular basis. I have heard customers talking about tens of thousands of reports they have created over a span of years, but they are not sure how relevant these reports still are to the business.  This is a great opportunity to re-validate the capabilities and solutions that have been delivered over time. 

Examples of BI best practice KPIs include, but are not limited to:  % of strategic KPIs tracked using BI,  % of employees with visibility into strategic KPIs, usage of BI/ Analytics to manage business processes, % of employees receiving analytical information,  % of external stakeholders receiving analytical information, and availability of real-time/predictive insights into business processes.

Lastly, IT Departments often don’t advertise or promote BI success stories to broader groups internally and externally.  This is a critical factor to expand your BI program and generate more funding for it.  Most BI groups have a business facing team who work closely with business partners on gathering requirements, setting expectations and translating requirements to engineers.  You can leverage this team to write and promote success stories across the company. The win stories could be published as part of your BI Guerilla marketing approach via newsletters, email communications, portals, etc.

A good BI strategy will bring together all the different BI efforts across the organization, including the broad spectrum of decision makers and decision making processes.  It will guide organizations toward an effective, pervasive use of analytics and thus leading a path to success.

Here is a roundtable discussion on how smart BI is without a strategy: Culture eats strategy for breakfast, so make sure your strategy is delicious – Part 1, Part 2, Part 3

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