Survival of the fittest

Those who want to survive and thrive have to move fast to keep up with customer demands, changing regulations and the risks of everyday business.

Those who want to survive and thrive have to move fast to keep up with customer demands, changing regulations and the risks of everyday business. It’s a challenging environment, but success is certainly possible for those companies that can make sense of the vast quantities of data at their disposal – which is where better business intelligence comes in. Advanced analytics and data warehousing solutions are providing the means to deliver the increased insight needed to prosper, and are proving invaluable at unearthing previously hidden information treasures that are making the difference between success and failure.

But with a multitude of options available to them, how can organizations ensure they’re getting bang for their BI buck? Business Management spoke to a number of industry insiders to find out.

Robert Carlson is President and CEO of Intelligenxia. His career encompasses more than 20 years of management and information technology experience and he has built a reputation for creating strong partnerships, developing productive, talented teams and creating innovative business solutions that provide competitive advantages for his customers.

With over 15 years of experience in the business solutions space, Stephen Nelson is responsible for raising Clarity’s product and professional services awareness in the CPM market through a number of marketing and sales support initiatives, including key messaging and product positioning, thought-leadership, competitive intelligence research, whitepaper development and analyst relations management.

Steve Pugh is CEO of CODA Financials, Inc. in the Americas. He is responsible for CODA’s US commercial operations covering the marketing, sales and support of CODA-Financials. He also sits on the CODA Executive Board and holds executive responsibility for the CODA Global Support function, working closely with support managers around the Group to ensure that the support service provided to customers is of a consistently high standard worldwide.

As Vice President of Business Development, John Power is responsible for strategic initiatives focused on accelerating Longview’s growth and profitability. John joined Longview in 1996 and has held a variety of senior management roles, most recently as Vice President Canadian Operations where he was responsible for Longview’s Canadian business operations, including both the company’s current customer base and new business development.

BMUS. The regulatory environment for all companies has been dramatically affected by recent federal legislation such as Sarbanes-Oxley. How can better analytics help organizations address regulatory compliance?
SN. The foundation of regulatory compliance is in the automated processes within the source systems that maintain data integrity. However, human oversight (and intervention) cannot be eliminated. Without tools that allow easy, accurate and flexible reporting, this necessary human oversight proves difficult, if not prohibitively expensive.

RC. Business intelligence solutions for unstructured information technology provide a tremendous opportunity for management to gain new, deeper insight into business processes and employee actions than ever before. This technology can help identify emerging problems before compliance issues have actually occurred. This ‘speed-to-insight’ allows time for management to manage the situation. This is the best compliance solution possible.

SP. Analytics in isolation won’t help an organization address regulatory compliance. For example, Sarbanes-Oxley is all about certifying that a company’s system of internal control are in order. True, it is also about adequate and accurate reporting, but no matter how good the analytics, if the basis of control is faulty all the analytics can measure and report on is the result of inaccurate and faulty (possibly even fraudulent) accounting. It’s a cliché, but ‘garbage in, garbage out’ is still an applicable maxim.

What analytics can do, however, is give the organization visibility into its business. Applied correctly, analytics can be used not only to report the most basic concepts – for instance, analysis of sales by department and profit and loss across divisions – but they can be used to analyze trends, monitor performance and catch inconsistencies. Furthermore, a good analytics implementation will make dissemination of this information quick, easy and secure. This will enable the recipients to use the results to spot and address problem areas in their business. This may seem like a statement of the obvious, but from market research CODA has undertaken there are still an amazing number of large businesses conducting their financial forensics from mounds of paper and a large and unwieldy library of spreadsheets.

JP. The intent behind Sarbanes-Oxley is to create greater financial transparency, accountability and more aggressive reporting timelines. Regulatory compliance demands you know and disclose where your business has been, where it is headed and how you plan to get there. This creates tremendous opportunity – opportunity to use visible numbers to tangibly influence the conduct of the business for the better – to achieve higher profitability, customer satisfaction and revenue growth. Transparency and increased reporting demands requires sophisticated automation. The days of tolerating spreadsheet input error and back of napkin analysis are over. If data is not accurate, it doesn’t matter what you can do with it. And, if it doesn’t arrive on time, it doesn’t matter how functional your system is. Companies should look for a performance management system with speed and accuracy and global corporations should add scalability to the criteria.

BMUS. In addition, many companies are actually turning this greater focus on compliance into an opportunity for business improvement. How are companies making use of compliance-related software and tools to provide business flexibility, efficiency and financial advantage?
RC. A good example of this is the new solution for employee feedback analysis. Many companies have begun annual, corporate-wide processes to capture their employees’ insight into critical business and operational issues. This process has been greatly enabled by internet chat technology and is resulting in thousands and thousands of employee comments being received on every topic. By using a systematic process to explore employee understanding and reaction towards key business processes and controls, management can identify and correct issues before they become compliance problems.

JP. Research shows that greater visibility achieved through an automated process such as a performance management system can improve your business. A 2005 Aberdeen Group study reported that companies using best-in-class, closed-loop business performance management consistently outperform their competitors across all industries and company sizes, with 32.7 percent gross margin versus 24.7 percent. What separates these companies is their greater agility. They are able to achieve a faster understanding of the factors underlying performance problems and quickly make the changes needed to improve their bottom line.

Without accurate business insight, you may treat symptoms, unable to make a correct diagnosis and ultimately find a cure. Automation provides a view into your business that helps you to see what is driving your business and why. Understanding your results properly enables you to make wise investments.

SN. Just as a reduction of complexity is mandatory for management of the processes that facilitate regulatory compliance, so too is it a prerequisite to crystallize the terabytes of valuable (but incomprehensible) data now held by every business into information and insight. When implementing performance management systems, companies often focus on easy wins – that is, companies will marginally improve their reporting and planning capabilities through installation of better technology without committing to the real work of improving business processes and reporting methodologies. But regulatory compliance forces a thorough examination of data flow and control. Many companies leverage this work to develop the breakthrough performance management systems that technology (though necessary) can only enable.

SP. The companies who are seeing real benefit are using compliance to get on the front foot. They are taking a long hard look at their business processes and at the controls that are required and are re-engineering them accordingly.

In the world of SOX compliance, business processes performed by we humans are a real risk. We are (for the most part) honest, but we are still fallible and designing systems to check and double check in case we make a mistake is both time-consuming and costly. In another survey CODA undertook, every compliance officer we interviewed rated time expended as the number one compliance issue; number two was their concern over the completeness of controls in place and (perhaps surprisingly) cost only came in at number three.

The early approach taken by the auditors to certification has been very black or white; the concept of materiality has been pushed firmly to the background. When you hear of SOX certification failures caused by a designated signatory failing to date as well as sign-off a document, you begin to appreciate the risks around manual processes. In this context, automation becomes extremely applicable. Rules can be created and software built to drive those rules-based processes. The software can drive the stages of the process around the organization via the desktop using e-mail and all stages of the process can be captured and recorded for future validation. This moves the organization to an environment where the majority of controls are preventative, not detective. This enables the organization to manage its risks much more tightly and to achieve a very quick ROI from cost savings in labor, audit and internal audit, as well as picking up savings in time.

BMUS. Should firms be overly concerned with the ROI of their BI implementation, or are there other, less tangible benefits? How can IT departments/senior management establish whether a BI solution is providing value?
JP. Organizations should always be concerned with ROI, particularly when it comes to technology expenditures. While there are intangible benefits associated with better, faster information, it is important to link BI solutions and the specific initiatives or applications that are being enabled to overall corporate objectives and business benefits. While these benefits may not be easily or directly quantifiable, the ‘value’ can be self-evident if the introduction of a new BI solution directly enables strategic corporate objectives or addresses problems like appropriate controls around the generation of financial information. The utilization of a methodological approach to business case development is crucial to being able to demonstrate how such solutions align with corporate goals and deliver value.

An integrated BI/BPM system enables the collection of massive amounts of data from HR or ERP systems into a readable, understandable, usable format. Value can be measured by gauging the lessening ‘sweat equity’ required to collect this data and the creation of more time for ‘brain equity’ – analysis and decision-making. The ability for company executives to make informed short-term decisions and more thoughtful long-term strategic plans based on financial truth is an invaluable competitive advantage.

An often-overlooked savings component is the idea that the more systems you have in place, the more testing and standalone internal control systems you have to build as a finance person. Think of how much time you would save if your internal and external auditors had five key systems to test as opposed to 15.

SP. ROI can be very hard to determine. How do you put a value on better quality of information and the fact that it enables your workforce to make timelier and better informed decisions? Yet these are very often the objectives of a successful implementation and all organizations have to use something like ROI to decide which projects they can invest in and which should have priority. The key to obtaining ROI metrics is to be selective about the areas over which a BI project is implemented. Instead of a blanket BI project, the organization should identify areas critical to business success that require better information. Some success criteria should be defined – whether a reduction in debtor days, inventory turnover, order lead-time, customer satisfaction or whatever. Implement the BI project, monitor its operation and measure the defining criteria over a period of time. A successful BI implementation should become readily apparent. If improvements are hard to measure, then either the areas identified were not business critical or the BI project failed.

SN. When BI is tied to an application, such as corporate performance management (CPM), there is a measurably positive ROI. But all BI implementations yield results that are not easily quantifiable. Moreover, there are almost always unexpected returns that are significantly greater than the forecasted ROI. Often, a dollar amount can be established once a system is implemented. When that proves difficult, some companies will ask end-users to rate the value of reports and information that they previously could not retrieve and then track the number of times per month that report is accessed.

RC. ROI is still very important, but the focus of business cases may change. Recently, the Aberdeen Group has championed the value of customer intelligence management. Their research provides a compelling list of benefits derived from superior customer insight, market knowledge and employee feedback, and states that: “Effective customer intelligence management is about transforming customer information into revenues – customer data converted to profits.” In many cases, this customer information is contained in unstructured information such as e-mails, surveys, chat and blogs. These are complicated business cases that require improved speed-to-insight for better decisions. But as Aberdeen’s research indicates, the payoff can be extreme with “best-in-class customer intelligence management leaders reporting greater than 25 percent year over year improvement in each of these key performance metrics: annual revenues, customer acquisition and customer retention rates.”

BMUS. According to Forrester’s research, most Global 2000 companies have between five and 15 separate reporting and analysis solutions in use, placing a strain on IT resources and calling into question the integrity of the data in any one report. What potential is there for enterprise-wide BI deployments, and what benefits could these bring?
RC. For traditional BI solutions, consolidation into an enterprise-wide implementation is unlikely. But for emerging BI for unstructured data solutions, the situation is different. While traditional BI solutions sit on top of the database, new BI solutions for unstructured data will sit on top of enterprise search. A faster rate of acceptance is predicted, because in most cases the enterprise search solution is already in place – providing a single point of access for unstructured information. As CIOs continue to improve search by investing in new technology and by indexing more enterprise content, this common infrastructure will be able to support more business needs.

SN. Data integrity is more of an issue with data sources. A well-designed data warehouse, which serves as a staging area between transactional sources and analytical BI solutions, can store cleansed data serving multiple BI systems. Data integrity is then ensured nearer the source. Even though multiple analytical solutions are in this way more easily deployed and populated, maximum value is achieved when the end-user experience is common across all venues. And, of course, maintenance by IT is easier under a common system.

JP. There is no question that a reduction of BI deployments would offer significant benefits in the areas of reduced support costs, improved data integrity, reduced user training costs and generally improved effectiveness within the user community. However, the diversity of reporting and analysis requirements and the nature of corporate environments – including mergers, acquisitions, and divestitures – make enterprise standardization on a single BI platform more of a wish than a reality. A realizable goal is for the IT organization to reduce the number of reporting platforms and to achieve interoperability across their existing platforms.

The integration of BI and BPM solutions, as is the case with Longview Solutions and Information Builders, addresses the issue of data integrity. A BPM solution should perform over disparate technologies, reside on one central server and consolidate reports according to consistent business rules. An integrated BI/BPM solution provides a single view of that financial truth – a key benefit through the governance-mandated audit process.

SP. Several challenges have prevented companies achieving enterprise-wide BI deployments. The BI solutions have been technically quite hard to use, so rolling them out beyond core, highly trained users has been tough. That has also presented technical challenges in terms of creating appropriate data sources – do you have one massive data warehouse or smaller ones more focused on departmental or functional requirements? Thirdly, the cost of rolling out some of the standard BI tools has been prohibitive. And finally there is the internal politics issue, which causes each department to want its own specialist tools – sometimes with good reason.

At CODA, we see new flexible, light technologies like Microsoft’s Reporting and Analysis Services as being very exciting, as they offer the potential for companies to roll out focused BI solutions that are relatively straightforward to use, cheap to deploy and robust. However, they do require specialist support and input to create the solutions in the first place. Large enterprises are increasingly bringing reporting and BI into a ‘shared service’ environment, which allows them to standardize processes, standardize technology either across the entire enterprise or into sensible functional groupings, and provide central, highly specialized skills and support to the enterprise. This seems likely to be the way forward for larger organizations.

BMUS. What are your hopes and expectations for the next 18 months regarding BI uptake? What trends/developments will drive market growth?
SP. BI still has not made a huge impact on the mid-market, and I think that will change over the coming 12-18 months. That will be driven by two things: the focus on pure ‘compliance’ will broaden into a focus on ‘enterprise governance’, where stakeholders will demand that management not only demonstrate legislative compliance, but are transparent in the strategies, tactics and KPIs they use to run the business; and the availability of cheaper, flexible tools that provide the focused and affordable solutions such organizations need will start to make an impact. Large enterprises will no doubt move towards enterprise-wide BI, though with significant challenges. Mid-market organizations will start to increase the sophistication of their reporting and analytics, principally focused around key functions such as finance and CRM.

RC. Over the next 18 months, the market for BI solutions using unstructured information will blossom. These new solutions will leverage the enterprise search foundation to obtain access to information. Initially, customers will implement solutions like voice of the customer, employee feedback, competitive intelligence, fraud analytics and call center analytics. Over time, the implementations will broaden to support the hundreds of ad-hoc questions asked each day supporting critical business decisions.

SN. As the technical installations of BI tools become business implementations of performance management applications, it will become easier to incorporate promising (but underused) methodologies such as EVA, ABC/M, the throughput accounting of the ‘theory of constraints’, the utilization of strategic initiatives in the balanced scorecard to influence operational planning, rolling forecasts and driver-based budgeting. In addition, a more ‘business solution’ approach toward implementation can encourage a willingness to simplify processes and business rules, streamline the chart of accounts, eliminate cost centers that are only placeholders of data, and introduce dimensions that enable insight into product and customer profitability. These will lead to the breakthrough results that the aficionados of CPM have for so long been predicting.

JP. I believe BI will continue to move into the genre of application solutions and therefore will experience accelerated adoption. The following trends will propel this development: 1) streamlining (the elimination of architectures that require the creation of massive amounts of redundant data); 2) interoperability (the ability to dynamically gather or report on data from a broad variety of transaction sources); and 3) integration (BI/BPM solutions that help ensure that the information being reported is accurate).