Fixing the "chain pain"
by Bruce Jones
There is often a “pain chain” within large organisations – a ripple of causes and effects across departments that result in business problems. The challenge in this information overload era is to clearly identify these patterns, and then address them. People can no longer rely on gut feel or past practices, but need to depend on technology for assistance.
Business intelligence solutions help by transforming company data into intelligence, and analysing it to address the “pain” or business issues.
Business intelligence consultants are trained to identify business issues. They do so by asking the affected individuals a series of questions. In this way, they obtain a broad-brush idea of the magnitude of the problem, and can begin to design business intelligence solutions that will identify the patterns, and then overcome the problem.
For example, the CEO’s “pain” may be that the company share price is dropping. The question and answer methodology might uncover the fact that this is because revenues are dropping, and this may be an issue associated with sales. Perhaps the product range has been superseded or made redundant. Or it may be because the production manager cannot get hold of materials required to make new types of products.
The point is that business issues within a company have a knock-on effect. If you uncover the pain throughout the organisation and across departments by asking a series of “why” questions, you can then provide solutions to companies that address their issues.
By following this route, it is easy to demonstrate positive return on investment (ROI) with business intelligence solutions.
However, it is very difficult to prove tangible benefits and positive ROI when it comes to operational systems such as ERP (enterprise resource planning). ERP systems are vital to business to formalise processes and capture data. It is, however, extremely difficult to prove their benefits and ROI. The major deliverable from an ERP system is to create lots of data. An organisation can only start benefiting from this operational exercise once that data is changed into intelligence.
An ERP system is not going to create a core difference in any company. Leveraging that data to provide intelligence, however, does.
Business intelligence solutions can increase revenue or reduce costs, while simultaneously increasing profitability, within a few months.
Typically one needs to find out where measurable benefits will be most rapidly apparent, and then prioritise implementation projects so that these are done first. The extended business intelligence exercise then becomes self-funding.
Typical areas in which ROI is rapid and measurable are in customer and supplier relationship management.
By introducing marketing automation on the customer front, companies can gain immediate wins by reducing costs and increasing revenue. Business intelligence solutions enable companies to target marketing campaigns intelligently. By reducing the number of marketing brochures from a random 100 000 to a carefully targeted 20 000, the positive response rate will be higher and more positive. Added to this, the cost of producing the marketing material is substantially reduced.
If organisations understand the characteristics of their customers, and their likely behaviours, they can then predict when they may be likely to leave for competitors. On the basis of this intelligence, organisations can then put interventions in place to keep profitable customers, and to let the non-profitable ones go.
Rapid returns are also common when business intelligence is applied to supplier relations. Data can be consolidated and cleaned, and rid of all duplication due to data being caught differently. Simply by undergoing that process, a company may unearth the fact that it has only 500 suppliers, and not the thousands it thought it had. Further analysis may reveal that of those suppliers, many belong to the same group of companies, so that the organisation is in fact only dealing with 200 different supplier groups.
Once these relationships have been established, the organisation can negotiate far better discounts, based on group discount structures. Similarly, by de-duplicating data of purchased commodities, organisations may cut out duplicates and increase purchasing from fewer suppliers.
Organisations can also reduce risk by better understanding suppliers.
If an organisation knows a supplier is likely to go bankrupt in the near future, it can proactively intervene and start to source from a different supplier to reduce risk.
All this is possible using business intelligence technology. While the trend is often to focus exclusively on internal data, the inclusion of external data – for example parent/child company information – can be extremely valuable. Technologies such as data mining can then sift through the data to uncover previously unrealised relationships and patterns.
The organisation sets the rules, and the business intelligence tools then perform the analysis. People throughout the organisation see immediate payback, and are more likely to buy into the longer haul.
Bruce Jones is the Sales Support Manager at SAS Institute. He holds an MBA from UCT and a Civil Engineering degree, has worked as a strategy consultant for Andersen Consulting, and started his own software development and marketing company. He specialises in business intelligence solutions at SAS. He can be contacted on (011) 713-3400.