The Value of Business Intelligence

7/30/2019 The Value of Business Intelligence

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The Business Value o

Business inTelligenceA Framework or Measuring the Benets o Business Intelligence


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B obt. The Business Value o Business Intelligence

In every organization, employees make hundreds o decisions each day. They canrange rom whether to give customer X a discount, whether to start producing partY, whether to launch another direct mail campaign, whether to order additionalmaterials, etc. These decisions are sometimes based on acts, but mostly based

on experience, accumulated knowledge, and rule o thumb.That poses a problem because experience, knowledge, and rule o thumb cantake years to develop. Some employees never acquire them. Those who do maystill all prey to decision traps or biases in judgment. Improving the quality obusiness decisions has a direct impact on costs and revenue. For instance,giving a customer a discount may or may not help the bottom line, depending onthe protability o the client over the duration o the relationship. To improve thequality o decisions, managers can:

Option: Do critical tasks themselves.Result: This leads to burnout, bottlenecks, and opportunity costs o

not doing more strategic work.

Option: Hire additional skilled sta.Result: This increases costs dramatically.

Option: Attempt to dene a policy or all possible decisions.Result: This leads to decisions that do not meet with the rapidly

changing needs o the business.

Option: Give existing sta the means to make better decisions.Result: This creates an agile enterprise and is the most

cost-eective solution.

The Value o BeTTer DecisionsHow are Decisions Made in Your Organization?

conTenTs

2 The Value o Better Decisions4 The Means to Making Better Decisions

4 All Employees Can Use

Strategic Inormation4 Are we Meeting our Objectives?

5 The Case or Business Intelligence6 What is Business Intelligence

6 The Vision6 The Problem

7 The Solution-Business Intelligence8 The Characteristics o a Business

Intelligence Solution8 Single Point o Access

to Inormation8 Using BI in All Depar tments

o an Organization8 Timely Answers to

Business Questions

9 Making the Most o the Internetby Creating an Extranet

10 The Benets o Business Intelligence10 Lowering Costs12 Increasing Revenue14 Improving Customer Satisaction

16 Justiying the Investment16 The Process or Quantiying

BI Benets18 Suggested Solution

20 Conclusion

Authors: Mark Ritacco and Astrid CarverContributor: Mike Bendel


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You understand the value o making a better decision and how giving youremployees greater access to inormation can empower them and yield evengreater results. Now its just a matter o nding out how a BI solution can makethat notion a reality.

This document will supply you with the knowledge you need to gain a completeunderstanding o all the issues you will ace when implementing a BI solution.The brochure is divided into three sections. The rst section gives you a cleardenition o the term business intelligence and highlights the characteristics o aBI deployment. The second section outlines the three most common benets youwill gain rom a BI solution. The third section looks at the issue o measuring thebenets o BI and explains how you can justiy your BI investment.

Throughout this document, youll nd numerous examples o current BusinessObjects customers who are using BI in a wide variety o creative ways to make theirorganizations more responsive, productive, and protable.

The case or Business inTelligence


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The VisionAn account manager, on her way to a client visit, looks up past proposals, as wellas the clients ordering, payment, delivery, support, and marketing history. At aglance, she can tell that the clients ordering volumes have dropped lately. A ew

queries later she understands that the client has a support issue with a givenproduct. She places a call to her support department, and learns that the deectivepart will be replaced within 24 hours. In addition, the marketing records show thatthe client recently attended a user conerence and expressed interest in the newproduct line. The account manager is now ully prepared or a constructive salescall. She masters all aspects o her clients relationship with her rm, understandsthe clients issues, and can condently address new sales opportunities.

The proBlemVast quantities o data...As businesses increase their reliance on enterprise systems, they are rapidlyaccumulating vast amounts o data. Every interaction between departments or

with the outside world, historical inormation on past transactions, as well asexternal market inormation, are entered into inormation systems or uture useand access.

...Yet very ew answersWith all this data available, its surprising how dicult it is or managers to get aclear picture o undamental business inormation, such as inventory levels, ordersin the pipeline, or client history. In most organizations, it would take the accountmanager, in the example above, hours or days to get answers to her questions.Many organizations contain disparate silos o inormation. Client orders andpayment records are kept in the accounting system; installation and supportinormation is stored in the customer service database; contact managementsotware tracks the proposals and sales call history; and marketing contact

history is kept by marketing. Rarely do these systems speak the same language,and there is no simple way or a non-technical user to get answers quickly.

whaT is Business inTelligence?


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The dierent inormation systems described in the previous section may besuccessul at helping users accomplish specic tasks, but theyre typically not wellsuited at providing inormation to end users. With business intelligence, users willbe able to turn this inormation into knowledge, and knowledge into prot.

So what is business intelligence? BI enables your organization to track, understand,and manage your business in order to maximize enterprise perormance. With BI,organizations are able to improve operational eciency, build protable customerrelationships, and develop dierentiated product oerings.

In enterprise networks, BI provides employees with inormation to make betterbusiness decisions, and can be used in environments ranging rom workgroups o20 users to enterprise deployments exceeding 20,000. In an extranet environment,BI is deployed in applications that allow organizations to deliver new services andbuild stronger relationships with customers, partners, and suppliers via the internet.In enterprise perormance management (EPM), organizations must understandand have constant visibility into their key perormance indicators and metrics thatspan across their organizations. By doing this, organizations ensure their strategy

is aligned rom top to bottom and across the organization rom marketing to salesto manuacturing to human resources. Providing this enterprise insight is a keystrength o BI.

The soluTionBusiness inTelligence

Business intelligence reersto the use o technology to

collect and eectively useinormation to improvebusiness eectiveness.


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single poinT o access To inormaTionWith BI systems, organizations can unlock inormation held within their databasesby giving authorized users a single point o access to dataa BI portalin bothintranet or extranet environments. Wherever the data resides, whether it is stored

in operational systems, data warehouses, data marts and/or packaged applica-tions, users can prepare reports and drill deep down into the inormation to under-stand what drives their business, without technical knowledge o the underlyingdata structures. The most successul BI applications allow users to do this with aneasy-to-understand, non-technical, graphical user interace.

using Bi in all DeparTmenTs o an organizaTionThere are many dierent uses or BI systems. Our example at the beginning o thissection ocused on one specic application: sales. However, as illustrated below,BI systems can be used at every step in the value chain.

Volkswagen AG: The company uses BI to track, understand, and manage datain every departmentrom nance, production, and development, to research,

sales and marketing, and purchasing. Users at all levels o the organizationaccess supplier and customer reports relating to online requests andnegotiations, vehicle launches, and vehicle capacity managementand tracking.

Timely answers To Business quesTionsThe key to unlocking inormation is to give users the tools to quickly and easily ndanswers to their questions. Some users will be satised with standard reports thatare updated on a regular basis, like current inventory reports, sales per channel, orcustomer status reports. However, the answers these reports yield, can lead to newquestions. Some users will want dynamic access to inormation. The inormationthat a user nds in a report will trigger more questions, and these questions will not

be answered in a prepackaged report.While users may spend 80% o their time accessing standard or personalizedreports, you will nd that or 20% o their tasks, they need to go elsewhereto obtain additional inormation not available in the original report. To addressthis need and to avoid end user rustration (and related report backlog or theIT team), a BI system is required that lets users autonomously make ad hocrequests or inormation rom corporate data sources.

The characTerisTics o a Business

inTelligence soluTion


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making The mosT o The inTerneT By creaTing an exTraneTYou can open up BI system access to users outside the organization throughextranet applications with clearly dened security limits. For example, customersmay want to consult their ordering history to analyze their buying patterns and

identiy cost-saving opportunities. Or suppliers may be interested in gatheringsales data.

MasterCard International: For merchants, access to BI oers the opportunityto monitor their businesses more closely on a day-to-day basis. Advertisingagencies are able to use inormation rom the extranet when developingcampaigns or merchants. On the authorization side, a call center can pullup cardholder authorization transactions to cut down on raud. MasterCardexpects that in the long term and as business partners increasingly demandaccess to system data, the system will support more than 20,000 externalusers.


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Because o the wide applicability o BI in both enterprise and extranet deployments,the business benets are numerous. These benets can be grouped into three maincategories: lowering costs, increasing revenue, and improving customer satisaction.And this list is ar rom exhaustive, since empowered users continue to nd new

ways to implement BI.

lowering cosTs

iv t f

By giving internal or external customers access to real-time data over the web,customers can track their own accounts and answer their own questions. As aresult, customer satisaction is improved while reducing support costs. A signicant,added benet to real-time data access is that data becomes much cleaner. Byreviewing the data themselves, customers can spot errors, and help improve thequality o the inormation in the data warehouse.

A leading risk insurance company: Today, the organization's customer care

extranet allows customers to access their account inormation over theinternet; however, it used to be that the company would send paper reportsand diskettes to all o its customers. Any errors in the reports would take oneto two months to correct because customers would rst have to receive thereport, catch the mistake, and then notiy the company o the error. Nowcustomers spot the errors themselves in real time and notiy the insurancecompany directly through the extranet, usually within a couple o days or less.

et t b d d

Business intelligence allows business users to design their own queries andreports, allowing organizations to redeploy the programmers who ormerlyperormed this task. This can generate signicant cost savings in humanresources, since sought-ater sta can be reallocated to projects that addmore value to the organization.

Handspring, Inc.: The company receives data rom such partners in multipleormats and a variety o systems, so it needed to consolidate and analyzedata to give employees better inormation or decision-making. [With BI,Handspring] can now generate reports on items such as web orders,bookings, billings, backlog, and shipping activities in less than one day,versus weeks beore.1

The BeneiTs o Business inTelligence


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B obt. The Business Value o Business Intelligence 10

ntt btt tt t d t

A solid grasp o acts and gures is invaluable when it comes to negotiatingcontracts with suppliers and customers. For instance, by analyzing supplierperormanceon-time delivery trends, percentage o rejects, and price changesyou

are in an excellent position to discuss all aspects o the contract as well aspossibly negotiate volume discounts. And identiying a customer's spendingpatterns could qualiy him or her or a particular packaged deal.

Shell Services International: With its BI solution, Shell was able to accessinormation about revenues between uel and non-uel business. Seeing that20% o their products were delivering 80% o their sales, Shell made sig-nicant improvements in margin and turnover. They also negotiated better dealswith suppliers and improved product master le management, which helpedthem reduce working capital.

Find root causes and take action

I one division is doing better or worse than others, identiy the root cause and either

implement a best practice or x the problem. Was the problem caused by better/worse management? A regional market trend? A new sales strategy?

With BI, you can nd root causes both to problems and to best practices by simplyasking Why? The process is initiated by analyzing a global report, say o sales perquarter. Every answer is ollowed by a new question, and users can drill deep downinto a report to get to undamental causes. Once they have a clearunderstanding o root causes, they can take highly eective action.

Using BI can turn open questions into specifc answers.

Do 20% o your productsaccount or 80% o your

sales? I you don't know,business intelligence cangive you the answer.


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idt td d d vt t

You can use BI to apply activity-based costing methods to identiy hidden costsor missed opportunities. From these ndings, resources can be allocated to highlyprotable products, customers, and projects, thereby increasing the bottom line.

Also, having a clearer understanding o success o promotions can help toeectively monitor inventory levels.

TruServ: The parent company o True Value Hardware has used BI sotware toimprove eciency o its distribution operations and reap a $50 million reduc-tion in inventory costs. The marketing department uses [BI ] to track salespromotion results such as which promotions were most popular by store orby region. Now that TruServ is building promotion histories in its databases,it can ensure all stores are ully stocked with adequate inventory during anevent. TruServ was able to achieve a return on investment in about ve tosix months.4

lv vtt erp dt

While the bulk o the investment in your BI system is probably in enterprise resourceplanning (ERP) applications or your data warehouse, it is very dicult or non-technicalusers to take advantage o available data without a good reporting and analysis tool.BI helps unlock the data in your companys data warehouse(s).

BOC Gases: One o the worlds leading suppliers o industrial gases uses BIto make ad hoc queries against its SAP system. Thanks to BOCs BI system,sales people can access reports that are tailored to their needs and that holda lot o detailed inormation. Working ofine on their laptops, sales people candrill down to the required level o detail on product or customer inormation.


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increasing reVenue

s t t t, t, d

Leading organizations are using BI to dierentiate their product and service

oerings rom competitors through value added, web-based services. In thepast, many departments generated zero revenue, but now with BI extranets,they create a recurring revenue stream by selling inormation to customers,partners, and suppliers.

Owens & Minor: The $3 billion medical supplies distributor has signed up 80hospital accounts and six o its top suppliers, including pharmaceutical giantJohnson & Johnson, or the service. Hospitals pay up to $1,250 per monthand suppliers pay $2,000 per month. It is estimated that Owens & Minor willgenerate at least $2 million in ees next year.

iv tt t btt t

With easy access to ordering, accounting, production, shipping, customer service,and even external databases, marketers can nd answers to the most detailed oquestions such as, What was the success rate o my direct mail campaign? orWhat was the incremental revenue generated rom the new TV ads we just ran?or Which ten items were most popular across our 50 stores during the past coupleo weeks?

With this inormation, the marketer can precisely tailor product launches andpromotion campaigns to the targeted audience. Using BI, companies can microsegment their markets and gain an edge over the competition.

Ben & Jerrys: BI allows the U.S. ice cream maker to track, understand, andmanage inormation on the thousands o consumer responses it receives on itsproducts and promotional activities. Through daily customer eedback analysis,

Ben & Jerrys is able to identiy trends and modiy its marketing campaigns andits products to suit consumer demand.


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Departments within an organizationthat have led the deployment o BIextranets have ound themselves

switching rom being a cost centerto becoming a prot center.

e

Better results rom your sales orce can be achieved by analyzing its sellingpatterns: compare results to targets, to gures rom previous years, to othersales sta results, and suggest improvements. Encourage the sales orce to

ocus on high protability customers and products. The sales orce can alsouse BI to analyze data on brands, clients, and distributors.

TaylorMade: When salespeople went out to visit TaylorMades customers atgol pro shops and sporting goods retail chains, they didnt have up-to-dateinventory reports. The sales reps would take orders or clubs, accessories,and clothing without condence that the goods were available or delivery aspromised, [Tom Collard, inormation systems director with TaylorMade] says.The technology has helped TaylorMade not only reduce costs by eliminatingthe reporting backlogit has eliminated a lot o wasted eort that resultedrom booking orders that it couldnt ll.5

improVing cusTomer saTisacTion

gv t t btt d

With access to inormation, users can make better decisions aster, withouthaving to escalate standard problems up the management hierarchy. Thisguarantees pragmatic and eective solutions since the people directly involvedin the operations make decisions. In addition, users have the increased satisactiono controlling their own process.

Ingram Micro: This wholesale provider o high-tech goods to technologysolutions providers is working to create a new BI extranet in order to deliveradvanced inormation to the companys suppliers and business partners.Says Ingram Micro CIO Guy Abramo, Today its incumbent on us to provideour partners with sell-through inormation so they can see what happened

once their PCs hit distribution. Thats critical or them to do inventory planningand manuacturing planninghelping them to understand what products areselling to what segments o the marketplace.6


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pvd t t

One o the primary benets o BI is that you can dramatically reduce the time ittakes or internal and external users to get answers to their questions. With ewerdelays and aster response time, users are empowered to act quickly, based on

the inormation they receive.

Principal Financial Group (PFG): PFGs nancial department has receivedsubstantial benets rom the products real-time data extraction and analysiscapabilities. The department can now rapidly review monthly and yearly rev-enue data, increasing the speed o decision-making and improving productivityand business perormance.

c t t t t

Almost all businesses rely on assumptions and rule o thumb. However, it isworthwhile to challenge these hunches through detailed analysis o operationaldata, because assumptions and rule o thumb are requently incorrect.

British Airways: Peter Blundell, ormer knowledge strategy manager or BritishAirways, and various company executives had a suspicion that the carrier wassuering rom a high degree o ticket raud. To address this problem, Blundelland his team rolled out business intelligence. Once we analyzed the data,we ound that this ticket raud was not an issue at all. What we had supposedwas raud was in act either data quality issues or process problems, saysBlundell. What it did was give us so many unexpected opportunities in termso understanding our business.7 Blundell estimates that their BI deploymenthas resulted in around $100 million in cost savings and new revenues orthe airline.


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By now, the benets o BIlowering costs, increasing revenue, and improving customersatisactionhave been explained, and you can see why BI is a prerequisite to makingbetter decisions. But you might be wondering, How do I justiy this investment?

The process or quanTiying Bi BeneiTsIncreasingly, top-level management expects IT departments to justiy their costsby presenting quantied value gains, typically using ROI methods. Management isno longer prepared to sink large sums into IT projects simply because they are thelatest and greatest technology. Inormation technology has come o age, and it isexpected to make a signicant contribution to the bottom line.

When looking at how BI aects the bottom line, you should analyze the various ben-ets you can expect to see rom a BI deployment. A practical way o breaking downthese numerous benets is to separate them into our main categories:

Quantiable benets

Indirectly quantiable benets

Unpredictable benets Intangible benets

Quantiable benets include working time saved in producing reports, sellinginormation to suppliers, etc.

Mot et Chandon: The amous champagne producer, reduced its IT costs romapproximately $.30 per bottle to $.15.

A leading risk insurance company: Because customers have sel-serviceaccess to their inormation in the insurance company's database, they nolonger receive paper reports. This one benet alone saves the organization$400,000 a year in printing and shipping costs. The total three-year ROI orthis BI deployment was 249%.

jusTiying The inVesTmenT


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Indirectly quantiable benets can be evaluated through indirect evidenceimproved customer service means new business rom the same customer, anddierentiated service brings new customers.

Owens & Minor: A customer o Owens & Minor cited extranet access to the

data warehouse as the primary reason or giving the medical supplies distributoran additional $44 million in business.

Unpredictable benets are the result o discoveries made by creative users.

Volkswagen Finance: The BI system allowed an interesting discovery that laterresulted in signicant new revenue. The customers o a particular model o theAudi product line had completely dierent behaviors than customers o othercars. Based on their socio-economic proles, they were thought to want longlease terms and airly large upront payments. Instead, the inormation revealedthat Audi customers actually wanted shorter leases and to nance a largepart o the purchase through the lease. Based on that insight, the companyimmediately introduced a new program combining shorter length o lease,

larger upront payments, and aggressive leasing rates, especially or that carmodel. The take up on the new program was immediate, resulting in over $2million new revenue.

Intangible benets include improved communication throughout the enterprise,improved job satisaction o empowered users, and improved knowledge sharing.

ABN AMRO Bank: The corporate human resources department at ABNAMRO uses BI to gain insight into its workorce by analyzing inormation onsuch items as gender, age, tenure, and compensation. Thanks to this sharingo intellectual capital, the HR department is in a better position to demonstrateits perormance and contribution to the business successes o the corporationas a whole.


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suggesTeD soluTion

While a deployments ROI is most accurately determined on a case-by-case basis,we suggest the ollowing approach or evaluating these systems. This approach hasthe advantage o taking both measurable and intangible benets into consideration:

Quantiy the expected measurable benets.

Qualitatively describe, as precisely as possible, the anticipatedintangible benets.

Estimate the total cost o ownership (TCO), including hardware, sotware,personnel, consulting services, and uture ongoing costs. Bear in mind thatthe choice o system architectureintegrated or non-integratedcan greatlyaect total cost o ownership.

Then apply the ollowing decision rule.

I TCO < Quantifable and IndirectlyQuantifable Benefts (A+B), then thesystem is clearly worth the expenditure.

I TCO > A + B, then you must evaluate theunpredictable and intangible benefts to makeyour decision.


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Measuring these intangible benets, while challenging, can be done by creatinga series o assumptions to determine the impact these types o benets have hadon the bottom line. For example, i customers access reports directly and thatempowers the sales orce to make more sales calls (because their time has been

reed up rom creating the reports), how much more revenue are the salesrepresentatives bringing to the company because o these additional calls?Would a realistic, conservative estimate on the amount o incremental businessdone with this additional time be a 2% increase? I so, then in a $100 millioncompany, that would be a $2 million benet or the company.

This process can be undertaken or any benet acquired through businessintelligence. And while a little more time consuming than simply calculating thequantiable benets, it will in all likelihood yield numbers that are sure to create apositive ROI that would make any executive or business manager eel thatimplementing business intelligence was a wise decision.


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The widespread use o inormation technology can generate tremendous amountso data within an organization. This data contains inormation that is invaluable tothe organizations decision makers.

The issue or most organizations is that the data is inaccessible to all but the

IT department. While IT can run queries and produce reports at the request obusiness users, a sel-service approach to inormation provides the greatestbenets. With direct, easy access to inormation, users can nd answers to all thequestions that are raised by their activities. Armed with precise, up-to-the-minuteinormation, users can develop eective responses that help their organization attainits goals.

BI is the key to leveraging this wealth o data that accumulates in an enterprise.

With BI, non-technical users can pinpoint what drives their business activity.They can help reduce costs, increase revenues, and improve customer satisaction.While many o these benets are clearly quantiable, some o the more intangibleones, such as improved communication throughout the enterprise, improved job

satisaction o empowered users, or sharing o intellectual capital, can give yourbusiness the greatest edge over its competitors.

We hope this paper has helped clariy the value that BI can deliver or yourorganization. I you would like urther inormation on Business Objects and ourproducts and solutions, please visit businessobjects.com.

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The Value of Business Intelligence