Did you hear the one about the US retail chain that bumped up its revenues by sticking bottled beer on the shelves alongside nappies?
Apparently analysis of sales figures revealed that young fathers were popping in to buy nappies on a Friday night and would snap up a bottle or two of beer in the process if they were on the same shelf. The story has become one of the staple clichÈs of every data warehousing and business analytics vendor in the industry. Unfortunately despite all their efforts to claim this ‘result’ as their own, it is also totally apocryphal – no US chain store would place alcohol next to nappies. It would be illegal. But never let reality get in the way of a good marketing pitch – and this is a good marketing pitch.
It demonstrates the importance of business intelligence (BI) activities and why BI is a key enabler to cut through some other industry clichÈs. Perhaps the most important of these is the old standard about companies investing in technologies that result in the accumulation of data but then simply end up with mountains of the stuff that they have no means of analysing and turning into actionable information.
This has been seen most notably in the field of data warehousing, where it seems that size very much matters. Knowledge is power for the executive mentality and as such you focus as much effort as you can into gathering as much data as possible. Only as you are drowning in data do you realise that you now have too much and cannot turn it into knowledge. That is where BI comes in. In a survey of 1,400 CIOs, Gartner found BI will surpass security as the top technology priority this year. CIOs plan to increase their business intelligence budgets by an average of 4.8 per cent, and Gartner predicted that sales of new licenses for BI software will reach $2.5 billion this year, a 6.2 per cent increase from last year.
So it is good news all round then? Well, not exactly. Spending money on a technology solution does not make much difference if the problem it is supposed to solve has not been properly considered. Compare Gartner’s optimistic assessment with a study by ICS of 1,000 UK business managers which found that over three-quarters of respondents made decisions ‘blind’ due to late or insufficient business information. Or an Oracle-funded survey of 200 IT directors in which over half of respondents said they did not have any BI systems.
One immediately apparent problem is definition. Even in an industry where terminology is bandied around in a shamelessly expedient manner to drive the latest bandwagon, BI has been hideously abused. Over the years it is been applied to analytics, data mining, data warehousing, online analytical processing, even good old fashioned expert systems.
“BI does certainly mean different things to different people,” says Anthony Bull, eprocurement manager at Norfolk County Council. “In fact what it means can vary depending on what part of an organisation you are in. I’m in corporate procurement so we tend to look at it from a corporate point of view. We’re also in the public sector so we are not aiming to make a profit using BI but to understand interactions in order to deliver a good quality service. Before we had Oracle Daily BI and Oracle BI Discoverer all of our data came from taking information out of old accounting systems and then trying to break it down. Our invoice detail was usually at summary level so trying to understand what we bought and from whom was not easy. To get down to that level of information was going to mean digging out initial invoices and going back to the person who had ordered it. Now we get standard reports.”
A general definition would be that BI refers to tools and systems that play a key role in the strategic planning process of the corporation and which allow a company to gather, store, access and analyse corporate data to aid in decision making. They should illustrate business intelligence in the areas of customer profiling, customer support, market research, market segmentation, product profitability, statistical analysis, and inventory and distribution analysis.
According to research analysts IDC, the top benefit derived from successful implementation of BI is being able to optimise customer communications, followed by generating action-ready insight based on customer value metrics. Organisations that use BI tools show a 16 per cent higher ability to provide insight into customer needs and are more effective in predicting customer behaviour by 24 per cent than those who do not. Internet marketing and ecommerce specialist E-consultancy reckons that BI and analytics capabilities are now being married ever closer with sales and marketing activities within organisations. “There has been a move in ownership of analytics from the IT department to the marketers,” says Linus Gregoriadis, an analyst at the firm. “IT used to look at the data but not necessarily share it with the wider business, but now it is seen as a tool to drive business improvements.” That is particularly true in high churn business sectors where analysis of customer behaviour, moods and activity is crucial.
For example, online financial firm Egg has deployed Enterprise Feedback Management (EFM) software Confirmit from FIRM as its reporting platform to service a customer experience team with expertise in survey research. Business users can push requests for data to this team which creates surveys populated with data drawn from its CRM systems. Deliverables have included an enhanced set of customer relationships and increased loyalty with an initiative launched in 2005 to target those customers who are at risk of losing control of their debt. “With any information that you got out of a tracking system or service, if the levels of satisfaction dropped or increased then you had to go away and investigate further,” says John Jennick, head of customer experience and action at Egg. “That would then be a two week process, which just wasn’t quick enough. You need to have a really clear picture of a customer – how many customers do you have, how much contact have you had with them, what products do they buy and so on.”