BI and Enterprise Performance
If information is power, then the days when power is held exclusively in the executive suite are over. Business is too competitive and fast-moving for an elitist approach to operational and strategic decisions.
Information is at its most powerful when placed in the hands of employees across the enterprise, not just senior management. If relevant and reliable information is available to the right people, anywhere, anytime, then employees at all levels will be empowered to make informed decisions that directly impact the strategic goals of the business.
This democratization of information, along with other significant factors, is affecting the role CFOs play and their ability to impact corporate performance.
New Information Demands
As the CFO’s role has evolved to embrace a wider scope of responsibilities, the pressure for accurate, timely, and transparent sharing of financial and operational information to a wide variety of internal and external stakeholders has increased.
Part of this new set of responsibilities includes evaluation of new technologies, assessing which technology investments are the best fit, and demanding a quantifiable ROI. The ability to select and implement solid, value-add technologies is critical to ensure that companies achieve their financial, operational, and market goals.
To carry out their expanded responsibilities, CFOs are searching for solutions that will deliver the information to help them:
- Improve enterprise performance. The CFO needs to provide near real-time information for multiple lines of business,with flexible, customized levels, views, analysis, and consolidated reports to a range of audiences. While getting a complete view of enterprise performance is vital, extracting data from disparate sources and making it meaningful is a major challenge.
- Contain costs. While CFOs can typically “slice and dice”data on the revenue side of their business, they generally have to rework data more extensively to get meaningful cost data to solve cost problems.
- Comply with new corporate governance and risk management. CFOs must now comply with accelerated reporting timelines with an extended range of reports and filings,without sacrificing integrity, accuracy, and completeness of the data.
- Improve time management. Finance teams spend inordinate amounts of time manually preparing and distributing standard reports to the organization, as well as responding to the increasing number of requests for custom finance reports.
The Problem: Application, Data Silos
Most companies don’t have a shortage of data. They have the challenge of enabling people to access usable information in a timely manner. Typically, companies have a broad range of databases, as well as multiple strategic business applications (e.g. ERP, CRM, supply chain). Each contains critical business information, but these systems typically don’t meet the reporting, analysis, and information delivery needs of large organizations. As a result, there is a heavy reliance on limited IT resources to extract business performance information.
Historically, as business units within companies have wanted more data or improved processes, they’ve resorted to deploying yet another application, which only compounds the problem. Chances are good the data they want already exists within the company. They just can’t get to it.
One way companies have attempted to deal with the problem is to build a data warehouse to store all the data they collect. These tend to be massive and expensive projects with a questionable ROI. While data warehouses may solve the problem of consolidating data, they do little to address the more important issue of reporting, analyzing, and distributing data to people who need to make decisions.
The Answer: Business Intelligence
Business intelligence (BI) provides a more costeffective approach by solving a very simple need: providing access to data, the tools to make it meaningful, and the infrastructure necessary to deliver it to stakeholders inside and outside the enterprise. For business intelligence solutions to be effective, they should:
- Report from all systems, both operational and financial. From large ERP, CRM, and supply chain systems, every database and application provides a consistent and consolidated view of the organization that creates a way in which to assess organizational performance on a comparable basis;
- Provide excellent enterprise and businessunit performance and productivity metrics to manage performance against targets and budgets, with the ability to drill down on summary-level items to get to more detail;
- Provide visibility to key information that enables decentralized decision-making, ensuring greater responsiveness to business trends, performance issues, and competitive information;
- Allow for customized report creation that alerts managers when actual performance hits predetermined levels;
- Provide rapid reporting within hours of a period close – e.g., provide corporate, line-ofbusiness, and discipline-specific information, as well as metric reports on actual performance against budget/target/KPI;
- Enable advanced analytics for selected end users, such as financial analysts, to perform in-depth queries and analysis of critical information; and
- Be scalable, 99.999 percent reliable, adhere to open standards (not rely on proprietary technology), and have established integration with the company’s core systems. There are two approaches to business intelligence, the application approach and the information infrastructure approach.
Application Approach
Perhaps the more readily understood is the application approach.This method of business intelligence seeks to consolidate data for a single purpose (e.g., company metrics or sales forecasting). Centered on high-end analytic tools and data marts, this method is effective for solving specific information needs, but the technology cannot be easily leveraged to solve other information needs across the organization.
Typically, these systems are designed with sophisticated business analysts or power users in mind. To get the information they require, users must conduct their own queries or build their own views of the data. It is an approach that is effective for some, but for the majority of users it is complex and slow.Most people (often as many as 95 percent of people in the enterprise) simply need to access a predefined, formatted report to get the information they need (see Figure 1).With a focus on more complex analytic tools, this application approach to BI results in relatively few people having timely access to corporate information.
Information Infrastructure Approach
The more effective business intelligence approach views the challenge from a horizontal information infrastructure perspective. It focuses on reporting as the most common enterprise need, with emphasis on reporting from any database or application. It also effectively addresses the complexities of securely delivering reports to every user that requires access to them. Finally, it provides the analytic tools necessary for those users who need to dig deeper into business information.
Rather than solving each discrete problem with a separate packaged application, this approach allows you to solve common reporting, delivery, and analysis needs using consistent, integrated technology.
BI IN PRACTICE After four quarterly losses, Aetna, one of America’s leading providers of insurance, has posted three profitable quarters and is on track to show solid profits for the full year, thanks in part to its executives having access to granular financial information. Aetna has created an executive information system to provide timely financial and operational information with accurate information on sales, operations, and market conditions by |
business unit, geography, product, and customer segment. BI provides better data at local levels, so management can make more effective decisions in near-real time. Through an enterprise-wide business intelligence and reporting system, Aetna’s executives are now able to review key performance indicators based on detailed information. Variances are analyzed and operational adjustments are made to keep the business on track. |
Reporting and Delivering
A business intelligence infrastructure, as shown in Figure 2, gives you the ability to conceive, produce, and distribute financial, operational, and management reports from disparate systems that provides a consistent, current view of the business.
The essential foundation of business intelligence is the reporting and delivery
of information. It doesn’t replace ERP or CRM; it consolidates data from
every packaged and custom application within the company, and reports it in
a way that is meaningful and timely for managers throughout the company, and
the extended enterprise, to use. An information infrastructure approach to business
intelligence increases the efficiency of producing and delivering the information
enterprise stakeholders need.
It democratizes data.
Information Is Power
Data democratization is being powered by two trends: the notion that critical data can be entrusted to all appropriate people throughout a company’s value chain (employees, suppliers, customers); and everyone in the company is considered not simply an employee, but a consumer of information.
In a way, data democratization creates hundreds of executives within the company; line managers and authorized employees now have access to the same key data usually saved for the exclusive use of top management. Data democratization focuses the company on the strategy set by C-level executives, keeps everyone in alignment, improves decision-making, and frees the CFO from the day-to-day reporting tasks.
A good example of creating an army of mini-executives is Virgin Retail, which operates 92 entertainment stores in the United Kingdom and Ireland. The company wanted to provide staff with a way to view and react to daily sales data, so store managers were given instant Web-based access to varying levels of sales data. As a result, store mangers can react quickly to customer demand and increase time available to concentrate on customers.
At the head office, the finance department is now able to focus on its primary functions rather than on producing numerous reports, and senior management is able to access valuable business data quickly. Increased access to information has led to a more focused marketing function, smarter purchasing,more informed forecasting, and better informed daily decision-making within stores.
Conclusion
Information is the power that drives companies, and business intelligence helps CFOs empower the company’s entire value chain – employees, suppliers, and customers – in a way not possible before.
A business intelligence infrastructure maximizes the value of systems already in place and removes the “special report” bottlenecks to move data quickly through the organization. It allows the data to be disseminated while it still has its maximum strategic value.
The end result is the maximization of
the company’s current data resources, a
more nimble company that is better aligned,
and a finance department that is freed from
day-to-day data culling so it can fulfill the
vision of being a truly strategic force within
the company.
