[IMGCAP(1)]Why do the top companies invest so heavily in business intelligence? Profits.
They understand that by transforming the data they have into information, it will provide them with a competitive advantage and improved profits.
The mid-market is no different from the Fortune 500 in that respect. The businesses are no less complex. The need to improve profits is just as prevalent. Every company has data; few have information. It is the transformation of data into meaningful information that makes business intelligence so valuable. An informed decision as opposed to a bad decision will justify the cost of a robust BI solution.
What is business intelligence? In laymen’s terms we take one fact, associate multi attributes, create a string of data, shove it into a cube and “poof,” you have BI!
Really? People are spending billions of dollars on this? Although I may have oversimplified the process slightly, the answer is yes. The reason is that data properly structured and accumulated can be transformed into meaningful information. Making informed decision is the difference between successful companies and struggling ones.
In the mid-market some practical applications in business intelligence include the following:
Enhanced closings and improved analysis: One of the most important aspects of the close process is analytical review and variance analysis. These critical review techniques tend to get shortchanged as pressure for timely results compresses the close process. By utilizing business intelligence, the time to prepare analysis can be compressed and the analysis time enhanced resulting in better and more thoroughly reviewed results. The time to refresh analytics literally takes seconds.
Business intelligence can improve the efficiency of finance teams as well as their morale. Spend your time analyzing your business, not preparing to analyze.
Planning and budgeting: One advantage of some business intelligence tools is the ability to write back to the database. Another advantage of some BI tools is the ability to work in Excel and create dynamic models. Combine the write-back capability and a strong Excel interface and you are in budgeting nirvana. Be able to create your budget model, roll the results up and analyze against actuals.
Business intelligence allows budgets to be the tool they are meant to be.
Improved accountability: Driving accountability can be one of the most challenging objectives of a company. But to drive accountability, you need to provide timely feedback. It is not practical to give every manager access to the bowels of the business systems. Oftentimes many of your key performance indicators come from a combination of data sources. Business intelligence gives you the tools to share timely information and from multiple sources. If we want managers to own their decisions, they need the feedback to validate their decisions.
You can drive accountability with the visibility provided by business intelligence.
Customer profitability and price sensitivity analysis: Understanding your sales data and thus your customer is one of the most critical tasks of any company. Devoid of data, analogies, assumptions and perceptions rule the roost. Who is your most profitable customer? It may not be who you think. When you increased prices, who stopped buying? Who bought more? Who is your top agent? By profit? Transforming voluminous sales data into information is the ideal application for Business Intelligence.
Know your customers and their buying behavior. Don’t speculate, evaluate!
Managing acquisitions: Acquisitions are one of the most exciting and challenging events a company can undergo—bringing two different organizations together wrought with difficulties. From the systems point of view, do you go with a common system or best of breed? The answer to this question is, it depends. How similar are the companies? Do we have the budget for a system implementation? How does optimizing the system fall relative to other corporate priorities?
One of the advantages of business intelligence is that the system is indifferent to source systems. As long as you can make a connection and retrieve a flat file or make an SQL call or execute an API command, you can transform your data into meaningful information. Business intelligence can be used to bridge systems on a temporary or permanent basis. Because of the flexibility of business intelligence it can bring order to the most chaotic environments.
Flexibility and scalability make business intelligence indispensable.
Maximizing the exit: Whether you are an entrepreneur or a private equity firm, maximizing the valuation of your enterprise is critical. During the exit process, nothing is more important than reliable financials and information. After years of hard work and countless hours, nothing can be more destructive to enterprise value than erroneous numbers. They can make you look foolish, destroy buyer confidence and in the end cost you points on the multiplier. Leveraging business intelligence can eliminate this risk by providing a “single version of the truth,” or SVOT. By leveraging a well-designed BI system to develop your exit package, you never need to worry about conflicting numbers or the disastrous impact they have on buyer’s confidence. You cannot afford not to leverage business intelligence. A single version of the truth is perhaps the biggest benefit of BI.
These are only some of the practical mid-market applications of business intelligence. There are other applications but perhaps the most important aspect of business intelligence is the ability to make informed decisions. BI will never replace experience, sound judgment and insight that executives and entrepreneurs bring to the market but it can greatly assist them in making the best decision possible.
Charlie Gaddis, CPA, CMA, MBA, is the managing partner and founder of Beyond Intelligence and has been working with business intelligence systems for over 20 years. He can be reached at Charlie.Gaddis@BeyondIntelligence.org or (330) 485-3888.