Special Report
Business Intelligence is more important to finance directors than ever before. We bring you a range of views on what 2010 could throw up in this critical discipline..
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Business Intelligence for 2010 |
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| Special Reports | |
| Written by Professor Andy Neely, Dpty Director of the Advanced Institute of Management Research -(AIM Research) | |
| Friday, 22 January 2010 | |
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Business Intelligence is now more important than ever before despite many finance directors questioning such investments.
In the years leading up to the economic crisis, the market for Business Intelligence exploded. In 2008, AMR Research was estimating that US$57 billion would be invested in Business Intelligence. Today smart firms, such as some Continental Airlines, are claiming 1,000 per cent returns on their investment. Now, as we enter a phase of tighter spending, many finance directors may be questioning investments in Business Intelligence and data analytics altogether. Yet Business Intelligence is more important now than ever before. In tough economic times, we need to focus limited resources, and we need to make smarter investment decisions. The insights that data can deliver are a valuable commodity. Indeed, Business Intelligence and data analytics have the potential to open up new business models and hence revenue streams. Business Intelligence can also reduce processing costs. Despite its promise, however, many Business Intelligence implementations fail to deliver. This is because people often see it purely as a technological solution when the real gains only come when you invest simultaneously in technological infrastructure and organisational infrastructure. Then you can see an uplift in productivity of about 34 per cent. However, changing organisational infrastructure is not straightforward. Many firms are still using models of management that were developed in the 1970s. Few organisations have been able to turn the management models of yesterday into ones that work today. Today, executives are no longer simply looking for ways of controlling vast empires, they are looking for mechanisms that enable their people to perform. So, Business Intelligence systems need to be designed to facilitate and enable, not to command and control. The key is getting the right data, to the right people, at the right time so they can make the right decision. Take an Ambulance Service. Here, a key performance target is arriving at the scene of Category A calls within eight minutes. Put simply, performance saves lives. Ambulances wait in lay-bys at strategic points around the city for emergency calls to come. But every so often there’s a traffic jam. There’s no point designing a performance reporting system that gathers data to feed up the organisation’s hierarchy, i.e. informing senior executives that ambulances arrived late because of traffic. It is the local managers who need the data and who need to be empowered to act on its insights. They must make the decision to re-locate the ambulances. So, efficiency and effectiveness can be improved when we combine the power of measures to influence behaviour with the potential of Business Intelligence to reveal new insights. This example shows that for Business Intelligence to be truly effective we need to be very clear about the organisation’s performance architecture – ensuring that the right people have access to data and the freedom to act on it. While it is still too early to assess integrated Business Intelligence systems, their constituent components have been shown to impact on organisational performance. Firms that adopt the strategically aligned performance measures outperform firms that do not by 27 per cent points in the market value of equity sample, by 30 per cent points in the book-to-market sample, and by 28 per cent points in the net assets sample. Even the stock market recognises the potential of Business Intelligence. It has begun putting a premium on stock prices following announcements of initiatives. So, there is little doubt that Business Intelligence can deliver significant returns to those who capitalise on its potential. However, it will only succeed when the focus is on strategy and its execution, not on measurement. Professor Andy Neely, Deputy Director of the Advanced Institute of Management Research (AIM Research) www.aimresearch.org
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