The first thing any small to medium enterprise (SME) executive thinks when he hears the term “BI” is, ‘yet another acronym buzzword that my IT department is going to heckle me about’. Let’s take a look, what is BI (or Business Intelligence), why it is not a chore, and why every business, regardless of their size, needs Business Intelligence even more than they need positive cash-flow.
What is ‘BI’ or Business Intelligence?
Business Intelligence (BI) is the collective mechanism and/or tool set used when utilising existing knowledge to base current and future business decisions on.
An actual example of the classic supply and demand question: A sales manager that is considering the total profit of his product sales, wants to know if applying a lower annual sales price increase, will result in more product sold? He also wants to know if more products are sold, will this translate into an increase in total profit?
Another example could be: An operations manager evaluates options to increase number of units produced at lowest cost possible, he considers 2 options, automating unit production, or increasing workforce capacity. He evaluates his decision by considering both opex and capex over short and long-terms.
Some larger organizations use a more formal / structured framework, while SMEs typically only use a few tools from the available toolsets to increase advantage over cost and remain agile & dynamic to maximise the competitive edge gained from BI. Most (if not all) BI activities start from seemingly simple business questions, such as:
- Which product is most profitable?
- How much time do my consultants spend on the road?
- What is my true delivery cost?
These questions are the very core of BI, and the driving force of business success. BI can also be described as an assistant to help manage eventualities.
Where did ‘BI’ come from?
The idea isn’t as new as you might think, it all started in the heyday of the spice trade from India, and the advent of modern economics. As spice sales, stock and cash-flows increased (and fluctuated), business managers saw the need to document their activities with the goal of planning for future activities. Ever larger businesses ultimately gave rise to classical accounting systems – these evolved into the more traditional double-entry systems and finally, the more modern GAAP / IFRS etc.
Believe it or not, these were the first BI systems. For centuries, financial reports served as a primary decision support system. As with many other industries, it is the finance role that pushed the development of modern IT systems, similarly, it is the finance department that is pushing for more intuitive and flexible reports to answer every day business questions across all departments.
I thought BI was an IT thing?
No. BI is a business thing that uses some parts of IT. Most of the traditional BI tools still have a high IT involvement / dependency, while the more modern BI tools are requiring less and less IT input; thus giving the power back to the business decision maker – some call this ‘Rapid Fire BI’. In any modern organization, most business activities depend on the IT environment; BI is no different. BI uses existing ERP / accounting / stock-management systems’ databases to expose the lurking knowledge, ready to be reviewed by decision makers, enabling them to gain competitive edge over their competition.
Why do I need BI?
The reason usually has something to do with a need to grow profit, market share or efficiencies. If your competitors are already using BI, you should seriously consider it before they grow any of these faster than you! The insights gained through BI could see you
- drive down costs,
- cut unnecessary costs all together,
- increase profit
- even venture into new markets and regions,
- discover focus areas to maximise profit.
More and more organizations are realising that if they don’t find ways to maximize the value on their products or services, they will lose business to their competitors who have managed this success through the use of BI. Modern BI tools can help you analyse virtually any aspect of your business through simple visual displays and dashboards or through highly complex mathematical models and statistical, trend and predictive analysis. BI is your management companion, your greatest tool, your most valuable asset.
OK, so I setup my Balanced Score Card, then what?
Not quite so fast: Taking modern BI tools / techniques into consideration, the Balanced Score Card can be better described as archaic, ancient, prehistoric and possibly even Business Un-intelligence. Investigate the modern tools available for answering your business questions and make informed decisions. I recommend using Tableau, but don’t take my word for it, take a look at these customer success stories: http://www.tableausoftware.com/learn/stories/products.
“In the 21st century, ‘BI’ is tantamount to the Industrial Revolution of the 18th century” – Wayne Prinsloo
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