More Data ≠ Competitive Advantage: Using Business Intelligence to Drive Revenue and Profits
In today’s business world one constantly hears that to compete one needs to understand and use technology to one’s advantage. This is also true in the Financial Planning and Analysis (FP&A) world and we constantly hear about the various technologies and tools we should be using that will make forecasting easier, more accurate and beneficial for our employer. One such tool that many of us here about regularly is business intelligence. One might be wondering what exactly is business intelligence and why is important to me as an FP&A manager.
The term business intelligence has been used for many years. One of the earliest known uses can be found in the ‘Cyclopaedia of Commercial and Business Anecdotes’ first published in 1865. The term is used to describe how Sir Henry Furnese, a banker, gained a profit by receiving and acting upon information before his competitors.
““THROUGHOUT HOLLAND, FLANDERS, FRANCE, AND GERMANY, HE MAINTAINED A COMPLETE AND PERFECT TRAIN OF BUSINESS INTELLIGENCE [EMPHASIS ADDED]. THE NEWS OF THE MANY BATTLES FOUGHT WAS THUS RECEIVED FIRST BY HIM, AND THE FALL OF NAMUR ADDED TO HIS PROFITS, OWING TO HIS EARLY RECEIPT OF THE NEWS.””
I am a big fan of the above statement because it emphasizes that the idea behind having business intelligence is to gain a competitive advantage. At the end of the day, whatever technology one uses or thinks of implementing, it is important to always ask how will this help my organization gain better insight into my business and improve our competitive advantage.
This is especially true when a company decides to implement business intelligence tools because not only can it be costly but it can be very time consuming and if not done properly one can be left with a big expense and very little benefit.
Business Intelligence Defined
A generally accepted definition of business intelligence is a “a set of techniques and tools for the acquisition and transformation of raw data into meaningful and useful information for business analysis purposes”. (Turner, Dawn M. “What is Venture Management?”. www.VentureSkies.com. VentureSkies. Retrieved 24 February 2016.) Based on this above definition a business intelligence tool could be as simple as building an Excel model to as complex as having a data warehouse storing all the various data sets throughout the company and using a powerful business intelligence tool to develop dashboards, and predictive analytical reports.
Implementing Business Intelligence
Throughout my career, I have seen business intelligence used in many ways from the simple spreadsheet to the large-scale implementation of popular business intelligence tools such as Tableau and MicroStrategy. These experiences have taught me that for a company, or the finance department within a company, to be successful in rolling out a business intelligence tool a lot of work is required upfront. In the first implementation of business intelligence I was involved in I saw the importance of understanding user needs and requirements upfront. My company implemented a business intelligence tool with the initial implementation being nothing more than taking our existing Excel reports and putting them in MicroStrategy. When we were done, no one wanted to use the reports because now they had to use a tool they were not familiar with to get the same report they used to get in Excel and could not easily manipulate. This example taught me early on that it is important to look at the problems the business is facing and how the proposed solution can address these problems.
In our case the issue was we did not have the level of insight into our supplier data required to maximize revenue and moving to MicroStrategy was about much more than just porting Excel reports into a system.
It was only after a few years of working with MicroStrategy that I started to see reports being developed that would provide the kind of insight that would allow us to deepen our relationships with our suppliers and maximize our revenue. The reason this implementation failed to benefit the business sooner and put forth finance as an analytics leader were many. A few that stuck out to me where:
No upfront requirements gathering
Selecting the tool strictly because the company was already using it
Failing to involve finance in data sourcing upfront
As you go forward in your career keep in mind that when you decide to implement a business intelligence tool or any software tool that is critical, you have a clear understanding of the problem you are trying to solve and gather all requirements before starting implementation. At the end of the day, many companies have implemented a business intelligence tool only to find they have more data and reports but are no closer to gaining a competitive advantage from the data than before they started.
The Power of Business Intelligence
Lest I sound like I am not a fan of business intelligence let me stop and say I am a big fan of business intelligence and when utilized properly it can be a great tool. I strongly believe that a well-implemented business intelligence tool linked up with the right data can provide huge benefits to any finance organization and company. I also believe that for some companies a successful implementation could be nothing more than pulling some data into Excel and building reports that provide the necessary insight to drive smart decisions.
Over the last year, I worked with my company to implement Tableau, a powerful business intelligence solution, that will provide new insights to the business team and help drive better decisions making. The new Tableau reports developed will allow the business to access sales and liability data for several years for all markets, products, and currencies sold.
This business intelligence tool and the reporting available within it will help drive decision-making going forward for the business as it winds down. It will allow finance to partner with the business in making the best financial decisions for the company. Had this data been available several years ago, when many markets were being shut down it would have allowed them to shut down the markets while maximizing revenue. Instead, markets were shut down based on limited data and gut instinct and revenue was not maximized. While this implementation is not finalized and the business has run into some data problems this experience taught me the value of the business and finance partnering put together.
Within the finance community, I hope when we hear about business intelligence being necessary to drive our business to the next level we take time to step back and assess the situation. If finance engages the business and works together to do the proper work upfront to ensure a successful implementation of a Business Intelligence tool everyone wins.
Whatever you do remember that “More data”, better reports, or even enhanced visualization does not, in and of itself, give an organization a competitive advantage. To drive revenue and profit over the long run you must truly understand what data is required and then intelligently use and analyze it.
