Friday, December 25, 2009

business analytics & optimization

IBM recently released a pair of studies detailing the successes of businesses employing sophisticated business intelligence tools versus those with limited insight into their performance. The results are astounding. More than half of the low performing organizations surveyed were using rudimentary (simple) processes to manage their decision making processes, while three times as many top performers versus low performers had sophisticated processes in place for monitoring and managing their performance.

Full articles can be found here:

If you're looking to gain insight into critical business processes and push the limits of performance within your organization, the adequate employment of leading business intelligence tools is a critical step in the right direction.

Wednesday, December 9, 2009

business intelligence overview

For those of you who may have no idea what business intelligence is or how it may add value to your organization, the following video will provide a great overview for you:

While this is potentially an oversimplification of BI, it definitely describes business intelligence in layman's terms. From the early stages of databases and business applications forward through aggregation of segregated data sources into data warehouses and into the present day, the challenge for businesses has been to intelligently present data in an efficient and effective manner to assist in intelligent decision making.

Give it a watch and hopefully you can convince the key people in your organization that the modern BI effort is one worth making. It is our opinion that, even with aggregated data sources, everything still seems to end up back in Excel (which means there are differing views and differing "data silos" on nearly every desktop across the enterprise). In order for unified decision making to take place, data silos have to be knocked down and, well, that means that IT people need to become embedded within the business units and not play the role of the "data protector". IT people, please don't send hate mail. We won't read it anyways.....

Sunday, November 29, 2009

performance dashboards

Wayne W. Eckerson, author of Performance Dashboards: Measuring, Monitoring and Managing Your Business, has written a definitive guide to business intelligence and its applications. In the opening lines, Eckerson concisely highlights the importance of dashboards in managing performance. We're not talking just about the performance of a specific asset or product, but the performance of every individual across the enterprise. Much like the driver of an automobile depends on the gauges in front of them, each employee depends on some form of feedback in order to determine the conditions of their progress.

In a world with perfectly effective management who provided adequate feedback and had a good grip on every project delegated to their staff, dashboards might not seem terribly useful. Realistically, this isn't the case. Employees are all too often left wondering how they're progressing towards their goals. Work groups push diligently towards deadlines while losing sight of the big picture and having little indication of how their current work is contributing to the overall annual goal.

The driver of an automobile has some fantastic tools at their disposal to determine the success of their journey. The speedometer is indicative of their rate of travel, while the odometer tells them how far they've come and, granted they set their destination in advance, how far they have to go. These two tools alone are more than the majority of today's workforce has at their disposal.

The employment of key performance indicators (KPIs) helps ensure that individuals and groups are focused on the tasks that are most critical to the achievement of end goals. KPIs, by definition, should be closely linked to goals in a manner such that they indicate progress towards them. For example, consider a small financial institution that has an asset sensitive balance sheet (i.e. loans and mortgages are "repricing" more quickly than deposits and investments). The board of directors has decided that a liability sensitive balance sheet is more desirable, as their expectation is that interest rates will decrease in the short- and medium-term, causing margins to compress. In this environment, it is desirable to fix the rates received on lending products while allowing deposits to float.

The KPI used by a lending manager could be very simple: two small pie charts, one for assets, the other for liabilities. The asset pie chart would show % of assets that are fixed rate vs. floating rate, and the liability pie chart would show the same.

Let's assume that the current mix shows 40% of assets and 70% of liabilities are fixed rate. The board of directors would need to set a simple mandate to grow fixed rate assets to 55% while decreasing exposure to fixed rate liabilities to 55% by encouraging customers to take advantage of floating rate deposits. The pie charts mentioned above could be updated in real time from the data warehouse and the product managers would have their finger constantly on the pulse of their team's progress towards the board's goal.

How does this help the staff on the front lines? Simple. Another KPI linked directly to their own compensation. In order to incentivize staff, their bonus compensation can be linked directly to the goal of rebalancing the balance sheet. The mix of products they sell to customers can be displayed for them individually, or a simple point system can be established to reflect their contribution to the goal (i.e. +1 point for every $1,000 in fixed rate product, +0.5 points for every $1,000 in variable rate products with the point goal linked to their annual sales goal).

With today's technology, these are not pie-in-the-sky concepts. Solutions such as these are relatively easy to implement in a cost effective fashion. In fact, there's almost no excuse for the absence of performance dashboards in an organization.

So, what's on your dashboard?

know data, know business; no data, no business

We live in interesting times. The transition from information age to attention age will place previously unseen demand on firms as the speed of information increases. Especially in the world of business, if you don't know your data, you won't stand a chance.

For instance, picture two hikers in a dense forest where the sun and sky are not visible due to the thick bush and tree line. One hiker holds an old fashioned compass; the other, a handheld GPS device. We all know which hiker is going to be successful in finding their way through the wilderness and back to civilization in the most expedited fashion. The other is a little less likely to make it out alive.

The same concept applies to business data and information systems. In order for a firm to succeed above its competitors, they need an edge. Relying on spreadsheets to turn around information required for prompt decisions is going to set you back a few yards. Spreadsheets are like the old fashioned compass in our hiking example. While they may get you an answer, the precision of that answer leaves something to be desired. Spreadsheets are like information silos, and the more silos there are, the less information you're seeing.

With a data warehouse (think GPS device), you can be perfectly certain that all the information sourced from every aspect of the business is available to you from a single source.

This week, Trent University chose Cognos 8 BI as their data warehousing implementation of choice. In the competition for enrollment numbers, Trent U has recognized the value provided in having all their data available in one centralized location where it's easy to assess the impact of changing economic tides on their business. Whether they're dealing with past due accounts, budget balancing due to public funding cuts, or the demand for increased program funding based on enrollment numbers, their data warehouse will provide them the critical information they need in less time than would be possible by all other methods.

In the years to come, the firms that know their data will be positioned to react quickly while those with lacking information systems are left in the dark as the sun goes down...