The case for business intelligence
Business intelligence (BI) can bring about greater profitability for your organisation, but it’s not a simple process, says Tim Wilson, a partner at US advisor BKD.
Speaking at the Sage Summit in New Orleans, Wilson argued for a switch from rear view mirror management to looking ahead. But finance managers need to build a good business case before committing resources to the concept.
“The devil is in the detail,” he said. “Finance directors should take careful steps along the way of implementing a BI solution.”
Wilson asked attendees if they were happy being followers when it comes to making business improvements and growing profitability, or were they prepared to innovate.
BI can improve planning and forecasting to bring down purchasing and stock costs, boost margins and ultimately give the business more cash, he said.
“A business intelligence approach can lessen the risk of making the wrong decision.
"You’re imagining where you want the company to be in three or five years, not just the next 12 months”.
BI allows organisations to improve budgeting accuracy and move towards activity-based costing models. Equipped with these tools, finance professionals can assess performance against measures such as budgeted costs and wider strategic plans.
Wilson outlined the following elements of the BI business case:
- Enhanced data quality –from a central system of record that can produce figures faster and more accurately.
- Measure customer satisfaction – Customer behaviour, responses and feedback can be captured at stages from initial inquiries through to orders, and after-sale support. All of these insights can be compared with financial data to gain new insights into the business.
- Enhanced sales revenue – Marketing, sales and customer service staff can be trained to deal appropriately with customers according to their preferences and behavioural profiles.
- Pipeline transparency – CEOs are critical to the BI process. Giving them earlier and unambiguous insights into pending orders, incurred costs, billings and customer service issues gives them more time to adjust the business strategy.
- Better customer management – reduce exposure to losses, and match services to revenue, for example by offering lower cost services for lower value customers.
- Manage organisation headcount – BI process improvements increase productivity and accuracy which can mean lower headcounts, or redeploying staff to more productive activities.
To conclude, Wilson said there was a need to go beyond “managing by the numbers” and suggested implementing a balanced scorecard approach.
The balanced scorecard is a performance management tool developed in the early 1990s that adds strategic non-financial performance measures to traditional financial metrics to give a more rounded view of performance.
Examples of non-financial BI data points could include capacity utilisation percentages, customer satisfaction, cycle times, units of output and cases shipped, according to Wilson.
“BI will help you manage the processes that deliver the numbers,” he said.