SMU CSE 7360: Class 04 - Business Intelligence & Planning

	Management of Information Technologies
Notes	Class 04 Business Intelligence & Planning Copyright 1996, 1997, 1999 by Bill Petersen All rights reserved. No part of this work covered by the copyright herein may be reproduced or used in any form or by any means - graphic, electronic, or mechanical, including, but not limited to, photocopying, recording, taping, or information storage and retrieval systems - except for the use in the SMU CSE-7360 classes during the combined summer session of 1996, 1997, and 1999 - without written permission of the author, Bill Petersen. Published in the United States of America Published in the United States in 1996, 1997, 1999 by Bill Petersen 817 Cedar Crest Lane Allen, Texas 75002 USA
	Agenda Introduction to Business Intelligence Building an SBIS Using Business Intelligence Case Studies Summary References Introduction to Business Intelligence What is Business Intelligence? Let's start with Intelligence. Intelligence is the ability to learn or understand or to deal with new situations. Also the skilled use of reason. Business Intelligence is information which has been processed to aid in the reasoning or decision making process of a business. Organizational Management will use Business Intelligence to make a more informed decision. The more distributed or decentralized organizations get, the harder it is for central management to gather all of the information required to make intelligent decisions. Management therefore has to go through an effort of information gathering and processing of that information to determine what pieces are applicable to the decision at hand. Business Intelligence gathering is born. Higher levels of management use not only internal, but also external forms of information in making strategy decisions. They can be flooded with data and information and must determine which are useful in making the business decisions. Lets recap some terminology. Data is raw numbers, words, etc. Information is data which has been processed in some way to make it more useful Intelligence is information which is particularly useful for one reason or another. Competition in the business world is akin to war. Only the fit survive. How do you (as a business) become fit? By providing higher quality products By marketing products better By being more competitive on price By providing better service By being to market with a product first Better is a relative term. How are you going to be better? Better than who? Lower priced than who? To determine if you are better than someone else, or better than the market average, you have to know what the standard is that you are going to measure yourself by. Sometimes you don't even care if you are better, you just don’t want to be surprised. Goal might be to monitor changes and potential for change in the industry looking for opportunities and challenges. Asian companies, especially those in Japan, have some of the most advanced Business Intelligence Systems in the world. Building an SBIS So you need to gather intelligence to make your business more competitive. And you'd like to automate the collection and processing of this information. Where do you start in building a Strategic Business Intelligence System (SBIS)? Goals/Objective Needs/Requirements Build a first pass Evolve the system Goals: Early identification of potential for action by competitors, customers, suppliers Intelligence, with strategic implications, to allow the timely formulation and implementation of reactionary or defensive plans Not normally to outsmart the competition Rather to keep from getting surprised or to imitate specific successes. Requirements: Information needs Delivery preferences (email, paper, in-person,..) Frequency Level of detail Flexibility What else? Note: Monitoring/collecting data continuously allows for trending of markets/industries Ad-hoc data collecting can be more useful and timely, for specific queries Periodic collection allows for the general trending of of many more markets/industries with fewer overall resources. Preparing a Competitor Analysis Operating policies and procedures Marketing Products Finances Personnel Culture Profile What else? The measure: to produce results that are valuable to the end recipient of the intelligence Critical Success Factors Grow end-user's knowledge Integrate with existing intelligence/information gathering tools and information delivery tools Maintain a reactive sized staff Generate valuable intelligence Obtain feedback Maintain Visibility Build the system Identify the goals/objectives Identify the information needs Identify the information sources Create the information filter Create intelligence by drawing implications Distribute the intelligence Obtain feedback Evolving the system Re-confirm goals & objectives Re-confirm information needs Look for new information sources Evolve information filter for higher "hit" rates Communicate, communicate, communicate Integrate internal and external sources of information Offer incentives for employees to feed information into the system Development should be done in small, measurable, incremental steps, using the tornado development model. Trying to create the perfect system from the start can be the kiss of death! You can get to far off track, and before you know it, waste months of effort. Initial efforts should concentrate on making a few delighted customers by providing intelligence that has the most potential for high returns. A Senior Manager should be close to the project. Point-of-contact between other management (users) and the developers of the system Assist with funding issues Assist with visibility and marketing Intelligence Analysts: Need research or investigative skills Behavioral analysis skills Knowledge of the company or at least the industry Data gathering skills Good insight, strategy, persistence, and creativity Information Sources: Sales people Conferences Trade Journals Annual Reports Books and periodicals On-line services WWW sites Other Sources of Information: Benchmarking Surveys Talking with former employees Product samples and literature Sales people Product announcements The value of the information has got to be greater than: the cost to acquire the data plus the cost of processing the data (to get useful intelligence) plus the cost of storing the data and conclusions plus the cost of accessing the data Using Business Intelligence Two important end-user (manager) traits: Managers like to act quickly, and don’t want to wait for additional data gathering Managers don't like to hear that industry rivals have a competitive advantage in any area Without exception, all data must be collected in legal and ethical manners. Information managers must realize that even as they are collecting data about their rivals, their rivals are attempting to collect data about them Security awareness must be high! The need to safeguard proprietary information and technology is critical. All management must realize that even as employees are the companies greatest asset, they are also the largest risk to its assets. It is cheaper and easier to bribe an employee to deliver a backup tape into the wrong hands than it is to capture the data rveillance efforts. Case Studies Mitsubishi has two floors of intelligence analysts in the New York Met Life building. NutraSweet won a significant up-hill battle through the use of business intelligence. Open Discussion SUMMARY Business Intelligence is information which has been processed to aid in the reasoning or decision making process of a business. Organizational Management will use Business Intelligence to make a more informed decision. Higher levels of management use not only internal, but also external forms of information in making strategy decisions. They can be flooded with data and information and must determine which are useful in making the business decisions. Data is raw numbers, words, etc. Information is data which has been processed in some way to make it more useful Intelligence is information which is particularly useful for one reason or another. Only the fit survive. To determine if you are better than someone else, or better than the market average, you have to know what the standard is that you are going to measure yourself by. Goals/Objective Needs/Requirements Build a first pass Evolve the system Preparing a Competitor Analysis Operating policies and procedures Marketing Products Finances Personnel Culture Profile What else? Critical Success Factors Grow end-user's knowledge Integrate with existing intelligence/information gathering tools and information delivery tools Maintain a reactive sized staff Generate valuable intelligence Obtain feedback Maintain Visibility Build the system Identify the goals/objectives Identify the information needs Identify the information sources Create the information filter Create intelligence by drawing implications Distribute the intelligence Obtain feedback Evolving the system Re-confirm goals & objectives Re-confirm information needs Look for new information sources Evolve information filter for higher "hit" rates Communicate, communicate, communicate Without exception, all data must be collected in legal and ethical manners. References Umbaugh, Robert E., ed. Handbool of IS Management, fourth edition, Boston, MA: Auerbach Publications, 1995. Chapter I-8, The Reality of Outsourcing; Chapter IV-4, Outsourcing Software; Chapter II-5, Shifting to Distributed Computing; Chapter V-5, Enterprise Network Strategies; Chapter VI-5, Security Strategy. Flynn, Robert. NutraSweet Faces Competition: The Critical Role of Competitive Intelligence. Competitive Intelligence Review, Vol 7, John Wiley & Sons Inc.