Companies that tie business intelligence capabilities to broad IT performance management practices and strategic goals can gain a significant strategic advantage, said analysts and IT managers said at the Gartner BI Summit being held here this week.
Most enterprise BI systems today are still inward-looking, using mostly past performance data such as revenue, profit and costs to support efforts to improve operational efficiencies and decrease costs.
However, systems that serve to answer only such ad hoc, tactical business queries yield far less strategic benefit than a more comprehensive BI system could, said Gartner analyst Patrick Meehan.
Enterprises could gain more strategic, long-term benefits from BI investments by linking business intelligence to more forward-looking performance management practices and data — both internal and external, several Gartner analysts said.
Corporate executives should formulate the two or three strategic business questions that need to be answered on a persistent basis, and then determine what data must be regularly gathered and analyzed to answer them intelligently, Meehan said.
“[BI] is not something you buy. It’s not something in a box. It’s about questions,” he said. The biggest impact from BI is its ability to anticipate business opportunities.
To do that effectively, companies must look at both past performance data and more forward-looking, leading indicators, said Michael Smith, another Gartner analyst. The broader analysis can have a far more significant impact on a company’s bottom line, he added.
“The vast majority of information in BI systems [today] is lagging indicators,” Smith noted.
Leading indicators can come from both internal and external data sources and can be highly business-specific, Smith said. For instance, a company could analyze qualified leads to predict future financial performance.
And analysis of external indicators, such as raw material shipping costs and inflationary indexes could help a company make needed adjustments to its operations on the run.
The ubiquity of the Internet has made getting such important external information an almost trivial task, Smith noted.
Using that data well can significantly improve a company’s ability to respond quickly to internal and external changes, he said. A company needs to be able to correlate the data effectively and know how to look for only those indicators that have a direct impact on its business, Smith added.
“BI, analytics and performance management is about adding intelligence information to make better decisions,” Gartner analyst Bill Hostmann said in a conference keynote.
A broader BI system would allow for descriptive, diagnostic and predictive analysis of data to determine what happened and why and then predict the consequences of the event, he said.
The need for companies to tie BI data to a broader enterprise strategy and performance management objectives has been well understood for some time, said Lisa Pappas, a product marketing manager at SAS Institute.
Companies are increasingly looking to do more predictive modeling and forecasting in an effort to make better decisions, she said.
Rajeev Kapur, director of business analytics at Newell Rubbermaid, said Gartner’s advice makes sense at a high level, but there are several caveats when it comes to implementation. “I would love to be able to do it, but it’s not easy,” he said.
Often, enterprise BI groups work in silos and do not directly report to a C-level executive, he said. At Newell Rubbermaid, for instance, Kapur’s group reports to a vice president of process, who reports to the CIO.
Typically, requests to the BI group have to pass through multiple management layers, Kapur noted.
“There are so many layers, that agility is lost,” he said.
For BI to gain real strategic importance, the function should be overseen directly by the CFO, the COO or another top-level executive, Kapur noted.