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Technology
Business Intelligence
Is information overload chipping away at your corporation's profits? Then it's time to adopt technology that can turn data into dollars.
Like many U.S. manufacturers, Brayton International knows what it's like to live through the agony of a recession. When the U.S. economy soured three years ago, the furniture maker found itself in a cash squeeze because clients were canceling orders. To make up for the revenue shortfall, the High Point, N.C., company quickly looked for new sales opportunities. Its secret weapon: technology known as business-intelligence software that can help managers glean data on almost any trend imaginable.
Almost immediately, Brayton was able to analyze its supply-chain data to see which distributors were most successful, what products were top sellers, and who the most active buyers were. Six months later it was able to identify the health-care sector—hospitals and medical offices—as a lucrative market to target. "The trend we saw was that even as the economy was going down, health care continued to grow," recalls Markus Hill, Brayton's manager of information technology. "We felt it was a sector that could keep us going." The bet paid off. Today 20% of Brayton's $50 million in annual sales comes from the health-care industry.
Brayton's tale is not unusual. Many companies are now using business-intelligence technology to gain a competitive edge. That's because the return on investment can be huge. In the case of Brayton, the software's ROI was over 500%.
Brayton didn't just use the technology to churn out detailed reports for the sake of analyzing results. Instead the company focused on obtaining data that could be used to help formulate business strategy. Like an increasing number of companies, it tapped into business-performance management (BPM) software. The technology adds a layer of tools to the traditional business-intelligence suite that automates processes such as goalsetting, decision-making, and performance analysis.
Performance Management
Business-performance management shares the same business-intelligence foundation as other solutions. Companies still need tools to extract data from disparate systems and load it into a data warehouse. They still need software to mine and query that data. BPM adds a layer of functionality that essentially integrates existing management techniques (Six Sigma, Balance Scorecard, etc.) into the business-intelligence cycle.
"Basically these software suites combine traditional business-intelligence analytics with planning and control functions," explains Howard Dresner, vice president and research director for Gartner, based in Stamford, Conn.
BPM software sits on top of traditional business-intelligence tools to help automate and streamline management processes from collaborating with stakeholders and setting goals to establishing plans and monitoring results. In addition to working with data, BPM users look at metrics and key performance indicators to see how their business is doing. Executive dashboard software augments querying tools in order to present important information in an easy-to-read interface that is accessible to multiple levels of management. And scorecards supplement standard reports to provide a snapshot view of the metrics that indicate how a business is performing. Scorecards have many different levels, so executives can monitor performance at a corporate level while managers can see how they stack up on a business-unit or departmental level.
The ultimate goal of metrics, dashboards, and scorecards is to make it easy for executives, managers, and other stakeholders to see how they are performing vs. the company's goals. Because these days it is often difficult to get a complete picture of business performance, while at the same time it's increasingly necessary.
We're seeing a change in mindset," says Robert Ashe, president and chief operating officer of Cognos, based in Ottawa, Ontario. "Companies now realize that decision-making and the information that goes into it are as important as underlying data. Instead of looking back, companies want to look forward. What do the next six months, the next six weeks, look like?"
Avoiding Analysis Paralysis
What's changed over the past couple of years? Why the push for BPM? One reason is that companies are drowning in more data than ever before. It comes from every enterprise-resource planning (ERP) solution, every
customer-relationship management system, every supply-chain management program that a company installs. On one hand, managing this sea of data can present an awesome challenge. On the other hand, it's a treasure trove of information that can help a business make better decisions.
In addition, companies look to BPM to help get them through lean times. "It's a somewhat recession-proof category of enterprise software," says Dresner. "Companies always need to know how they are performing, and in a bad economy they have to know even more."
And if that's not enough, increased emphasis on corporate accountability in the post-Enron days means companies need to get a better handle on all the factors that affect their performance. The Sarbanes-Oxley Act of 2002 demands more auditing insight and requires CEOs and CFOs to personally certify their company's financial results or suffer penalties. BPM software gathers data from multiple business systems to assemble a clear picture of a company's financial performance. It updates that picture on a continuous basis and makes it available to managers throughout a company.
But most important, BPM software can help companies improve processes and operate more efficiently. Singapore-based Flextronics is a $13.4 billion global manufacturing services provider. It produces everything from cellphones to network equipment for the world's largest electronics and information-technology companies. With more than 100 manufacturing facilities worldwide, it is important that Flextronics provide consistent service and competitive pricing to customers worldwide.
In 2001, Flextronics deployed a Cognos business-intelligence platform in order to aggregate information from around the globe and better monitor its performance. "By pulling together data on a global scale, we can get better pricing, respond to customer needs faster, and make better decisions about operations," says Flextronics CIO Mike Webb.
The company makes key metrics available to customers to help integrate them into the manufacturing process. An electronics vendor can monitor manufacturing at a remote plant using a secure extranet portal. "And they can see the information within 30 minutes of what is actually happening on the factory floor. Our customers feel in control. They could literally stop a truck from leaving a facility if they thought there was a problem," explains Webb. Flextronics and its customers save both time and money through this type of performance management.
The Big Payoff
One thing everyone seems to agree on is that business-intelligence software, whether basic data mining or comprehensive BPM, can deliver quick results. According to independent analysis done by Nucleus Research, based in Wellesley, Mass., furniture-manufacturer Brayton International saw payback from its investment in Cognos business-intelligence tools in just one month. Nucleus determined that Brayton's annual ROI over a three-year period was 576%.
There are several ways that business intelligence solutions can deliver ROI. As the technology becomes easier to use, more employees in an organization can do their own analysis without inundating IT staff with requests for special queries and reports. Prior to using business intelligence, Brayton relied on IT to pull reports from the company's ERP application. But it was a slow, unsteady process that often crashed the entire system. The dashboards and scorecards that come with BPM software are designed so anyone can use them. What's more, newer business-intelligence solutions require less training, so more users can be up and running in less time. In its research, Nucleus has found that the greater the number of people using business-intelligence tools, the greater the ROI for the company.
In addition, BPM dashboards and scorecards help executives see and react to information as it becomes available, which allows them to meet demand, fix problems, and shift strategy on a daily rather than a weekly or monthly basis.
"It's the next step in business intelligence and a good way of delivering returns," says Rebecca Wetteman, vice president and founder of Nucleus Research. "Now companies can move beyond reporting and use data to impact performance."
TruServ, a member-owned hardware cooperative in Chicago that includes True Value, Home & Garden Showplace, and Grill Zone, recently adopted business-intelligence tools from Business Objects to monitor metrics across its supply chain. The group's data warehouse collects information from a variety of sources, including inventory-management systems and points of sale at hundreds of TruServ's 6,800 retail member stores. The data is then made available to management through an executive dashboard, as well as a secure extranet that suppliers and stores can access.
The goal was to allow everyone in the supply chain—executives, warehouse managers, sales reps, members, and suppliers—to meas- ure and manage TruServ's distribution, pricing, and sales and marketing functions in real time. Using the internal dashboard application, TruServ management can view real-time demand down to the SKU level by store and region. They can then respond quickly to transfer inventory from distribution centers where there's less demand to those that supply the stores that have the greatest demand. Since TruServ started using a Business Object dashboard, its "red zone" inventory—goods that have to be liquidated or sold at a loss—has dropped from $60 million to $10 million. And its ability to accurately forecast pricing has improved its profit margin by nearly 1%—a significant improvement for a $2.6 billion company.
Shopping Made Simple
Provided a company is sold on the benefits of business-intelligence and business-performance management software, shopping for a solution should be easier than in the past. While the business-intelligence market hasn't exactly undergone much contraction, the many software vendors available now offer a complete line of solutions. It used to be that if a company wanted a reporting tool it might buy it from Crystal Decisions, and if it wanted a data-mining tool it might shop at SAS.
"Some organizations were out of control," says Dresner. "I know one that had 16 different overlapping tools and never threw anything out. Now companies want to consolidate and standardize."
Today companies like Business Objects, Cognos, and SAS sell complete lines of business-intelligence solutions—including BPM suites. That's a good thing because customers would like to buy their tools from as few sources as possible to enjoy economies of scale and ease of integration (see "Toshiba Prefers One-Stop Shopping for BI").
Going forward, these companies plan to add more predictive-analytics capabilities to their suites. The goal is to give companies the ability to do more "what if" scenarios based on internal and external data.
"Business intelligence hasn't hit a wall," says Mark Smith, CEO of Ventana Research in Belmont, Calif. "We're only just seeing how important it is."
—Brad Grimes
Brad Grimes is a partner in Content Foundry LLC, a communications firm serving the high-tech industry.
Moving Data in Real Time
Sharing and analyzing data rarely takes place within four walls anymore. Organizations are spread out across the country—and across the world. In such cases pulling together information in a central data warehouse requires a network. While some companies rely on the Internet backbone to communicate, others use secure, high-speed lines. Verizon Communications offers both.
Shields Health Care has roughly 500 employees serving 14 imaging centers in Massachusetts and Rhode Island. These centers provide an array of services, including magnetic resonance imaging (MRI), positron emission tomography (PET), and computed tomography (CT) scans. The company uses high-speed, reliable, secure data lines from Verizon to link its central data warehouse to remote-imaging centers so doctors can rapidly access scans. "We have the best equipment and the best doctors, and we wanted the most reliable network," says Jack Shields, president of Shields Health Care.
Every scan from a remote center travels back to the data warehouse through Verizon data lines and is available to referring physicians using Shields ExpressLink, a unique, secure web-based viewer that allows referring physicians to view both images and reports online. It used to take up to seven days for the results of an MRI scan to reach a patient. Today radiologists can remotely access scans from Shields locations, which means Shields can get results to patients in hours instead of days.
When sharing data quickly is more important that simply sharing data, the network has to be fast. Shields Health Care knows this, but more important, patients know it.
Toshiba Prefers One-Stop Shopping for BI
When Toshiba America Business Solutions (TABS), based in Irvine, Calif., broke off from Toshiba America Information Systems in 1999, it was relying on legacy systems and procedures to obtain business intelligence. That had to change. The company, which sells Toshiba copiers, printers, and fax machines, needed new tools for extracting critical data from enterprise software systems, analyzing it, and creating usable reports. And it didn't want a piecemeal solution.
"We wanted to leverage one integrated suite from one vendor," says Denise Fishel, director of e-business planning and development. "There's a cost to getting two different vendors' products to work together."
The company decided on Cognos Series 7 tools. It uses DecisionStream to extract, transform, and load sales and marketing data from its Unix-based data warehouse; PowerPlay to explore large amounts of data through a simple interface; and Impromptu to create reports and share the analysis that leads to better business decisions. The data is available to employees through an Internet portal that supports 15,000 users. In addition, dealers and distributors can use the portal to get daily production, sales, and inventory reports and other important company information.
Fishel says the new solution is rapidly paying for itself. Now more people in the company can do the kind of data querying and reporting that just a handful did before. "We're seeing quick time to value," she explains. "Our ability to get to data and make business decisions has
improved dramatically."
Putting Business Intelligence Online
As companies demand more from their business-intelligence solutions than querying and reporting, software developers are delivering integrated software suites that handle everything from analysis to data integration. And some are helping customers share business intelligence virtually online.
In May, Business Objects launched BusinessObjects Enterprise 6. "With Enterprise 6 we're helping companies track, understand, and manage enterprise performance, giving business intelligence a central role in decision management and goal setting," says Chris Caren, vice president of product marketing at Business Objects.
Increasingly, companies are using Business Objects software, including the new WebIntelligence 6.0, to build secure extranets that allow strategic partners and customers to benefit from their business intelligence. The Workers' Compensation Insurance Rating Bureau of California (WCIRB), a nonprofit statistical agent for the insurance commissioner of the state, uses Business Objects software so its more than 400 members can
access information in its half-terabyte data warehouse.
"From a simple web browser, they can securely run reports that show trends and benchmark information for sectors of the workers' compensation market," explains CIO Randy Millen. By delivering data in a secure, self-service model, WCIRB can concentrate on providing the best information possible instead of running queries and reports on behalf of its members."
WebIntelligence lets us support more users with features that will allow constituents to do more with the information we give them," says Millen. "And it strengthens our relationships with our key partners and clients."
1-800-Flowers.com Is Coming Up Roses
In the late 1990s, 1-800-Flowers.com, based in Westbury, N.Y., already had a widely recognized brand name and a successful business that was branching out into new lines of specialty gift products. But president Chris McCann was not satisfied with mere success. "We'd already ac-hieved operational excellence," he says. "We wanted more customer intimacy."
McCann says that 1-800-Flowers.com wanted to turn brand loyalty into brand relationships by using the vast amounts of data it collected to better understand customers' needs and expectations. The company adopted SAS Enterprise Miner to analyze customer data and help build one-on-one relationships. Enterprise Miner sifts through data to reveal trends, explain outcomes, and predict results so that businesses can increase response rates and quickly identify their profitable customers.
We can use our business intelligence to segment customers and be proactive in our marketing campaigns," says McCann. "If you treat customers as a mass, they won't have a relationship with your business."
Already 1-800-Flowers.com has seen that focusing on the customer can help it weather and even thrive in difficult retail climates. In its fiscal 2003 third quarter, which ended March 30, the company reported total revenues of $124.1 million, up 7.5% over the prior year period. At the same time, online revenues jumped 13.6%.
"In our business the customer doesn't always see the product because he or she is sending it to a loved one,"
explains McCann. "That's why it's so important for us to focus on customer experience."
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