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Companies have done a good job figuring out how technology can help them capture and crunch data. Now comes the hard part.
Janet Kersnar, CFO Europe Magazine
June 12, 2006
Synthesis is a subject that's discussed a lot around Novasep. With good reason. A big part of its €400 million ($491 million) business depends on the ability of biochemists to synthesize organic molecules for customers in industries like pharmaceuticals and agrochemicals. But it's the synthesis taking place outside of Novasep's laboratories that's been the centre of CFO Olivier LeGrand's attention lately.
Until a few months ago, information and knowledge management at Novasep was anything but synthesized. Having grown rapidly via acquisitions, the Loire valley-based company was struggling to get hold of crucial sales and marketing data scattered throughout its new units.
Enter business intelligence (BI) technology. Sitting on top of two different ERP systems, a BI application from Hyperion is now being used by LeGrand and his finance team in Pompey, to gather and consolidate data for faster, more efficient reporting and control. Rolled out throughout Novasep, including units in Germany, Switzerland and other parts of Europe, the tool has been pivotal in helping the company not only monitor past performance, but also drive strategy and new growth initiatives. One way that's happening is by uniting sales and marketing information via a data warehouse so that sales teams have a single, robust source that they can use to keep track of all of Novasep's product lines-valuable insight for winning new customers and avoiding the duplication of sales efforts. "Now, instead of having someone from each of our entities talk to the customer about a specific technology, one person can talk to them about all the technologies," says LeGrand. "Before, it would have been just too difficult."
Novasep is onto something that's causing a stir in enterprise software circles. While BI technology certainly isn't new, companies like Novasep are pushing the traditional boundaries of the software. They're aiming to spread the use of BI across their entire organizations and enhance the technologies with powerful analytical and predictive functionalities.
That's much easier said than done. Above all, it means challenging the whole way business strategists have become accustomed to exploiting data. According to Seán Kelly, an Ireland-based consultant specializing in data warehousing and other aspects of BI, companies rarely use information as a strategic business resource. "In such circumstances," he writes in his latest book, Customer Intelligence: From Data to Dialogue (John Wiley & Sons, 2005), "information is a comfort blanket to which the organization clings in times of crisis. It is used to report against performance rather than to determine direction....It is perceived as a series of snapshots rather than a continuous flow. And it is treated as a defensive asset rather than an offensive capability."
Traditionally, BI has been used primarily as a tactical, rather than strategic, tool. "We're a long way off from what properly deployed enterprise BI can achieve," asserts Andrew Kellett, a senior research analyst at Butler Group. In a March report assessing BI usage, Kellett grouses that while vendors have been talking about "integrated BI" for the past few years, "little has been done to move the technology from a tactical data and information manipulation tool." He adds that "the issue with extending the use of BI is not necessarily about more BI, but about making better use of it." (See chart below.)
The good news is some of the barriers to preventing enterprise-wide strategic BI are falling fast. Notably, the technology has improved in leaps and bounds. Over the past couple of years, innovation and heavy investment by both large and small vendors — not to mention plenty of end-user customization — have brought a host of BI tools capable of extracting and integrating data from all sorts of sources and turning it into operational intelligence on which to base forward-looking strategy. "Today's business intelligence should be able to direct you in terms of what sales you should do next — predictive modeling, sales pipelining, forecasting what market segments have the highest propensity to buy a service," says Andreas Bitterer, a Hamburg-based analyst at Gartner, a market research company.
Stuck in Silos
Now that those capabilities are a given, the next step towards strategic BI is greater standardization. At the moment, says Kellett of Butler Group, companies are awash with BI tools — but most are "silo-based" within individual departments so information is only shared within small groups, rather than across an organization. Why should companies go through all the hassle of standardizing BI tools? "For all the same reasons other technology is being standardized in other parts of an organization: better integration, easier administration and more security. It could also mean lower costs," he says.
In order to reap the benefits of standardization, however, Kellett says companies should bear in mind that some technology cannot be standardized easily. The key is to probe vendors about whether the technology will be up to the job by finding out whether an application can support, among other things, a growing number of individual users who will require variable access and data manipulation rights; the use of scorecards and dashboards; and third-party applications, portals and web tools.
But beyond the technology, there's a far greater barrier preventing the development of strategic BI: people. Just ask Jeff van der Eems, CFO since last spring of £1.3 billion United Biscuits, known in the UK for snacks such as McVitie's biscuits and Jaffa Cakes. As a relative newcomer to the London-based company, van der Eems has been impressed with the amount of performance data — driven by a BI application from Cognos and in-house tools sitting on top of an SAP system — that finance has access to. "It helps me most in understanding brand dynamics — what the relative margins are, what the costs are to grow the brands and so on," he says. In addition, the plant performance information, such as the per-unit productivity, is also vital. "To be the best brand you also have to be the lowest cost producer," he says.
The problem is that intelligence isn't reaching as many parts of UB as van der Eems would like. "BI works very well within finance, because that's the mindset and that's the core competency," he says. "Supply chain individuals use it very well too. That's just the nature of the beast — it's an internally controlled environment and they're very numerically driven." As for sales and marketing, "that's not so good," he says.
At the moment, van der Eems says there's a lot of data — such as details of recent promotional campaigns — that remain stuck inside some parts of the commercial units. "It's always going to be a bit of a challenge because you don't want a sales guy who spends all his time running to the database rather than sitting in front of [a customer like] Tesco," he says. "But on the other hand, you have to get these guys smarter about how they promote and how they structure the terms, and balance that with sitting in front of the customer, because they'll get a lot more from their visit if they're smart when they go into it."
There's no quick fix, yet van der Eems looks on the bright side. "It can be frustrating when I think we've got all this data and I don't feel like we're harnessing it. But if I look back at where we once were, BI has come along in leaps and bounds."
Centre of Attention
Jim Muehlbauer agrees. For the past three years, the vice president of Best Buy has been on the front line of a daring plan to change the business model of the $27 billion Minneapolis-based consumer electronics retail chain. The main thrust of the change centers around shifting sales efforts to the customers themselves, rather than just moving computers and TVs off its shelves. In what Best Buy parlance calls "customer centricity," BI is pivotal.
With the help of applications from Business Objects and Teradata (and, again, plenty of in-house customization), nearly half of Best Buy's 700 stores are now customer centric — that is, they've aligned their businesses to cater to the five types of Best Buy's most profitable customers, from suburban mothers to affluent techno geeks. Weekly P&Ls on each customer segment and other intelligence show both head office and shop managers not only which customers are buying what product, but also whether any accessories or complementary products and services are bought at the time, and whether the customer returns to make additional purchases related to the original sale. Rather than being banished to spreadsheets stored at head office, all this data ends up back on the shop floor in order to arm shop assistants with better knowledge about customer buying habits.
Customer centricity is also benefiting Best Buy's relationships with suppliers, says Muehlbauer. "We now have the ability to give our vendor partners macro trends so they can understand how to best promote their product in our channel. If our customers are happy our entire business model works," he explains.
According to Muehlbauer, one of the keys is training, and one part of that training requires all staff at the customer-centric stores to participate in a short finance course. The aim is to provide staff with an overview of the key drivers of profitability at each store and general performance indicators such as return on invested capital.
But like other companies embarking on ambitious BI projects, Best Buy staff could easily end up being overloaded with too much data; or worse, with data that's useless for their jobs. Therefore, another important component of customer centricity has been to sort out what data needs to be harnessed and turned into scorecards that shop managers can "action." As Muehlbauer explains, that's done through regular working groups from all parts of Best Buy — including store managers — "who each look at the data with different lenses." As he sees it, "When you are building data warehouse capabilities, as we are, you need a lot of dialogue with the constituents."
But how much data is too much? Muehlbauer concedes that some data now needs to be reined in. "Our stores get ranked on well over 150 metrics on a daily basis," he says. "That is too much information to absorb and take action on, and they can't all be driving the same level of value. How can we get more focus on the top 20 metrics, and then provide the insights that go along with it?"
While he searches for that answer, Muehlbauer is also working on organizational resistance. Getting the various parts of the company to use BI isn't an issue at Best Buy-"we've always had a data-driven culture," he says. The hard part is getting functions within Best Buy that already have their own BI tools to give them up and use the new standardized applications. "Breaking down those organizational barriers and showing each part of the business how they can benefit from a different look at the data with different insights has been our biggest challenge," he concedes. But there's no turning back, he says — as more and more standardized BI tools are rolled out under the customer-centric model, scrapping the old "silo" perspective of the business "is now a non-negotiable."
With additional reporting by Stephen Pritchard.