The Role of Business Intelligence by L2w96Gt


									The Role of Business
     Nimrod Sofer
What is Business Intelligence?
Business Intelligence is the processed information of interest to •
management about the present and future environment in which the
business is operating (Greene, 1966).

Note the emphasis on processed information. Raw data are not useful as      •
intelligence until evaluated, interpreted and disseminated by the right
people to the right users.

Note also the emphasis on management. Management determines what would
be of interest and without management involvement the business
intelligence deteriorates to a second Library of Congress.

Note, too, the mention of present and future. Intelligence can be tactical and
strategic in nature.
    What to look for or what BI
New Market Opprtunities •
Launching new products •
Identifying acquisition targets •
Formulating competitive strategies •
Forming joint ventures •
Investing in R&D •
Pricing products •
        Yom Kippur War - 1973
• Israeli Intelligence and the
    Yom Kippur War of 1973
• The Yom Kippur War of October 1973 was a terrible surprise, which
    put Israel's security - and even survival - in jeopardy. By the end of
    the war, Israel had turned the tables and both Cairo and Damascus
    were under threat. But that did not diminish the sense of shock
    which shook the nation in the aftermath of the war. How could such
    a disaster have happened? Israel was supposed to be nearly
    "invincible", in the minds of many of her military and political
    leaders. That sense of confidence deflated quickly in the aftermath
    of the war. Much of the blame fell on the shoulders of the
    Intelligence community, which was blamed for not accurately
    assessing clear information that Egypt and Syria planned to go to
    war on October 6, 1973.
           Yom Kippur 1973
• Lieutenant Benjamin Siman-Tov, "War
 Preparations in the Egyptian Army." This report
 was in contradiction with the headquarters
 intelligence assessment, so it was not
 forwarded. In the report, he stated that the
 Egyptian exercise could be camouflage for a real
 operation. Lt. Siman-Tov had a tense
 relationship with his commanding officer and
 had had disagreements with him before.
     Yom Kippur 1973 (cont.)

• Zeira had a reputation for not agreeing
  with anyone who disagreed with his
• Zeira’s dogmatism and untruthfulness
  denied Golda Meir’s cabinet the
  information needed to conclude that a war
  was pending
                         September 11

• WASHINGTON (CNN) -- U.S. intelligence
    gathering was fragmented and poorly
    coordinated before the September 11,
    2001, terrorist attacks, the 9/11
    commission reported Wednesday, adding
    that it remains unclear how such crucial
    information is managed.
              September 11
• "A question remains: Who is in charge of intelligence?"
  reads the final line of a critical report by the National
  Commission on Terrorist Attacks Upon the United States,
  as the bipartisan 9/11 panel is formally known.
• The report, examining the performance of the
  intelligence community, described a "loose collection" of
  intelligence agencies that often operated independently
  of one another with little communication or cooperation.
  And it faulted CIA Director George Tenet for not having
  a management strategy to battle terrorism before the
  9/11 attacks.
                    September 11

• "In intelligence collection, despite many
   excellent efforts, there was not a
   comprehensive review of what the
   community knew, what it did not know,
   followed by the development of a
   community-wide plan to close those
Military Intelligence vs. Business Inteliigence

• $$$ against lives
• Company all the time in “war”
• Military intelligence – only “competitors”
• Competitor = partner, enemy = enemy
• Ethics
• Sources of information
The Business Intelligence Cycle

           • Collection
          • Evaluation
            • Storage
            • Analysis
          • Distribution
     Where to look for – Sources of
• Customers – competitors products, new product planning, pricing, service, personnel.
    Purchasing agents are of low reliability, Customers’ top mgmt and engineers are high
•   Suppliers – banks, advertising agencies, public relations firms etc. have access to
    competitors and/or suppliers.
•   Consultants – Though operating under confidentiality, they are free to discuss
    industry problems and issues, for instance architects and lawyers in construction
•   Dealers and Distributors – have a lot of gossip about others like product lines, pricing
•   Job candidates – information about former and current employers.
•   Chamber of Commerce – like to talk about other people’s business…
•   Trade Associations – in the hotel industry know about occupancy rates
•   Subcontractors – working for you and for others at the same time
•   Journalists – the best source of information as they are BI persons
    Collectors of Field Information
• Sales
•   Marketing
•   Service
•   Purchasing
•   R&D
•   Personnel
•   Manufacturing
•   Treasury
•   Legal
•   Top Executives
Designing your BI system

• What intelligence is needed by users?
• What intelligence information is already
• Who can serve as collectors of
• Formal and informal methods of
  communications which can be used.
Building a BI system in steps

1. Specify system objectives •
Which decision making areas will the system supports?              •
Strategic planning/mergers & acquisition / New product development/ Launching –
New Products/ Entering New markets or industries / Establishing New businesses/
R&D Planning / Identifying threats and opportunities/ Technical decisions
Type of System –
Used for document storage and retrieval/ Storage of abstracts only / Storage of       –
references only/ Storage of intelligence reports only (competitor profiles) /
Interactive competitor profiles

2. Determining output –
Establishing users / identify user needs/ Design intelligence reports / Establish a   –
reporting system
Questions in building BI system
         Collection     Evaluation       Storage          Analysis
 Who     Collection
                         Analysis       Information
                                                            and           Users

What    Targets         Coverage
                                        Raw data

                         Sources         Profiles

Where     Sources
                        decentralized   decentralized    decentralized
 How     Internal /     Usefulness        Manual /        Theoretical     Paper path
          External      Measures        computerized                        On-line
                                         On-line / off   Framework
        Centralized /                                                    computerHu
                                                                           man Path
        decentralized                     (e-mail)
                                        References /
Building a BI system in steps

3. Establishing input needs •
Identify sources of intelligence data / Determine what should be computerised and what should          •
not / Establish data structure and file formats / Design appropriate competitor profiles / Establish
information quality control procedures

4. System Design and organizational •
Determine methods for data input / who will input the data into the system? / Identify potential       •
system bottlenecks / Establish criteria for system and data security / One data base or many?
Establish centralized or decentralized system.

5. Computer systems •
What is the estimated memory/processing capacity or existing hardware? What software is          •
available internally? What existing databases can be useful?
Building a BI system in steps

7. Specifying system capacity •
Scope of the system / How many users / Number of competitors/suppliers to be tracked / what         •
information will be included in the competitor/supplier profile / How will data be stored (raw data
documents, abstracts, profiles?

8. System Evaluation •
Obtain user feed-back (method + tool) / Establish criteria for system evaluation   •
    The ongoing tasks of collection
•   Periodic updating of the target list
•   Constant motivating of the collection network
•   Evaluation of intelligence sources
•   Debriefing collectors and accumulating published
•   Revising the collection plan
•   Recruiting new members to the collection network
•   Identifying new sources of intelligence
             Roles of the BI Unit
•   Collection
•   Management of Collection
•   Integration of data
•   Communication
•   Facilitation of information exchange
•   Education (about BI)
•   Analysis
•   Interpretation
•   Environmental alert
•   Consultation
Computerized storage of Intelligence

• Source (complete reference)
• Key words
• Content (abstract of full text)
• Reliability of source
• Validity score
• Security / Access restrictions
               How to report
•   Written Reports
•   Newsletter
•   Hotline
•   Display
•   E-learning
•   E-mail
•   On-line Computer (MSN)
•   Meetings
Companywide BI Database
• Advantages
•   Access by many
•   Comprehensive data
•   Shared information
•   Remote Access
•   Direct data collection
• Disadvantages
•   Expensive data entry
•   Difficult quality control
•   Complex start up
•   Need to educate users
        Motivating Collectors

• Management Support
• Provide information on on-going targets
• Provide feed back
• Intelligence awareness briefings
• Reward
• Distinction between collector and source
        Implementing a BI System
• Development Phase
•   Gain Mandate
•   Educate Management
•   Intelligence audit (diagnostic tool)
•   Proposal

• Introduction Phase
•   Establish needs
•   Determine scope
•   Determine structure (formal/informal centralized/decentralized)
•   Designate staff
•   Establish committees
        Implementing a BI System
• Growth Phase
•   Educate line management
•   Build collection network
•   Develop storage system
•   Disseminate intelligence

• Established Phase
•   Motivate
•   Update Targets
•   Conduct briefings
•   Obtain feed back
•   Evaluate performance
           Potential problems with BI
• Sources
•   Limited sources
•   No field sources
• Collection
•   Pockets of information
•   No collection
• Dissemination
•   Dissemination of data
•   Irrelevant reports
•   Reports not used
• Storage
•   No storage
•   Inaccessible paper files
•   Information not centralized
•   No cross referencing
•   Multiple data bases
•   No knowledge how to access system
•   Input bottlenecks
         Potential problems with BI
• Analysis
•   No expertise
•   Biased analysis
•   Analysis not geared to needs
•   Analysis by end-users
• Management
•   No locus of responsibility
•   No budget
•   No management commitment
•   No training
•   Non-supportive organization structure
• Organization
•   Too centralized
•   Too decentralized
•   Low in the organization
•   Wrong place in the organization
•   Function fragmented
BI Intelligence in Brief

• What is BI
• What to look for
• Where to find it
• How to build
• How to report
Why is BI so relevant for SCM?
•   Globalisering/boundaries (deregulation)
•   Product life cycle
•   Slim margin >> competition
•   Target for bench market as market leader
•   Impossible to get patent on its products
•   Possibility to identify changes/advantages is
•   Networks (formal or informal) still crucial
•   Efficiency – SCM & BI
       The Role of Internet

• Easy access to public information
• E-mail is the only success element of the
 Internet Era
                   My experience
• Most companies do not get field information
• Most companies do not know who knows what
    (information pockets)
•   Sales/purchase waiting for the right forum to
    share their information
•   Q: How can BI prevent bottlenecks in allocating
    alternative suppliers, i.e. get what the business
    wants and not what the suppliers offer
SCM = Vertical Integration?

• SCM evolution – reduce costs rather than
  quality control
• Outsourcing to core biz companies
• What? Purchasing, logistics, distribution
• How? alliances with key partners and
  interactive technology
Network – Key success factor
• Normally there is no linked information network.
•   Result: internal gains only
•   Solution: encourage people to share information
•   Convert push systems to smooth flowing
•   SCM & BI – from individual performance to
     SCM’s evolution
         How did it arise?
margin>> competition >> efficiency
         >> SCM (and BI)
How do we see it in organizations?
Reduce Cost >>Vertical Integration
       >> Outsourcing>>
 SCM – Where in the org?

• Purchasing
• Logistics
• Distribution Functions
• Alliances with Key Partners
• Interactive Technology
SCM - Keywords

• Raw Materials
• Production
• Services
• Storage Distribution
• Service to Customer
 SCM – conclusion

• SCM = internal + external
• Supply network
• Network improvement
• Business Intelligence – help
 increase efficiency and shared
 across the network.
Similarity (1)

• Chad Holiday at Du Pont:
“   We will grow as a company held together less by internal services
    and more by a focus on the external world. We will have much more
    cross-business synergy with our customers, technologies,
    governments, suppliers and global external dynamics. This synergy
    will be created through modern techniques for networking across
    business lines including use of the most effective information
    technology. I will personally champion and lead the networking
    process to ensure that we gainmore total power as a company”
    SCM – How
1. Assessment of the current situation and
2. Designing new processes and a
   controlling business model
3. Proving the concept through a pilot
   demonstration, and
4. Implementing the new model in test
   market or with test customers
Can SCM and BI done at the same time?

• The key is first of all to capture the flow of data forward and backward
    across the chain so that a firm could determine and react to actual
    consumer behaving.
•   Identify information pockets in the organization or bottle necks.
•   Problem: information = power and sometimes money…
•   Early result is crucial to let the process go on: Reduce suppliers, reduce
    number of formats should last in money savings. Money savings = better
    prices for customers = ability to sell more >> bonus to sales persons.
•   Problem: cutting costs = lesser freedom
•   Next – cross departamental survey.
•   Problem: How can you break down these internal barriers?
•   Solution: Weekly meetings, personal interaction…
•   Conclusion: SCM improvement efforts have to cross divisions and in some
    companies also boundaries (borders)
Can SCM and BI done at the same

• Designing a new process:
1.   Who was ordering replacement goods, who the suppliers were,
     what quantities were ordered, and what prices were being
2.   Creating Teams to bring supply down to one source for major
     categories (this contradicts BI as one supplier cannot reflect an
     entire market).
3.   Next the chose suppliers takes ownership of the inventory.
      Comparison (1)
                  SCM     BI

Purpose           aim    Tool

Process           yes     yes

Can money judge   yes   indirect
Comparison (2)

              SCM                                     BI
         No formal model                       No formal model
             Alliances                        No formal alliances
 Idea generation programs with            Idea generation programs
           suppliers                              internally
Training (team formation, problem      Education for sharing information
 identification, root-cause analysis
     Cross department                      Cross department
  Key Success Factors

• Executive endorsement (leaders in their
  firm reward the players acting our their
  roles in the journey) and;
• cross functional effort.
• The greatest obstacle: lack of trust among
  the parties who will most benefit from
  cooperation in pursuing mutual goals
SCM & BI – competitive advantage
• The new supply chain game is becoming a
 competition between effective supply
 networks rather than individual
 corporations, and the gap between the
 leaders and followers is growing rapidly.

• Who is the driver? The CEO? The CIO?
• The CEO or an officer in charge of a
  business unit, empowered to direct the
  journey, must lead the way using
  dedicated resources and the best possible
• This person must be an intreprenour

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