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Information Management - Linio White Paper Part 1 'Nice-to-Know vs. Need-to-Know' - en

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This is the first part of a series of White Papers (in Dutch and English) about Management Decision Making and Information Management, published by Linio. In part 2 various best- practices and lessons-learned will be covered. Part 3 talks about creating a 'Reporting Council' and Best Practices for organisations dealing with Information Management.

About Linio – New Interim Solutions ©
Linio is an independent company, focused on Information Management, and aiming at improved Management Decision Making. A broad international experience helps Linio to look at these subjects in a practical manner. Without a preference for software applications, technical analysis tools or other 'tricks': the (commercial) success of the company and the functioning of the management are paramount. Facilitation of the correct 'tools' for managers, to take better decisions, and make the company controls its activities more effectively. That's what Linio stands for!

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Information Management - Linio White Paper Part 1 'Nice-to-Know vs. Need-to-Know' - en

  1. 1. Management Decision Making: what’s there to improve and how can we handle this? Nice to Know vs. Need to Know White Paper – Part 1 (2011 - EN) www.linio.nl ©Published by Linio – New Interim SolutionsAuthor: Peter ReijJupiterhof 73951 EA MaarnNetherlandsT. + 31 6 4285 4983 1 White Paper ´Nice to Know vs. Need to Know’ – Part 1 Linio – New Interim Solutions ©
  2. 2. I. Executive Summary Linio Whitepaper – Nice to Know vs. Need to Know – Part 1For any company the central objectives and business parameters determine the extent towhich management is on track to meet these targets. The business parameters are crucial andinclude KRIs and KPI’s. With KRIs (the critical result indicators) we refer to historical results;KPI’s (critical performance indicators) are about projections into the future.In practice, however, many companies, whatever the sector or industry in which they operate,have difficulties to set and monitor these business parameters in a correct, solid way. It is alsoclear that essential, underlying data – which is often increasing in quantity – is incorrect andunreliable.Senior management consequently receives inadequate qualitative information, to take adequatedecisions, and to steer the company in a responsible, necessary way in the current competitivearena. So every moment there is an important consideration: Nice to Know vs. Need to Know!Experience shows that there are six essential steps to fundamentally improve the decisionmaking for managers, independent of software applications, analysis tools or technical systemsused. This applies for Business Intelligence as well as for Marketing Intelligence and CustomerIntelligence. The six steps are:  Determining which business parameters apply (KPIs and KRIs).  Analysis and assessment of necessary data (e.g. with a data audit).  Improve data quality and establish rules to guard data quality.  Provisioning reporting processes/management and setting up effective reports.  Organising a Reporting Council (or reporting team).  Internal communication.There are important benefits with this approach: Quick Wins and financial savings, accuracyand functionality of the Management Information System, and a significant competitiveadvantage.This is the first part of a series of White Papers (in Dutch and English) about ManagementDecision Making and Information Management, published by Linio. In part 2 various best-practices and lessons-learned will be covered. Part 3 talks about creating a ReportingCouncil and Best Practices for organisations dealing with Information Management.About Linio – New Interim Solutions ©Linio is an independent company, focused on Information Management, and aiming at improvedManagement Decision Making. A broad international experience helps Linio to look at these subjects in apractical manner. Without a preference for software applications, technical analysis tools or other tricks:the (commercial) success of the company and the functioning of the management are paramount.Facilitation of the correct tools for managers, to take better decisions, and make the company controlsits activities more effectively. Thats what Linio stands for! 2 White Paper ´Nice to Know vs. Need to Know’ – Part 1 Linio – New Interim Solutions ©
  3. 3. II. Management ProblemsGeneralOne of the key problems managers are facing every day is taking the right decisions. And evenso, not taking the right decisions can have far-reaching effects. This applies to any company,non-profit organisation or governmental body, regardless of the industry or sector in which itoperates.Management Decision Making is an important subject that requires attention, at each level inthe organisation. Important are the responsibility of managers, the dependencies, andconsequences of decisions. But also the – financial - risks associated with this. Literatureis even talking about the Art of Decision Making : an essential component that can make orbreak the success of a company.A classic example is the manager receiving a monthly print-out on his desk, and turning topage 25 or 26 for net sales per product group. He/she then moves to a few pages about grossmargins, this time by product class. And just like last month looking at average unit prices ofproducts (page 42/43). He/she doesn’t take any further action with this figure mush: it is theview of what has happened over the past month, so there is not much to do anymore.The decision of this manager is in fact no decision at all; he/she continues with the day-to-day problems.Conclusion: this paper is superfluous, this management information is outdated, and thequality of the decisions this manager takes (based on this material) is questionable.Various research * confirms this conclusion and shows very clearly the signals of the outlinedproblems. For Example:  56% of senior managers are concerned about making poor choices because of bad data.  Less than 10% of executives receive the information they need.  ... the biggest obstacles to successful decision-making throughout the organisation: o Inadequate tools for gathering, integrating or analysing operational information (39% of respondents). o Inconsistent reporting of information among business units, geographies or functional operations (36%). o Lack of accurate, timely and relevant data from across the business (31%).Only 3% of respondents describe their companies as "experts" in using business data to drive better decisions,and only 27% agree that their company makes better, faster business decisions than their main competitors. * The Economist Intelligence Unit © 2009Only 13% of senior marketers felt confident in their ability to forecast the sales impact oftheir marketing programs. * Forrester © 2010 3 White Paper ´Nice to Know vs. Need to Know’ – Part 1 Linio – New Interim Solutions ©
  4. 4. Only 23% of Fortune 1000 companies have KPI’s that are accurately tied to business strategy andfinancial results: this group earned almost 3% higher return on assets and more than 5% higher returnon equity than the companies with inaccurately correlated metrics and strategy. * Harvard Business Review 2009How would companies operate if management base their decisions on a fundamental differentway of looking at information management?For each enterprise Objectives are essential, and steering parameters help us determine towhat extent we are on track to meet these targets. Steering parameters are crucial andinclude KRIs and KPIs. The KRIs (the critical result indicators) are about the historical results;KPI’s (the critical performance indicators) project the results into the future.In practice, many companies, regardless of the business, sector or industry, have difficulty ina correct, solid way to define and monitor these steering parameters. It is clear that essential,underlying data, which often greatly increases in quantity, is not correct and not reliable.Managers get insufficient qualitative information (see the example) to take appropriatedecisions to manage the company in a responsible way. In practice it results in companiesthat lag behind their competition.Information management – more than figures onlyThe basics of information management are explained by four related topics:I - DataThese are the figures in an ERP system or computer, normally loaded in a so-called datawarehouse: this is accessible with certain software. For example: number of products, orderdata, inventory figures, customer data, billing data +volumes, and various amounts of money.II - InformationThis relates to data that is displayed in a more structured and comprehensive form. Forexample, the number of products in categories, number of customers in customer segments,inventory quantities by product category, number of invoices on a certain date, gross or netturnover, costs prices etc.III - KnowledgeRefers to the intelligent rational of information: for example net sales per customer group for amonth, in Euro, totalled in descending order. Or the payment behaviour of customers andtrend figures on stocks. There are many ‘knowledge’ examples: company-, sector-andbusiness specific. 4 White Paper ´Nice to Know vs. Need to Know’ – Part 1 Linio – New Interim Solutions ©
  5. 5. IV - Decision (Behaviour)This concerns the actual choice one makes with the knowledge of specific customer behaviour, oncertain price changes or on special trends that become visible with this knowledge. So the(correct?) decision is taken with the obtained knowledge, which is based on the right information.This seems obvious for good management decisions. But we recognise from many issuesaround information management, especially for the first two topics, can cause majorproblems: data quality and definitions.Data QualityThe following complications are known: • Data quality is poor or insufficient: the company information is unreliable. • Number of data sources and size of these sources is growing fast (almost exponentially). • Ownership of data sources is unclear and often questionable.An extra problem for the hierarchy of data-information-knowledge-decision occurs withthe first subject: there is so much information available, increasingly in quantity, and in somany variations. Think of click/surfing behaviour, social-media traffic, blog-texts, input ofcustomer information by using Web pages etc.In addition, the processes to collect and save data can cause ‘moderate to poor data quality’(so we get the known problem garbage in is garbage out). That doesn’t make it any easier:how we categorize data? What are main issues, and what are the side issues? And how do wefilter relevant information? This classic issue is in fact the idea behind this White Paper (Nice-to-Know versus Need-to-Know).DefinitionsA lot of time is lost on internal discussions about the correct information’: when variousreports show for example net sales, direct costs or gross margin, and it doesn’t lead to thesame values… then what is the truth? And also, the value of a lead, prospect or a newcustomer is not clear in all cases.Next to the problems of data quality and insufficient consensus on definitions, othercomplications are known: • Business objectives and Balanced Scorecard parameters are not fully translated into practical business parameters for the organisation. • Duplication of information, reports, pivot tables, KPI/KRI-documents etc. There are (too) many reports, dashboards, maps, and so-called scorecards. • Who is responsible for data, reporting, and the available information? • The variety of reports and different interpretations can result in a mess, and with the use of PivotTables and spreadsheets even more new reports are added. It explains why certain people get the title ‘Excel Knight. 5 White Paper ´Nice to Know vs. Need to Know’ – Part 1 Linio – New Interim Solutions ©
  6. 6. This White Paper pretends not to be a scientific study or evidence about Business DecisionMaking. But a simple model shows how the hierarchy of Information Management can indicatethe current situation of an enterprise (the names of reports are here only for illustrations). Ithelps to explain the maturity of Information Management.A. At the left is the distinctive operational level from the given example: many classic reports on paper, monthly statements, and such. This management information is published internally and afterwards. The predictive value of such information is limited. We call these KRI’s: critical result indicators. IT has a substantial influence on the application that creates this reporting. There is little or no involvement from the business with this intelligence.B. Left from the centre is the situation with a multitude of reports, dashboards, and scorecards. Each manager has their own preference for layout, format, and frequency of these reports. Internal discussions are typically associated with the quality and reliability of the figures: the available information shows mainly the actual status and historical results. This enables practically no reliable forecast of results. The value of KRIs is reasonable, but that doesn’t apply to KPI’s (critical performance indicators).C. Right from the middle refers to strongly rationalised management information. The excess of reports and scorecards is reduced: they are published according to agreed standards and frequency. Clear definitions apply. Content of the information has significantly more quality, resulting in reasonably accurate predictions. The business has a lot of influence on the quality of the application.D. At the right is the most ideal situation of management information: a high degree of predictability, forward projections, and typical KPI’s. It enables management, with reliable historical data, to focus especially on the future.This Hierarchy of Information Management is a typical development that companies gothrough. The model helps explain the status of Information Management we need to take intoaccount. And what level of ambitions an enterprise may have or may not have. In other words,the model helps to raise awareness of the issue management decision making, and thechanges that are achievable for this subject. 6 White Paper ´Nice to Know vs. Need to Know’ – Part 1 Linio – New Interim Solutions ©
  7. 7. Recognisable problems! What is the solution?How to resolve these problems? What is a sensible approach? Are there any best practices?What risks and pitfalls should we consider? And … what could be the role for Linio?A fundamental understanding of information management will create more awareness – forall staff involved – and explain the difference between Nice-to-Know’ and ‘Need-to-Know . Inthe immense quantity of data-information-knowledge many people get lost very quickly;and that’s the key to make the right decisions. Managers will need to look at the essentials,the Need-to-Know subjects. It also requires the correct, clear definitions of the businessparameters. Side issues, Nice-to-Know’, are interesting to know, but don’t play an essentialrole for the success of a company.In practice, there are different ways to solve this problem. Often the approach is dictated bythe interests of suppliers of Business/Marketing Intelligence applications. Indeed solutionsfrom the technical environment, for example with changes of software configurations, datawarehouse and dashboards. Usually these precious interventions do not solve the problem!It creates high expectations among senior management, but the quality of decision makingdoes not improve a lot. In other words: more beautiful and colourful dashboards do notnecessarily result in better decisions!In essence, here are three distinct areas: a - Strategic choices : the assessment by senior management of business parameters for the company. It is related to the urgency management information needs to meet contemporary requirements and to compare results with these parameters. b - Tactical considerations : the design, development and management of reports. This will also include internal processes, definitions of the parameters and the role of employees with the necessary management information. The data quality has to be mentioned, and there must be a clear understanding on what the rules are to improve (and securing) of data quality and data processes. c - Operational implementation : the actual build (production) and distribution of reports, dashboards, and abovementioned KRIs/KPI’s (the key result and key performance indicators). It concerns the use of reports, scorecards and dashboards.Experience shows, also in the practice of Linio, that mainly six steps are needed to improvedecision making for managers in a fundamental way. Regardless of the size of the company,the sector or industry; it is applicable for each management level. Important: it works for anysoftware applications, analysis tools or technical systems used in the company!For all these steps, we have an important purpose, namely: Have the right information available throughout the organisation, for the right staff, at the right time, in the correct format, to manage the company in the preferred direction. 7 White Paper ´Nice to Know vs. Need to Know’ – Part 1 Linio – New Interim Solutions ©
  8. 8. 1- Determine which business parameters apply for the business (KPIs and KRIs): a. Define relevant business parameters for the company. b. Create awareness about the importance of Nice-to-Know vs. Need-to-Know. c. Agree with senior management what business drivers are valid. d. Define the business case, to draw up a plan of actions, and agree about the expectations. Assign responsibilities and authority.2- Analysis and assessment of necessary data (including data audit): a. Performing a data audit or quick scan. b. Determine availability of relevant data. c. Activities to improve data quality and data enrichment.3- Fix/improve processes: a. Optimise data processes: recommend how to improve data quality and data processes, as well as securing data quality. b. List management: querying and selection work in (marketing) database environments. Tuning where these activities are to be done and who will handle this. c. Related activities (by third parties for technical expertise): advice and design of ETL, data marts, DWH (incl. architecture).4- Organisation: a. Structure of current reports ( Reporting Grid ). b. Organising a Reporting Council or reporting team. This is also called a (Business Intelligence) Competence Centre. c. Monitor processes, roles and responsibilities. d. Project management of the above activities. e. Outsourcing or insourcing is a possible alternative to limited internal expertise or to deal with missing resources.5- Arrangements for reporting process/management + establish effective reporting: a. Definitions (+ retain this!) of parameters, data, and information within IT/Business. b. Designing, developing and deploying reports and (marketing) management dashboards: prototyping, development and production. c. Determine who builds the reports, who maintains them, and who is using them. d. Rules to customise standard reports (KRIs and KPI’s, dashboards, scorecards), and to what extent it is allowed to create new reports. e. Access rules for data: authorisation. f. Naming conventions, categories of reports etc. g. Assurance of these solutions within the company + version control. h. Managing mailing lists and distribution of reports.6- Internal communication about Management Information: a. Create ‘user acceptance’ in the entire organisation. b. Awareness of changes: what reports are used now, what are the restrictions, which items can be improved, and what improvements should be expected? c. Managing internal changes: with assistance of internal ambassadors, presentations by senior management, the role of super-users (all to clarify the improvements and benefits of the changes – at operational level).What are the real benefits of this approach?And what improvements can be achieved?Financial benefits – Quick Win’s and tangible results  ICT investment and cost reductions: o Limitation of direct costs by reducing work within the ICT department; questions about ad-hoc reporting, and requests for special reports are no longer accepted by ICT. 8 White Paper ´Nice to Know vs. Need to Know’ – Part 1 Linio – New Interim Solutions ©
  9. 9. o Lower indirect costs by less internal discussions on definitions and contents of reporting: unambiguity and consistency of the different names and terminology, as is used in reports and dashboards. This applies not only to the ICT staff but also on the ‘business’ side’ (so the users of this information; sales, service, marketing, operations, etc.)  Lower costs by reducing wrong reports and eliminating inefficient reporting: o Monitoring the right reports will result in spending less energy on unnecessary, redundant information. That is time efficient, so a saving! o With accurate and reliable information there is less risk of incorrect decisions.  Fast, efficient reporting: KPI’s-KRI’s, dashboards, and scorecards: o By better streamlining reporting, the required information, at the right time, in the correct format will be available to the right managers. o Less waiting times for users and stakeholders of reports; in particular, in creating new reports and changes or improvements of existing ones.  Reduced dependency on Excel Knights and manual reporting: o If clear choices have been made for specific reports (and we know this discipline is kept and monitored), then it must also be clear what reports are no longer needed. As a result, there is less need to compile additional reports (for example in Excel) and distribute them.Accuracy and functionality of the Management Information System  Relevant, up-to-date data is available for a large group of users: o In addition to reports and dashboards, ad-hoc queries can be processed as part of special analyses: such as what if scenarios and projections. o A wide range of users consume identical and uniform information: that is a must to achieve and maintain a professional impression to customers, suppliers and stakeholders (such as investors and finance authorities!).  Lasting solutions: o Improvement of data quality and reliable data is an essential part of a robust and professional management information system. o The authority of the Reporting Council is the foundation of a durable, reliable information system that can be changed as required within the structure and processes of the (commercial) operating conditions. o The growing demand for mobile information (smart phones) can demand the Reporting Council to work together with ICT on further professionalisation of accurate management information: to be available any time (24/7).Competitive Advantage  Advanced analytical intelligence: o Better data quality and greater accuracy of information makes it possible to obtain more and better insights in the management information system. And these views are not only backwards, but can be intelligent projections in the future. o Strategic and operational decisions can be taken quickly and reliable, when the desired information is available in a faster pace. If that is possible at any management level, compared to competitors who are less well organised, we can speak of a distinct competitive advantage. o Correct information means less annoyance for customers, and a higher reliability of the enterprise in general terms: it will result in higher customer satisfaction. 9 White Paper ´Nice to Know vs. Need to Know’ – Part 1 Linio – New Interim Solutions ©
  10. 10. Linio would like to play a role in improving Information ManagementThis White Paper is based on a broad experience with information management at variouscompanies, both B2B and B2C. Linio wants to share this knowledge with others, to createawareness of the concept Nice to Know vs. Need to Know, and to help with the rightapproach.About Linio – New Interim Solutions ©Linio is an independent company, focused on Information Management and aiming at improvingManagement Decision Making. A broad international experience helps Linio to look at thesesubjects in a practical manner. Without a preference for software applications, technical analysistools or other tricks: the (commercial) success of the company and the functioning of themanagement are paramount. Whether it be for Business Intelligence, Marketing Intelligence,or Customer Intelligence.Linio looks at the business objectives first: the technical solution is a tool to achieve thesegoals. Facilitation of correct tools for managers, to take better decisions, and make thecompany (profit, non-profit or not-for-profit) controls its activities more effectively.Thats what Linio stands for!For more information, contact Peter Reij: +31 (0)6 4285 4983 (email to peterreij@linio.nl) www.linio.nl 10 White Paper ´Nice to Know vs. Need to Know’ – Part 1 Linio – New Interim Solutions ©

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