Business Intelligence Maturity

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The information age has changed the way the business world operates. No longer is intuition the driving force behind strategic development and tactics are advanced. While value may be derived from “gut feelings”, when backed up by data, they become much more effective.

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Business Intelligence Maturity

  1. 1. An Acxiom White Paper Business Intelligence Maturity The journey from reporting to optimisation By ???????? and ?????? with assistance from ?????????
  2. 2. The information age has changed the way the business world operates. No longer is intuition the driving force behind strategic development and tactics are advanced. While value may be derived from “gut feelings”, when backed up by data, they become much more effective. Advances in computing power, data storage to answer the following questions to assess how capacity and analytical software capability have well you understand them: given business users the raw material to make more effective, data driven decisions. Distilling • What are the key performance indicators that information, perspectives and relationships from reflect the success of my marketing efforts? the data and using them to predict consumer • Can I measure and picture my key performance behaviour is essential for maintaining growth and indicators? If so, do I? staving off competitive pressures. • Can I identify the data that correlates to strong or poor values for my key performance Business intelligence solutions sit at the heart indicators? of the data-centric processes that provide that • Can I predict how my key performance knowledge and, consequently, enormous business indicators will be affected by changes in value. Analytics projects generally yield an average strategy or market conditions? ROI of 431%, according to research by IDC. However, using business intelligence initiatives, These questions will help determine the category respondents were realising returns ranging from of business intelligence technology that requires 17% to more than 2000%.1 focus. We define categories as groupings of business intelligence applications that provide Business intelligence is, however, a concept similar functionality. Categories include: that is often difficult to pin point. From a broad perspective, we define business intelligence as • Measure the practice of using data to facilitate decision Business intelligence applications and making. In application, there are a number of technology that allow for systematic evaluation distinct activities that can be defined in this way, and presentation of data. so it’s important to understand the broad goals of business intelligence as you begin to organise • Define and prioritise investment. Business intelligence applications and technology that facilitate the identification and First determine the current level of understanding classification of data that correlates to specified of key performance indicators and the financial conditions. and non-financial metrics used to quantify objectives that reflect strategic performance.2 • Predict Put simply, they will indicate whether processes Business intelligence applications and are working or not. Because awareness of key technology that provide the ability to predict performance indicators is critical to the success upcoming events and optimise the results. of business intelligence initiatives, take a moment
  3. 3. Categories are effective for defining broad, Measure strategic initiatives. However, they are often too The measure category involves the evaluation and extensive to be used to create a tactical course presentation of data. The first family is reporting of action. For example, a company might want and the second is data visualisation. to define its customer base more precisely – an objective that does not provide enough • Reporting information to formulate a strategic plan to Reporting involves the creation of standard, accomplish this goal. repeatable representations of data. It provides snapshots of data as they are modified by Each category of business intelligence technology processes over time or as the result of events has families of applications and processes that cause changes in the data. All processes associated with it to provide a specific function. are accompanied by audit reporting to reassure Families refine the activities from each category end users that their processes are operating as into tactical initiatives that create additional value. expected. Performance reporting presents the results of the overall set of processes that make up a solution. For example, a net response rate Table 1: Business Intelligence Categories dashboard is employed for marketing and Families performance management. Catagory Family • Data Visualisation Data visualisation is the practice of using a tool Measure Reporting to explore and graphically represent a set of Data visualisation data to allow users to identify trends and events. Unlike reporting (where the user gets Define Data mining to see the same information for different data Segmentation sets), data visualisation provides a limited, but bespoke, reporting interface. Analysts are not Predict Modelling limited to the data that is in front of them as Optimisation they can create new reports using available data and tools. Generally, these data sources are aggregated to allow the tool to process data more rapidly, so there isn’t unlimited scope, but many enhanced opportunities for creating value. Potentially confusing when considering reporting vs. data visualisation is that the tools used to deliver either process may be the same but the underlying data is different. Reporting solutions are based on discrete, limited data sources to answer very specific questions, whilst data visualisation solutions provide wider ranges of data and facilitate more open ended discovery. Additionally, the skills required to create one-time ad hoc reports are different than those needed to scrutinise and assess complex data relationships, even if they are using the same access tools.
  4. 4. Define Predict The define category moves beyond visualising Predicting behaviour as a result of actions taken the data to understanding relationships and is a key tool in the context of business developing new data elements that are more intelligence. For example, a strategy may call for useful than the raw input data. The activities in raising the price of a product by 3%. Being able this category, data mining and segmentation, to predict how consumers will react to that new build upon the knowledge created by the reporting price point is essential to understanding if it is and data visualisation processes. The results will something you should do. It might result in fewer be the initial data products that may be used to sales, but there are also other criteria to assess accomplish tactical objectives. and predict. The price hike may, for example, beneficially drive out the customers who generate • Data Mining the bulk of your customer service calls. Data mining applications are used to explore Forecasting consumer behaviour through data in a more granular fashion than data predictive modelling and optimisation are the visualisation processes, enabling free form key activities in this category. analysis of raw data rather than aggregated data sets. Because of data volumes and the • Modelling complexity of the analysis, these applications Using predictive data identified in the data tend to be robust users of processing capacity. mining process and the new data elements However, the results are far more valuable, created in the segmentation process, predictive including predictive data elements which can models are created to forecast future events be used to establish portraits for groups within and behaviour. Advanced analytical algorithms the overall data set. are applied to the available data to create a score which rates the probability of a specified • Segmentation action. Modelling might result in a prediction The segmentation process takes the definitive of the likelihood of a group of consumers to information distilled from the data mining respond to a particular offer, or determine processes and programmatically groups it the probability of a person to spend to define values that are common to certain a given amount over the course of their population units. These segments tend to relationship with you. In other words, consumer exhibit similar behaviour which can be used actions can be predicted to create more to characterise them. Segmentation can be effective marketing solutions and to provide as simple as defining people as customers vs. them with better services. non-customers, or very complex, using myriad geographic and demographic traits. • Optimisation Modelling behaviour can pinpoint the best Data mining and segmentation represent two actions for an individual, but the forecasts for examples of using analytics to systemically affect individuals taken en masse can often produce change in an organisation. The data elements less beneficial results. In some cases, defined in data mining processes can be used to individuals who receive an offer that isn’t the hone selection criteria in campaign management, most attractive to them may still respond. or, as triggers in automated account services They’ll respond in lower numbers, but if the systems. They also provide definitive or predictive revenue potential for that alternative product is values to be used in subsequent analysis. greater than the product with higher customer Segmentation uses data to organise entities into affinity, itmay still create a more profitable groups that exhibit similar behaviour, with scenario. Optimisation solutions assess segments based on individual, household, predictive analytics in the context of a total account, business or any other logical group population while satisfying specific business relevant to the organisation. Segments are broad rules, constraints and contact policies to brushstroke definitions of those groups that may determine the most advantageous outcome. be used as a shortcut for evaluating data at a Processes may be developed to find the best more granular level. answer for profitability, channel preference, maximising revenue and other scenarios.
  5. 5. TYPICAL KINDS OF MODEL SCORES RESPONSE Response scores forecast measures of probability that an individual will reply to an offer. REVENUE Revenue scores create a forecast of the economic benefit of the customer relationship. RISK Risk scores create a forecast and probability of the customer engaging in behaviour that will result in a negative economic impact. Modelling and optimisation represent the most complex forms of business intelligence, but they also create the greatest value. Significant investment is needed in areas of analytical expertise, hardware and software to address these families, but the associated benefits are too great to ignore.
  6. 6. Where are you? on shortcomings such as lines of business that Interestingly, these categories and families also cannot effectively report on their performance or provide a method to assess maturity in terms departments that use non-standard customer of business intelligence. By assessing business segments. Shortcomings may also involve the use of intelligence activities that are common or wide business intelligence with respect to the competition spread in an organisation, it’s also possible to – learning about their use of analytics can help gauge areas for improvement in terms of business indicate where your main focus should be. intelligence. Starting with reporting, the least complex initiative as well as the one with the What are my greatest opportunities? least impact, a business intelligence focus should Business intelligence provides a way to get ahead move through data visualisation, data mining of your competition. After assessing the competition, and Segmentation through to modelling and it will be easier to detect where the marketplace is finally optimisation processes. lagging. Even if it turns out to be an area in which you are not excelling, knowing that there is a Too often companies have a difficult time weakness in the marketplace will allow you to focus determining where they fit within the maturity on things that will give you an advantage. If, for model. Either there is a lack of understanding example, you ascertain that you industry does not of business intelligence within the company or make use of business intelligence for corporate an unwillingness to acknowledge shortcomings. performance management, there is an opportunity In most cases, analytical resources are competent to improve internal processes ahead of your and contentious, but new ideas and fresh competitors. Any distinctive capability within an perspectives provide improved performance and organisation can provide a precise focus to create overall satisfaction. It is essential to have a clear, competitive advantage. candid view of your position with respect to maturity and not attempt make the leap from Should I use a business intelligence suite or reporting to optimisation in one go. To do so best of breed applications? would result in wasted investment in services Once needs and opportunities have been identified, and software, frustrated analytical resources it’s time to look at the software applications. Some and an initiative that is doomed to failure. companies produce software with components that will address all categories and families of business It is a good use of time and money to solicit a intelligence. Others focus on a specific activity and third party to assess your business intelligence create the best solution to meet that specific capabilities. A consulting organisation with a objective. There are benefits to having an integrated business intelligence background can quickly platform such as sharing metadata, the ability to (and objectively) establish your strengths and process flow from application to application and weaknesses and help develop a strategy for algorithmic consistency. Unfortunately, integrated steady, long term improvement. Also helpful is to solutions do not include best of breed applications compare your business to other companies in the across all areas – multiple metadata repositories, same industry to help judge how quickly you need differences in language and interpretation and the to approach business intelligence enhancements. need for more training as analysts must learn more tools. This approach does, however, have the advantage of creating the best results for each Choices specific business intelligence activity. Once a thorough assessment of business intelligence capability is established, decisions What are the strengths of my analysts? on how to approach and prioritise initiatives The best software, hardware and data do not ensure can be made. business intelligence success. The most important resource is the team of analysts, statisticians and What are my greatest needs? modellers. Learn from them and understand their Business intelligence offers many opportunities strengths and weaknesses. Some may require for improvements in business practice. Assessing simple tools for data visualisation and others prefer precisely what is needed is the first step critical a bare bones approach to data mining or need a to prioritising effectively. Needs may be based wide range of tools to meet the requirements of each problem that is presented to them.
  7. 7. Am I better off with an in-house or a probably, have an understanding of business hosted solution? intelligence but their skills may be more strategic Many marketing organisations want to perform and organisational. Without leadership, the project their data management functions in-house and, will evolve into a “turf battle” over who ‘owns’ there are advantages to controlling the creation analytics for your company or a “holy war” and maintenance of your business intelligence regarding the best processes and techniques. environment. The source systems, for example, Whilst strong opinions from internal departments may have communication limitations that require can be constructive, solid leadership empowered close proximity to the business intelligence to choose the best course of action is essential. environment. However, a hosted solution makes Otherwise, the project will grind to a frustrating sense when the skills for data management and and expensive halt. warehousing do not exist within an organisation. If analysts have to spend too much time archiving, Unclear objectives storing and manipulating data prior to actually The ultimate purpose of a business intelligence creating their business intelligence outputs, a project must be defined in precise terms. hosted solution with additional data management A general objective of ‘improving business support may make more sense. intelligence’ will result in a lot of activity but little return on investment. By defining a business- Can I use software as a service model related objective such as ‘use business intelligence for business intelligence? to improve online sales rates’, analysts will have Much of the expense surrounding business a pre-determined focus for their reports and intelligence comes from the hardware and the statisticians can segment based on online software required to perform these tasks. purchase behaviour and create models to An alternative solution might be to use software determine which customers would become as a service offering to lower the total cost of online users if the incentive was appropriate. ownership for the business intelligence Simply put, this defined objective allows business environment. Some companies offer customised intelligence resources to be used to create more analytics as a service product that includes business value. business intelligence software, enhancement data, integration services and management solutions Unmeasured results which allow the analysts to focus on the creation Many companies fail to properly measure the of insight rather than the management overhead. results of their analytical efforts and do not have the ability to view changes in performance with Past hurdles new analytical practices in place. They cannot Business intelligence projects are not always assess when a tactic needs to be changed and, successful. In some cases, failure can be traced worst of all, will sometimes abandon a business to technical issues, but rarely is technology the intelligence activity because they cannot tell sole culprit for business intelligence projects whether or not it’s working. The long term effect not meeting expectations. Assuming the best is a devaluation of business intelligence, with decisions regarding business intelligence some companies scaling back analytical technology have been made, what else might processes and personnel – decisions which happen to prevent success? merely exacerbate their business problems. Lack of leadership Insufficient testing Typically, business intelligence projects require New business intelligence processes should a great deal of co-operation between internal constantly be measured against both the departments. There will be times when different incumbent processes and doing nothing. groups need aligning around a goal and a leader A common approach is champion/challenger must set those objectives and distribute the testing for predictive models where the new necessary resources. This person will, most model is used to select one population while the existing model is used to select another. A third population is randomly selected and each group receives a standard offer. The model that provides
  8. 8. the best result is used for subsequent campaigns. Conclusion It is essential to conduct this kind of testing on Business intelligence can create enormous value a regular basis to ensure that improvements are for an organisation. Understanding customers made and as a method to evaluate business better elicits loyalty and expands relationships and intelligence processes. predicting how their lives may change will allow you to react to their needs and wants. Optimising Data quality and availability the way you communicate with them will provide Data is the raw material of business intelligence a more profitable environment. Performing and a lack of data is the surest indicator that your effective business intelligence requires the right project will fail. Whilst extracting data from your tools based on the needs, opportunities and source systems can be time consuming, it is talents of analytical resources. Choose the tool essential to ensure that the project has sufficient that provides the highest return on investment, insight to create value. The quality of the data is but remember that business intelligence requires a also contributing factor to the success or failure data, computing infrastructure and commitment of a business intelligence project. In many cases, and leadership to build an effective practice. there are systemic or operational limitations that prevent improving data quality, yet knowing where To obtain a positive outcome – and long-term data issues exist is the key to avoiding pitfalls and success – companies should consider the using the most effective predictions possible. services of a strategic partner who has experience with business intelligence tool implementation. A strategic partner should be able to evaluate all available tools in a neutral environment and have a proven track record of experience and success. Additionally, a strong, comprehensive business intelligence foundation to address the underlying data problems that can compromise the effectiveness of even the best tools is essential. Acxiom is a recognised leader within the industry, providing expert guidance and invaluable services that can help your company achieve exceptional results. The Acxiom team has translated business needs for hundreds of clients and has been very successful at defining tool sets to meet those needs. For more information on how the right business intelligence tools can transform your business, contact Acxiom today. 1 Global Technology Forum, CFO: Companies still deploy BI systems bit by bit, Economist Intelligence Unit, 14 January 2003. 2 Wikipedia, http://en.wikipedia.org/wiki/Key_performance_indicators, 16 March 2008
  9. 9. See how Acxiom can work for you. For more information, visit our website at www.acxiom.co.uk or call 0800 035 2755 Acxiom Ltd Counting House 53 Tooley Street London SE1 2QN UK Tel: +44 (0)20 7526 5100 Fax: +44 (0)20 7526 5200 www.acxiom.co.uk ukenquiries@acxiom.com © 2009 Acxiom Corporation. All rights reserved. Acxiom is a registered trademark of Acxiom Corporation. All other trademarks and service marks mentioned herein are property of their respective owners. 22/04/09

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