Faster, smarter decisions are a top objective in the strategic plans of IT organizations at large enterprises. This trend is the result of a frustration on the part of business executives that, despite having invested hundreds of millions of dollars in enterprise software, the company doesn't use the information it collects to its potential.

Bob Parker, vice president of research for Manufacturing Insights, an IDC company, discusses the importance of using data in strategic planning to drive profitable growth.

These companies would like IT to deliver three key capabilities: more consistent processes, higher levels of collaboration and faster, better decision making. The capabilities will help businesses better link strategy to product demand and supply processes, but enabling these processes will require new information architectures.

Strategy and enterprise business objectives
Business objectives at large firms can be generally divided into three broad categories: product innovation, growth and productivity.

Organizations are challenged to bring an ever-increasing number of products to the market each year; yet, at the same time, they are pressured to shrink the amount of time it takes to design and introduce them. This "do more with less, faster" directive creates tremendous challenges for organizations trying to meet product innovation goals.

Objectives for growth come from three sources. First, the impetus for the explosion of new products is the desire to create additional revenue by serving ever-narrowing market niches. Next, emerging markets have been widely recognized as a source of revenue growth, with countries like Brazil, Russia, India and China experiencing growth in consumer spending at more than twice the rate of mature markets.

Last, organizations are looking to add services to the products they sell. Companies realize that as much revenue—and perhaps more profit—is made on the activity that occurs after the customer takes possession of the asset as on the sale of the asset itself.

Productivity gains, supported in large part by investment in IT, have been impressive in recent years, serving as a ballast to the overall global economy. But productivity has improved faster than markets have grown, which results in idle capacity—this causes serious downward pressure on pricing, which, in turn, drives companies to improve productivity to remain profitable. Rising costs in raw materials, energy and labor compound this problem.

The central task and the promise for the next wave of IT investment is to better link a company's strategic objectives for innovation, growth and productivity to the everyday front-line process—the "source-make-deliver" of the supply chain, the "attract-sell-serve" of demand generation and the "design-introduce-sustain" of product management.

Linking strategy to execution
To connect strategic objectives to process execution, company leaders understand the need to develop three key capabilities:

	More consistent processes. The biggest enemy to effective execution is variability. Executives want processes to be consistent more than they want them to go faster. They understand that if they trust the process, they can be more responsive to unexpected circumstances. Investment in transaction systems has helped, but that investment must be combined with Lean Six Sigma continuous improvement methodologies to achieve consistency.
	Deeper levels of collaboration. Executives also understand that successful companies have become increasingly dependent on other companies. Three types of business networks are being created: innovation networks to drive new products; commercial networks to coordinate go-to-market partners, such as distributors and retailers; and, of course, the company's supply network.
	Faster, better decisions. Companies have invested in technology to support decision making, but these investments have largely been focused on isolated areas, like inventory optimization or market segmentation. What is needed is the ability to link strategic portfolio decisions (balancing risk and reward, such as the right mix of suppliers, products, assets, customers and employees) to tactical optimization decisions (trading off service levels and costs) to operational decisions (assuring compliance with business policies that were created at the strategic and tactical levels). This type of strategic linking must be done for all major process domains—supply chain, demand generation, product management, financial, etc.

To be delivered effectively, each of these capabilities requires IT support, with the most work and attention needed in the strategic linking process. Perhaps the most critical outcome will be smarter decisions.

A new architecture for decisions
Organizations that want consistent processing capabilities and decision-making tools understand the need to invest in IT. Buying an integrated software suite to support business process is fairly straightforward—enterprise resource planning vendors have built their products to support a broad set of processes and offer deep vertical industry expertise.

But implementing an integrated decision suite for those processes is not as simple, because complete off-the-shelf applications are not available. An enterprise data warehouse (EDW) serves as a great foundation, but building an integrated set of decision applications requires some home cooking.

Decision applications will also require a fundamentally different architectural construct in four key areas:

	Semantic information instead of relational data. Combines aggregated structured data with semi-structured or unstructured data to put information in the context of the decision
	External rules, not embedded rules. Allow the business to dynamically construct a set of business rules to support changing business conditions
	Process replaces workflow management. Includes event triggers, long-running state management and predictive analytics
	Portable versus proprietary information interfaces. Support more intuitive and component-based user interfaces as well as integration based on common industry standards

Organize for smarter decisions
Organizations that have effectively implemented an EDW have a strong technological foundation for bringing together the entire decision architecture. However, this foundation must be supported by effective IT personnel who can complete the architecture, and by business analysts, also in IT, who can engage the support of management.

It is critical that business analysts include executives, management, process specialists and operational employees when discussing what constitutes smarter decision making. The team should also identify the necessary integration among strategic, tactical and operational decision making. This effort should provide organizations with a blueprint for the collaborative decision environments within the major process domains.

Organizations that unlock the value in information stored in the data center and desktops will successfully drive smarter decisions and achieve profitable growth. T

Bob Parker is vice president of research for Manufacturing Insights, an IDC company. He has been conducting research on optimizing business processes with technology for nearly 10 years. Before going into research, Bob spent nearly 20 years in IT and operational management at several manufacturing firms.

Photography by Bruce Zake

Teradata Magazine-March 2008