Business Intelligence In A Fluctuating Economy

It's impossible to completely isolate yourself or your business from changing economic times. Just as John Donne said that "no man is an island," so too have we seen that "no business is an island."

Recently, home mortgage problems in the United States have caused failures in overseas banks. We've witnessed dynamic changes in economies radically alter competitive landscapes and the cost of commodities. Not only do economic fluctuations occur more frequently than they have in the past, but they're also often more volatile, more widespread and more interconnected.

For many companies, the past is indeed the past. Gone are times when economic growth (or downturns) could be predicted and planned for. Instead, organizations have to work to be successful as business challenges and economic cycles rise and fall. As a result, companies need to respond quickly to business and technology developments while remaining profitable during economic fluctuations.

In addition, running a business isn't always about simply increasing revenues, although that's generally good. It's also about generating profits, usually through a combination of increasing revenues and lowering costs. But to do that, managers need good insight and actionable information into what's happening with their business and why.

That's where business intelligence (BI) comes in. For years, organizations have used BI to help develop strategic insights into current and historical business metrics. By providing increased visibility to business metrics, BI leads to insight, and insight leads to action, notes John Hagerty, vice president and research fellow at AMR Research.

"Business intelligence and performance management can help provide visibility, which provides insight that allows organizations to make changes so that they can actually take advantage of ways to grow their business," he says. "To me, business intelligence and performance management are part and parcel of having the visibility and understanding it takes to make a business successful when times get tough."

During tumultuous economic periods, organizations cannot afford to do nothing. Yet making the right strategic decisions requires the correct combination of knowledge and timing. That's why BI can offer an advantage during tumultuous stretches, and that's why many organizations are expanding their use of BI to run their businesses more effectively, even during a slowdown.

Why BI during a downturn
During good times, organizations can become complacent—they don't have to work as hard to identify inefficiencies or new opportunities in order to be profitable. But in a downturn, companies suddenly face a much leaner reality—they must reduce costs, understand the business better, adjust more quickly to market or competitive changes, and find and capitalize on new opportunities.

"BI and information analysis tools enable organizations to rapidly adjust to meet changing business environments," says Bill Hostmann, research vice president and distinguished analyst with Gartner Research. "Done right, they allow organizations to understand what's really happening from a business perspective and react positively to changes in the economic environment—whether it's a downturn or an upturn. You want to be able to change your business, and business intelligence is all about how you can make the decisions needed to respond in a repeatable, predictable, efficient and timely way."

Consider an insurance company facing a slowdown. To respond proactively, it needs to understand not just that the market is changing, but which of its products and services are most profitable given the new conditions. BI tools can allow employees to analyze different mixtures of products and their resulting effect on the organization's bottom line.

But BI solutions can also help the company make smarter decisions that could result in higher profits. For example, solutions can help analyze potential changes to the way the organization makes decisions about applications for insurance on a particular product category. By changing a few decision rules and analyzing the results, the insurance company could evaluate how a new application would compare with others and enable itself to better understand the risk pattern of those application types. As a result, the company would have the information it needs to decide how to alter its approval decisions to maximize profits in an economic downturn. Additionally, the insurer could respond quickly to changes in its business environment.

"That's really the power of business intelligence. It allows you to reflect the model of your business and use it to manage your business to answer those really important questions associated with decisions, and to be able to do it rapidly when the economic environment changes. So you can change your strategy, change your matrix, change your model, change the way people make decisions," says Hostmann. "Business intelligence allows you to answer questions about your business in order to change and adapt to new strategies that can reflect the change in the economic environment."

Best practices

Implementing business intelligence (BI) successfully requires more than simply installing some servers or software. It also requires business and IT to work together and think strategically. To help, here are some best practices recommended by noted analysts:

> Put BI to work. BI is only truly going to be useful if organizations use it to take action or make decisions. "As an organization you really need to think about your business and how you put that information that business intelligence systems provide into the hands of users so that they can make better decisions," says Bill Hostmann, research vice president and distinguished analyst with Gartner Research. "You know, you can put the right information at the right time that's consistent, that's timely, that's accurate, that represents the model of your business, but in order for it to be of value, it has to inform and compel a decision and action. Otherwise it's just a useful presentation of interesting information and not really of value in terms of improving business performance."

> Establish competency centers. A good step to getting your BI initiatives to pay off is by establishing competency centers. "We recommend that people establish either competency centers or centers of excellence for business intelligence and performance management," says John Hagerty, vice president and research fellow at AMR Research. "That helps to centralize the knowledge base as well as the strategy for how it will be deployed. It should be jointly funded and populated with both business and IT personnel."

> Align business and IT people. Another key to a successful BI initiative is to make sure that it's not just an IT-led project. "Getting business and IT people united is essential for business success," says Hagerty. "If business users buy into the whole process and participate in the planning for it, they'll foster adoption and help it to succeed. The recipe for success is joint ownership between business and IT."

> Extend the deployment. One way to increase the value of your BI investments is by extending your deployment to as many knowledge workers as possible. Doing so can increase its effectiveness and efficiency, leading to better results. "Business intelligence can be used to help align incentives with company strategy," says Dave Kasabian, research director at AMR Research. "In an economic downturn, you really need to be very focused on motivating your business to do what it should be doing. One way to do that is to allow business intelligence to be the tool that measures performance and makes it apparent at both the higher and lower levels."

> Stick with it. Organizations should stay the course with existing or new BI efforts, even when budgets are tight, because their payback can be significant. "Don't let the high up-front costs scare you away, because these types of projects are going to pay back in the future. Sometimes people lose their enthusiasm for projects where they don't see immediate payback, especially in hard economic times," says Hagerty. "If you've made the decision to invest in the infrastructure to support longer-term growth, don't lose sight of that. Keep your eye on the future and what you're trying to accomplish. Long-term alignment is critical."

—D.A.K.

During economic uncertainty, good reasons abound for an organization to increase its use of BI: (See table, above.)

	Leverage existing assets. In most organizations there's no dearth of data. BI can make that data useful. You've probably already invested in systems that track key transaction and historical data, and a range of vertical or customized applications. Now it's time to put that data to work. "One of the key triggers we're seeing for new business intelligence deployments is organizations trying to wring as much value out of the investments and data they've already captured," says AMR's Hagerty. "Now they want to use that information to help them grow their business."
	Understand where things are going wrong. When business is going well, efficiency isn't always the primary objective—usually it's increasing revenue and growing the company. But during an economic downturn, organizations need to work leaner. They have to work harder to understand what's going well with their business and what's going wrong. BI can help. "Without business intelligence, it's hard for organizations to do root-cause analysis," says Hostmann. "They may have no real idea of where to look, because they don't know exactly what's happening, or what's going to happen in the future. When an organization realizes it has problems but doesn't know exactly what they are or how it's going to fix them, it can motivate an investment in business intelligence."
	Respond to customers better. For any business facing a slowdown, it's critical that it holds onto existing customers and expands customer relationships whenever possible. BI can improve customer experiences by providing employees with the information they need to understand a customer and the context for that information. "Business intelligence systems are good at looking at users' roles and providing the information they need in the context of their roles, versus giving them a flood of information they have to sift through," says Dave Kasabian, research director at AMR Research. "Being able to provide it to them in context and provide the alerts to people when conditions have changed enables employees to take action proactively."
	Identify new opportunities. By enabling managers and employees to analyze and understand their products, services and customers better, BI tools can provide a bridge to future growth and continued business success. "The visibility that business intelligence provides enables insights that allow organizations to make changes so they can actually take advantage of ways to grow their business," says Hagerty. "But if they can't grow their business, at least they'll have a better appreciation of what drives their business, and they'll be able to make changes to make sure it's as profitable as possible."

Profit from the changing tides of fortune
While different industries confront market downturns at different points, it's good strategic planning for organizations to be prepared to prosper even when business slows down.

"Business intelligence provides greater insight into managing the business," says Gartner's Hostmann. "It can answer questions like what happened, why did it happen, what do you think is going to happen. As the economy changes, your model of the business can change, and that allows you to alter the business decisions your organization makes. Investments in business intelligence usually pay off very well when people start to understand the cause and effect of what makes the business really tick."

In the end, the most competitive companies earn a profit not only when the economy is good, but also when it's bad. Organizations that can capitalize on change and are flexible and agile enough to dynamically alter their business models, product mix or customer focus will be better positioned to succeed, whatever the economic forecast.

"When business performance starts to erode, the first thing that people do is try to get a much better handle on what contributes to performance—whether it's top line, bottom line or the profit margin in between," says AMR's Hagerty. "We see companies starting to look more closely at what drives the business, and in a lot of cases the only way they can do that is by analyzing the performance of their business operations at all different levels, and that's exactly what business intelligence does."

BI tools and technologies can help organizations by enabling them to leverage and analyze existing information, key performance indicators and business metrics. BI solutions can help organizations become more efficient and effective. T

David A. Kelly is a Boston-based freelance writer who specializes in business, technology and travel writing.