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White Paper - The Business Case for Business Intelligence
Table of Contents
Synopsis
This white paper looks at the business case that should lie behind the decision to build a data
warehouse and provide a business intelligence solution.
There are three primary drivers for making the investment in a business intelligence solution
2. Analysis of why things change in the business in order to react better in the future
As a consequence of the investment there will also be a number of secondary benefits that
will help to justify the investment and these are also discussed. Finally there are a number of
‘anti-drivers’ – reasons for not embarking on a business intelligence programme.
Intended Audience
Reader Recommended Reading
Executive Entire Document
Business Users Entire Document
IT Management Entire Document
IT Strategy Entire Document
IT Project Management Entire Document
IT Developers Entire Document
Introduction
This white paper looks at the business case that should lie behind the decision to build a data
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warehouse and provide a business intelligence solution.
Most businesses will describe information as a critical asset and therefore having the ability to
exploit that information to the benefit of the organisation should be a fundamental capability.
The value of the Business Intelligence solution is hard to quantify:
“Clearly valuing BI is not an exact science and often comes down to mindset.
Comparing BI to a college education: It may be expensive and time-consuming, but
there are many less tangible benefits, like increased earning power and overall
improved quality of life, which come years later.
There are, however, three primary drivers for making the investment in a business intelligence
solution
2. Analysis of why things change in the business in order to react better in the future
As a consequence of the investment there will also be a number of secondary benefits that
will help to justify the investment but these should not be an end in themselves.
The purpose of this white paper is to describe the primary reasons for making the investment
and to look at some of the secondary benefits in order to help business users articulate why
their organisation should make such an investment.
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A Data Warehouse (DWH) is a repository of an organization's electronically stored data.
Data warehouses are designed to specifically facilitate reporting and analysis
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A Business Intelligence (BI) solution is the set of skills, processes, technologies, applications
and practices used to support decision-making within an organisation.
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Bill Hostmann, Vice President & Analyst, Gartner, March 2008,
SearchDataManagement.com - Business intelligence ROI: value a matter of mind over money
Business processes are the tool that allows the division of labour within an organisation, i.e.
the distribution of tasks between a number of individuals whose work contribute to a single
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outcome.
1. Management processes
2. Operational processes
The processes that constitute the core business and create the primary value stream.
Typical operational processes are “Purchasing”, “Manufacturing”, “Marketing” and
“Sales”.
3. Supporting processes
Checkpoints
This is a place where something can be directly measured – often called a fact. The
number and value of sales, the amount of stock on the shelf, the number of staff
employed, the visitors to a website, etc. are all common examples of facts.
Information at a checkpoint can be examined in a number of different ways (sliced
and diced) depending on the associated information. For example if we know the date
when stock was measured and the product name and product group of an individual
item then it is possible to analyse stock levels by date and product group. This
associated information is usually called the ‘dimensions’ of the data. Without the
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dimensions the facts are just a meaningless set of numbers.
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Adam Smith, author of ‘The Wealth Of Nations’ and considered to be the father of modern
economics identified the importance of business process as early as 1776 in his famous
example of the pin factory.
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Consider a website visitor counter that says a site has had a number visitors, without
knowing when the counter was started it is impossible to know whether this is a good figure or
a poor figure. Without knowing the count for each day it is impossible to know whether traffic
to the site is growing or falling off, etc.
Flows
A flow is what moves things from one checkpoint to another. For example the number
of quotes that are created is one checkpoint, the number of sales is another
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checkpoint. A flow cannot be directly measured – we don’t know explicitly why any
specific individual chose to buy at that precise point, instead it is subject of analysis –
looking for the common characteristics of the individuals that obtained a quote and
subsequently made a purchase (or the common characteristics of those that did not
make a purchase). The objective of the analysis is to improve the flow in such a way
as to benefit the organisation, in this example to promote more sales. Analysis tends
to be particularly interested in how things change over time. Do some groups of
individuals purchase sooner after obtaining a quotation that other groups and if so
what are the common characteristics of those that behave in this way.
Here it is possible to determine the productivity of an individual assembler (i.e. how many
widgets does each assembler make each day) from the checkpoint. It is also possible to
analyse wastage in the flow between the component and widget as long as we know the
expected number of components used based the number of widgets created and the actual
usage of components. We may further understand whether that wastage is a consequence of
using a particular supplier.
It is only possible to measure the things at the checkpoint, and the quality of analysis across a
flow is highly susceptible to the quantity and quality of the data at the checkpoints. Therefore
when defining the requirement it is very important to ensure that the business processes have
all the required checkpoints and that the data required at that those checkpoints is identified.
This is a business responsibility – technologists should not be left to guess what data is
required to satisfy the needs of the business user, they will get it wrong. The technologists do
have a role in providing a usable framework for defining data and information requirements,
one that allows the business to clearly articulate their requirement
It should also be noted that as a result of a successful action the process may change and
this would have a knock-on effect on the information requirement. The data that satisfied the
original requirement may no longer be enough or even relevant and new data may be
required at the checkpoint.
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It is often possible to break down a process even further and then additional checkpoints
and smaller flows can be added to help create a better understanding.
It should not be assumed however that such performance indicators and reporting
packs are for senior management only. The success of providing information is in
ensuring that individuals involved in the process know how they are doing. It is of little
value to the organisation if the CEO knows the total number of calls answered in a call
centre but the call centre manager does not know who his most and least effective
operators are.
Since most organisations have high-level business processes that get progressively
broken down into sub-processes and ultimately to individual job-functions it is possible
to identify key business processes and follow these down to the lowest level
checkpoints. Taking the information that is available at this lowest process level and
aggregating it appropriately at each process level often provides the clearest set of
measurement requirements and if there is not an existing capability to deliver this
information this in turn provides the justification for building the solution.
Despite the ability to specify requirements for all aspects of the business relatively
quickly it will probably not be possible for IT to build an all-encompassing solution in
one go. Therefore it is also possible to use the business processes to identify those
aspects that should be prioritised. Critical business processes without measurement
data will be the priority. Senior management have to agree on priorities and where
investment can be most effective in order to prioritise the requirements.
1. Validation of the results – how does the analyst validate that the effect they are
seeing has the determined cause and is there a way to independently verify
this?
3. Monitoring outcomes – some actions will not have the desired effect, some will
have a disproportional positive/negative effect and some will have unexpected
consequences. The business must be ready, in information terms, to monitor
the outcome of the change and once again react to the consequences.
• Shareholders
The owners of the business, who, whilst they will have no direct involvement in
the day to day processes have a financial interest in the success of the
company.
• Regulators
Many organisations are now subject to some form of regulatory control and
have to be able to demonstrate compliance. Common examples will include
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financial, environmental/ethical, anti-discrimination, certification authorities, etc
• Suppliers
These stakeholders and others like them have become important business intelligence
users in the extended and virtual business models.
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Anti-discrimination legislation: http://en.wikipedia.org/wiki/List_of_anti-discrimination_act
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Smart Meter usage: http://en.wikipedia.org/wiki/Smart_meter
The development and value of a data warehouse will be significantly hindered if the business
is not prepared to invest in improving all of these aspects as part of a business intelligence
solution. It is also questionable if the data warehouse can deliver against the primary drivers if
these issues are not addressed. Many of the secondary drivers will deliver business benefit
before the data warehouse project is complete as they fix underlying issues in the existing
business processes.
Anti-Drivers
Whilst this paper has addressed the reasons for creating a data warehouse or business
intelligence solution there are also some very good reasons for not embarking on the journey.
Some examples of these might include the following:
“The winners that will emerge from this recession will race ahead as leaner, more
efficient, more agile, and less burdened by legacy infrastructure. These companies
will be bold enough to invest in IT to shrink long-term energy costs, get real-time
information to their revenue generators and client support staff, get their own
employees to collaborate more efficiently without the need to travel as often, and
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Fred Brooks, The Mythical Man-Month (Anniversary Edition). "There is no single
development, in either technology or management technique, which by itself promises even
one order of magnitude [tenfold] improvement within a decade in productivity, in reliability, in
simplicity."
most important, give their executives coordinated, correlated information that lets
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them react to the state of business in days, not months.”
Addressing all of these issues requires that the organisation to be fully committed to
delivering the changes associated with business intelligence.
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Tony Bishop Business Execution and Recession
Summary
This white paper has examined the business case that should lie behind the decision to build
a data warehouse and provide a business intelligence solution.
This has identified three primary drivers for making the investment:
2. Analysis of why things change in the business in order to react better in the future
It has also identified that delivering the solution will also deliver secondary benefits that will
add to the return on investment. There are also a number of anti-drivers, reasons for not
starting a project, which should be avoided when commissioning business intelligence
solutions. Successful solutions require full commitment from the business users and a
willingness to adapt to the changes that implementing the solution will bring.
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© 2010 Data Management & Warehousing. All rights reserved. Reproduction not permitted
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