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Assessing BIReadiness ROI
Assessing BIReadiness ROI
www.decisionpath.com
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Assessing BI Readiness:
The Key to BI ROI
Assessing BI Readiness:
A Key to BI ROI
Figure 1. Business- Centric Analysis of how BI can be used to create Business Value
tion of sponsor support (funding), subject matter expert technophobes who made their living be being knowledge-
(SME) involvement, and sound technical and management able about the products and good at nurturing relationships
methods will result in a successful BI project. We believe with buyers. As a workaround, assistants printed out hard
that industry experience shows a clear need to move beyond copy reports from the mart and e-mailed them to the sales
this traditional perspective if the business value of BI is to force;
be fully realized in a greater number of organizations. Two
relatively recent cases, disguised to protect the proprietary • The culture surrounding decision making was strictly
interests of the organizations involved, will illustrate this ad hoc and idiosyncratic, which did not allow for structured
point. uses of the new BI application within key sales and sales
management processes. Rather, each salesperson was free
Manufacturing Company Example to use, or not use, the application as he or she saw fit; and
Company A is a $2.5 billion manufacturer of consumer and • The Business/IT partnership was less than ideal, which
industrial products. At the time of the case (2000/2001), its led to a 50% project surcharge from IT to the business after
consumer products group had a deployed data mart used for development was complete but prior to the BI application
managing revenue and profit delivery to meet Wall Street’s being put into production. This caused resentment and
expectations. Company A’s industrial products group de- blaming, which has further hindered deployment of BI ap-
termined that a similar BI application would allow them to plications within the company.
do a better job of managing revenues and profits. Funding
was obtained, and a traditional development method was Had a BI Readiness Assessment been conducted, it is
employed to design, develop, and deploy the BI application. likely that many of these bumps in the road could have
Facilitated sessions with SMEs were held to determine the been avoided, or at least managed better. The design of the
business questions the mart would need to answer, several BI application would certainly have been different, even
business users were involved throughout the project, and though the information delivered would have been the
training was provided once the mart was completed. While same. Further, a richer understanding of the culture around
the BI application was ultimately successful, there were information use, decision-making, and the use of analytical
several bumps in the road that could have been avoided via applications would have allowed Company A to engage in a
a comprehensive BI Readiness Assessment. Specifically: more proactive business process reengineering effort, rather
than assuming that application training was all that was
• Continuous process improvement was not part of the required.
culture of the sales organization, the intended user of the
BI application. As a result, the change from static, canned Government Agency Example
reports delivered monthly to OLAP capabilities with daily
refreshes to the mart was difficult for the user community Government Agency B is a $8 billion organization that
to adjust to, even though sales users had been represented faces substantial business challenges over the next decade,
throughout the design, development, and training design due largely to projected demand increases, expected staff
processes; retirements, heightened service expectations on the part of
the citizens served, and a tight Federal budget climate. Ac-
• The culture around use of information and analytical cordingly, the Agency is challenged, like many government
applications was not supportive of adoption of the new BI organizations, to “do more with less” while maintaining or
application. The sales force was comprised mainly of older, improving service delivery.
These challenges are formidable, and the agency has information to feed the full spectrum of BI applications
embarked on a BI program aimed at providing all that will be required to run the agency productively and
levels of operations management with timelier, more with high levels of service to citizens; and
relevant information and appropriate analytical tools
so that managers can consistently improve productivity • The Agency employs effective IT governance mecha-
and service. The program is specifically managing the nisms that promote an effective business/IT partner-
BI readiness factors described in Figure 2, and it has ship, including executive level and working level
funded a specific major task to ensure that it captures steering committees, regular off site planning meetings,
the business value of its investments in BI. In terms of and web-based program communication mechanisms.
the BI readiness: The situation at Government Agency The business units are actively engaged in all aspects
B is different than that at Company A because BI best of the program and are prepared to manage the changes
practices have evolved to include business-centric de- required to capitalize on the BI investments.
velopment methods that explicitly consider and manage
the business risk associated with BI investments. The situation at Government Agency B is different
than that at Company A because BI best practices have
• The Agency funded a comprehensive project to ensure evolved to include business-centric development meth-
strategic alignment between its strategies, goals, and ods that explicitly consider and manage the business
objectives, its key service delivery processes, and the risk associated with BI investments. By assessing BI
BI applications required for making those processes readiness at the front end. Government Agency B has
more productive while improving service; positioned itself to: (a) design ROI into its BI applica-
tions from the outset; and (b) manage process changes
• The Agency has a record of continuous process im- and implementation risks so as to ensure that the BI ap-
provement and a culture that supports the goal of oper- plication deliver business value. In other words, they’ve
ational excellence. The company embraces the use of IT increased the odds that their BI applications will pay
to improve operational processes, it has come to realize off. Business-centric development methods, includ-
the business value of business intelligence, and it has ing BI readiness assessments, go beyond traditional
budgeted funds for business process reengineering to development methods by explicitly assessing the po-
capitalize on its BI investments; tential business value and probability of success for BI
investments, rather than assume that business sponsors
• The Agency recognizes that it will have to change the and SMEs have really thought about business process
culture within its operating units to embrace the use of changes and business risk.
enhanced information, modern analytical tools, and
advanced optimization models. The good news is that BI Readiness Factors
managers across the agency have a strong desire to use
BI to serve citizens better and operate more produc- To ensure a return on an investment in BI, we have to
tively; identify and manage those factors that make a dif-
ference in whether the investments pay off. From a
• The Agency is in the process of formally assessing its technical perspective, there is an established body
BI and DW technical readiness so that it can takes the of knowledge around data warehousing that we can
necessary steps to enhance its overall capabilities to ac- employ to ensure that fundamentals of acquiring , stag-
quire, cleanse, integrate, store, and deliver high quality ing, and delivering information and BI applications are
done correctly. From a business perspective, there are a we ensure–up front–a proposed BI portfolio or project
number of factors that ultimately determine whether a is strategically aligned.
BI application delivers a positive ROI. We can think of
these readiness factors as types if business risk, and we Continuous Process
can manage them accordingly. Improvement Culture
most well-known in the world. They are very success- deploying new BI applications because their operating
ful, but they are very deliberate about change. From the environment demands the use of BI applications and
perspective of capturing the business value of BI, These their culture supports those uses. In contrast, we have
two companies present very different management and worked with leading companies where the predominant
implementation challenges, and an effective BI readi- mode of operation was characterized by lack of infor-
ness assessment can help ferret out the specific change- mation and analytics, decisions driven by force of per-
management and continuous-improvement challenges sonality, and the dominance of intuition at the expense
that we need to manage. of fact-based analysis. These different types of firms
have different prospects when it comes to leveraging
Culture Surrounding the Use of BI to capture business value. An effective BI readiness
Information and Analytical Applications assessment will identify the relevant cultural obstacles
to a successful BI application that delivers ROI.
Organizations embracing the use of information and
analytical applications to improve profits (private sec- BI Portfolio Management
tor) or productivity and service (public sector) are better
able to leverage investments in BI than organizations A wide range of BI applications can improve the perfor-
that do not embrace and reward such approaches to mance of the functional units within a given company,
creating business value. We recently conducted a “mini- including applications that help drive revenue growth
survey” of BI readiness via our Web site. We found and those that help optimize costs and profits. Compa-
that major organizations differ markedly on this aspect nies that have undertaken a comprehensive review of
of readiness. On a scale of 1 (low readiness) to 5 (high the major BI opportunities for sales, marketing, manu-
readiness), the survey respondents scored as high as facturing, distribution, customer service, quality, and so
4.5 and as low as 2.5. While the number of respondents forth are in the position to manage BI as a portfolio of
in the mini-survey was small, the fact that those who investments, ranked by business impact and risk. This is
responded are major organizations (most have revenues important in an environment where capital budgets for
greater than $1 billion) makes the survey responses IT are constrained, as they almost always are.
valuable at least as anecdotal evidence.
The idea of managing BI initiatives as a portfolios
The fact that organizations vary in their readiness to use gaining increased attention in the context of discussions
information and analytical applications to improve busi- about the business value of BI.. In many companies, a
ness performance is an element of corporate culture and certain percentage of sales is budgeted for IT, and then
it is influenced by the environment in which the organi- IT investments are managed as a portfolio (Broadbent
zation operates. For example, businesses that operate in and Weill, 1998). Within the IT capital budgeting con-
high fixed-cost businesses–have long employed highly text, BI’s fit is shown in Figure 3.
sophisticated revenue-optimization models that they use
every day. These models dynamically manage pricing to Given its position in the IT portfolio, BI must compete
ensure that the tradeoff between price and capacity uti- for scarce capital funds, and the subject of ROI is al-
lization is optimized to deliver the most profits possible most always addressed by the formal capital budgeting
under given economic supply-and-demand conditions. process. If a given company has not examined the full
spectrum of BI opportunities from a functional perspec-
Such organizations are not daunted by the prospect of tive, it cannot know if the BI projects it is proposing
organizations to embed the use of BI applications into result that creates business value, and thus we must be
the core business processes that determine overall concerned with the business practices used to manage
performance. development and use of IT generally (and BI specifi-
cally). Organizations that have effectively used IT to
BI and DW Technical Readiness improve business results will be more capable of lever-
aging BI to create value than those whose practices do
A critical requirement for capturing the business value not create effective partnerships are shown in
of BI is the technical ability to deliver the information Figure 5.
and analytical applications that
comprise BI. Fortunately, there is Figure 5. Elements of Effective Business/IT Partnerships for BI
an extensive body of knowledge
about how to do this. That said,
Business Is Responsible for BI
some organizations are much more
Value Capture
capable than others of designing,
developing, deploying, operating, IT Is Responsible for Effective
Delivery of BI Applications
and maintaining the appropriate
technical environment to support Fund BI Projects Based on
data warehousing and business in- Projected ROI BI Applications
that Deliver
telligence. Since we are interested
Develop BI Expertise of Business Value
in increasing the likelihood that BI Business People
investments will pay off, we have
to be concerned about reducing Develop Business Expertise
of IT People
technical risk, which means that
we need to assess technical readi- Provide Organizational
ness. Emphasis on BI
The concepts encompassed within Figure 5 are not For example, changing the culture surrounding the use
new– they are the proven principles of effective use of of information and analytical applications will take lon-
IT to deliver business value (Dvorak, Holen, Mark, and ger than improving technical readiness, which in some
Meehan, 1997). By applying these ideas to manage- instances can be addressed by strategic hiring and/or the
ment of a BI portfolio, we can greatly increase the use of consultants. The principle objective, therefore, is
probability that individual BI initiatives will deliver to use the BI readiness assessment to provide informa-
business value. Accordingly, an effective BI readiness tion that can be used to develop specific, customized
assessment will test for the presence of practices that BI strategies and mentation plans that effectively
implement these principles. account for an organization’s starting position so
BI initiatives deliver as much value as possible as
Summary quickly as possible.
The seven BI readiness factors we have described Performing an effective BI readiness assessment is a
can be thought of as potential barriers to the ability to critical element of business-centric BI development
deploy BI applications that create business value. Ac- methods because it helps “design” ROI into BI initia-
cordingly, we must know where the organization stands tives from the outset. A BI readiness assessment to BI
in relation to these factors, and we must take a holistic success and then systematically managing BI initiatives
and realistic view of its starting position. No organiza- to overcome those impediments. Done correctly, it need
tion will achieve perfect scores across the board, and not be an expensive or lengthy process, and the insight
BI readiness is more easily improved in some areas gained into the principal business risks associated with
than others. BI initiatives will pay dividends in the form of deployed
BI applications that deliver real business value.
Steve Williams is the President of DecisionPath Con- DecisionPath Consulting provides strategy, business
sulting. With close to 25 years of experience, he is a process, technology and program management services
recognized expert in business and IT strategy aimed in the specialized field of Business Intelligence (BI).
at optimizing financial and operational performance When properly implemented, BI processes provide the
in both Federal government agencies and Fortune accurate, highly relevant and timely information that’s
1000 corporations. He is a frequent speaker at TDWI, required to optimize financial and operational perfor-
APICS, and NAPM events and is also a guest lecturer mance in any organization. DecisionPath Consulting
on supply chain collaboration and supply chain IT at is an independent, objective source of business and
the Darden School, University of Virginia. Steve holds technology expertise required to ensure that your BI
an MBA from the Darden School at the University of initiative is successfully deployed in a timely, cost-ef-
Virginia and a BS in Business Administration from the fective manner.
University of Maryland.
Nancy Williams serves as Vice President of Decision- For more information contact:
Path’s Business Intelligence and Data Warehousing
Consulting practice. She has more than 17 years of DecisionPath Consulting
consulting and management experience, and is a highly Six Montgomery Village Avenue, #622
sought after authority on data warehousing and busi- Gaithersburg, MD 20879
ness intelligence issues. Nancy is a regular instructor 301-926-6752
at TDWI World and Regional Conferences and has www.decisionpath.com
taught the TDWI Fundamentals and Data Modeling
courses for a number of Fortune 500 companies and
Government agencies. She holds an MBA from the For additional publications, visit
Darden School at the University of Virginia and a BS in www.decisionpath.com/Research.shtml
Education from the University of Virginia.