2D December 2008 I DM Review

Transcription

1 2D December 2008 I DM Review

2 Measuring the Value of ntelligence In Intelligence By Soumendra Mohanty I ntelligence is the ability to solve problems. It is also commonly referred to as practical sense or the ability to get along well in all sorts of situations. People cannot see, hear, touch, smell or taste intelligence. On the other hand, the more intelligence people bave, the better their ability to respond to situations around them. On a similar note, we can define intelligence in business intelligence (BI) as the ability to realize business success with easy access to actionable mformation througb timely and accurate insight into business conditions. It is crucial to examine BI initiatives from the perspective of the value created. If decision-makers do not understand the economic benefit generated by BI, they may grow to distrust the recommendations it generates. They may return to strategy by intuition and prioritization based on a hunch. How are data, information, intelligence and BI interrelated? ' generated by business events is raw witbout context, like customer data, product data and transactions. ' Infonnation is data with context and meaning; for example, information about product purchases made hy the specific customers. ' Intelligence is actionable mformation insight and is used hy various information consumers to achieve business objectives: Which group of customers buys which products? Is there a trend in purchases of tbese products by these customers? How can we use the trend to predict what will happen in the future? ' BI is intelligence based on business information, past actions and strategies for the future. BI is all about achieving greater profitability by analyzing huge amounts of data and numbers - presenting them, qualifying tbe assessments, finding trends and issues hidden in them, empowering action to resolve issues and providing Figure 1: Intelligent Paradigm Structured. Unstructured, Quantitative, Qualitative Information Facts, Metrics r Intelligence (tnformation+action) Trends, insights, Discoueof, Decision Enablers Predictive Outcomes Value actionable insights. The economic benefit of BI is often complex and difficult to quantify. Several factors may contribute to the overall revenue or profitability statistics tbat an organization needs to measure. A common factor in determining economic benefit is ROI on BI strategies or other metrics that quantify the number of sales, number of new customers acquired, etc. These numbers tell us how many and how much. Other faaors sucb as customer cen- Drivers Forces that cause the need to act Goals Desired Outcomes, Actions Strategies Planned means to achieve goals, : Actions to implement strategies Performance, Profitability ^ ' Results Review I December

3 tricity, lifetime value and wallet share are also critical. Negative economic impacts like losses due to char^e-offs and fraud should also be measured and considered. Additional pertinent questions include: ' Are we doing the right things? What is proposed for what business outcome, and how do we know which initiatives within the program contribute to the achievement of business strategy? ' Are we doing them the right way? What management and operational practices have we put in place to maximize our chances of success? Have we moved from intention to realization, and is the information accessible to the right people at the right time? Are we getting them done well? Are we applying the defined practices in the optimal way and monitoring them to ensure that they remain effective? Are we getting the benefits? How will the benefits be delivered? What is the value of the program? How do we measure it? What factors influence success or failure? Answers to these questions He in monitoring business operations, learning from past performance and then feeding the learnings back into transactional systems, thus forming a closed-loop performance measurement and optimization process. Tbe output of BI applications (actionable analytics) gets routed to business users in the form of business alerts and recommendations (such as product pricing changes, marketing campaign modifications or identification of fraiidu- Figure 2: Closed-Loop Performance Measurement and Optimization Transactional Systems ( Operations Focused) Transactional, Detail Oriented Alerts, Recommendations, Decision Automations Actionable Insights lent transactions) for identifying and addressing specific business issues. In order to do this, tbe BI system must provide easy-to-use self-service intelligence nuggets that enable rapid decision-making, ideally leading to decision automation through decision trees. There should also be a methodology either formal or informal) to help organizations assign responsibilities to specific business users for handling BI applications and to define Closed-Loop Performance Measurement and Optimization Process (Decision Enabiers) Actionable Insights (Intelligence Nuggets) Intelligence Analytical Systems ( Strategy Focused) Aggregated Information Intelligence Applications actions to be taken when the intelligence nuggets identify business problems that require urgent attention. Accessibility to information and exchange of information across the enterprise provide early insight to business opportunities and disruptions, thus leading to business agility. Information architecture is a key component to achieving business agility, and it must underpin clear metrics measuring tbe impact of Figure 3: Key Components of Enterprise BI Platform Linking to Drivers Foundation for Intelligence Management Modeling Ouality Integration Warehousing Migration Intelligence Reporting Analytics Drivers Operational Excellence Corporate Governance Customer Intimacy Governance Content Management Modeling Product Leaderstiip Understand and value your data Process your data to actionable informaiion Useaciionable Intormatiofi to... Measure and improve your business 22 December 2008 Review vmw.dmreview.com

4 Figure 4: Agility Index for Banking X 4 5b <u 2 W) s œ 1 Crosschannel credit risk framework Cross- I Enterprise-1 AML I Basel II: I KYC: channel I wide SOX I detection I operational I completenew I compliance I across all I risk, I ness, product rollout information to agility. How can organizations best evaluate information agility? While there is no easy answer, this does not mean that companies need to tall back on gut-feel decision-making. After selecting and applying measurements meaningful to the organization, the final decision may come down to a single question. And that question is not, "What Is the hest way to evaluate the impact of BI initiatives?" Rather, the question is, "What is the best way for the organization to evaluate whether a BI initiative can help identify and move the organization toward the goals more rapidly or with a greater Hkelihood of success.^" Measuring Information Agility and the Intelligence Quotient conditions are constantly changing, and opportunities are emerging more rapidly than ever. In this dynamic environment, information agility provides a distinct edge, enabling enterprises to: ' Determine how changing conditions and competitive pressures affect their hasic business strategies, ' Identify strategic refinements and ' Leverage technology to support and drive new or adapted strategies. Enterprises have accumulated huge amounts of data about customer needs, market trends, the competition, regulatory requirements and their own business operations. The volume of data has been growing 3t an accelerating pace. This huge volume of data bas made business analytics more important tban ever. A major distinguisbing factor tbai separates lines of products Banking Processes accuracy agile enterprises from their less successful counterparts is tbe ability to leverage the data they have amassed to make informed decisions by delivering the right information to the right people at the right time. This requires: ' Delivering aggregate information on key performance indicators (KPIs) for decision-making purposes, continuous improvement and regulatory compliance. ' Speeding the dissemination of information regarding business decisions throughout the enterprise and, when necessary, beyond. < Protecting this sensitive information from unauthorized access and personalizing its delivery. Companies have employed popular ROI calculation principles to judge the value delivered by BI initiatives as a general rule. However, to measure the impact of intelligence, one needs to dig deep into the various dimensions of information exchange, beyond the dollar value calculated by traditional methods of ROI. In meeting these challenges and requirements, information must have certain quahty-based attributes, including: authenticity, reliability, accuracy, completeness, timeliness, security, availability, understandability, usability and relevance. Only by having high quality information to rely on can organizations achieve intelligence in decision-making throughout the enterprise. Soumendra Mohanty is senior manager with Accenture Information Management Services (AIMS). He may he reached at soumendra.mohanty@accenthre.com. Drivers of BI The importance of managing information as an enabler demands sharper focus as the result of: The growing need by business users for high quality, 24x7, location-independent information that can be trusted. The challenges in responding to the information and reporting requirements of complex horizontal initiatives spanning multiple initiatives, business processes and applications. The increasing need to exchange information across the enterprise as a shared service. The information has to be relevant, simple to understand and accurate for business to use it effectively. The increased attention to management and regulatorycompliance accountability as a result of Sarbanes-Oxley (SOX), fraud, capital adequacy, etc. The increased costs incurred in coping Vifith large volumes of unmanaged information (e.g., unstructured data). The recognition that the value of information can accrue over time, thus leading to new knowledge creation. The challenge of managing the loss of business knowledge and corporate memory due to attrition of knowledge workers. The need to be agile to respond to competitive pressures, which means the enterprise should be prepared with high quality, complete, accurate and relevant information in the right format, in the right location and at a time of need. Review I December

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