Research Publication Date: 13 June 2008 ID Number: G00158605 How Eneco's Enterprisewide BI and Performance Management Initiative Delivered Significant Business Benefits Nigel Rayner Eneco was faced with significant business challenges due to industry deregulation, so it implemented an enterprisewide business intelligence (BI) and performance management solution to manage through these challenges, improve customer service and deliver on its strategic objectives. This generated many tangible and intangible benefits, and the project was one of the finalists for Gartner's 2008 BI Excellence Award (see Note 1). Key Findings Eneco has been able to create a BI and performance management solution that spans from the senior management team through the different business units down to individual employees. Individual targets are linked to strategic objectives through cascaded scorecards. This has delivered significant benefits. The data warehouse is used to provide a foundation for consistent reporting of financial and operational data. This eliminates time-wasting discussions about whose data is correct. Eneco standardized on BI tools from Cognos to enable maximum leverage of skills and resources. The BI competency center (BICC) was an important factor in Eneco's success, and forms a foundation for delivering additional capabilities to expand the scope of the solution. Recommendations Organizations considering balanced scorecard deployments should ensure that the scorecards are not restricted in use to the top levels of management. This means that a framework of performance metrics must be established that links strategic objectives with operational activities. Executive management sponsorship is key. This includes having a clearly articulated strategy that can be managed through a performance management system. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner's research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.
WHAT YOU NEED TO KNOW Implementing a major BI and performance management strategy will gain management attention when an organization is faced with a major business challenge. The deregulation of the energy industry in the Netherlands in 2004 placed Eneco in a more-challenging business environment, forcing it to restructure the business. Eneco had a patchwork of operational applications, so deploying a BI and performance management solution based on a data warehouse enabled the company to create consistency between financial and operational data without having to restructure the operational systems. Eneco then implemented analytic applications that leveraged this foundation to provide an enterprisewide performance management environment based on the balanced scorecard methodology. Unlike many companies that adopt the balanced scorecard concept, Eneco was able to link strategy management with operational execution by embedding the methodology in a sophisticated software solution. This leveraged a common definition of key performance indicators (KPIs) that were held in a central repository and linked through the scorecards to provide an enterprisewide metrics framework. This approach is a great example of how to implement a comprehensive BI and performance management strategy. Organizations starting out on the BI and performance management journey should learn from Eneco's success. CASE STUDY Introduction Eneco is one of the three leading energy companies in the Netherlands. It was founded in January 1995 from a merger of Energiebedrijf Rotterdam and Energiebedrijf Dordrecht. The name ENECO stood for "ENErgy and COmmunications," which referred to the business of two of the merging parties: energy distribution and the operation of communication cable networks. In 2000, the cable operator UPC Netherlands took over all telecommunications operations. From that point on, ENECO was dedicated to supplying energy in the form of gas, electricity, heat and, to a lesser extent, cooling. In July 2000, ENECO merged with six regional energy companies, and another two energy companies were added to ENECO from later takeovers. In 2003, Remu, which supplied the Utrecht area, was bought and integrated into ENECO Energie. In 2008, the company introduced a sustainable strategy and a corresponding new corporate style. The name of the company was changed from ENECO Energie to Eneco. Eneco now has approximately 5,300 employees. The head office, the core companies and the business units are located in Rotterdam: Several offices are located in other parts of the Netherlands. The shares of Eneco are held by 61 Dutch municipalities. Eneco has approximately 2 million customers, and revenue in 2007 totaled 4.5 billion, with a net profit of 426 million. The Challenge In 2004, the deregulation of the Dutch energy sector opened up the market to competition and mandated a series of complex intercompany operating conditions. From a customer perspective, deregulation divided Eneco (and the other energy companies) into a network transport company that delivers energy to customers, and a supply company that sells energy to its customers competitively. The company had to change its business model from focusing simply on delivering energy to delivering profitable revenue growth. This meant it had to reorganize the way it did Publication Date: 13 June 2008/ID Number: G00158605 Page 2 of 6
business, focusing business goals on operational excellence and outperforming the competition in growing and retaining profitable customers. To do this, Eneco had to adopt a retention-based customer strategy with a focus on growing customer profitability, but its existing systems did not provide sufficient insight into the customer base. The history of Eneco's evolution meant it had many legacy systems, temporary applications and disparate data sources, making it difficult to provide management insight into the business, get a holistic view of the customer or provide any early indicators of customers likely to switch suppliers. Eneco also had to replace its regionally focused, horizontally oriented business unit view of performance with national, vertical-market-oriented divisions each responsible for its own profit performance. Approach Eneco started initially with two pilot projects that showed the value of BI. By extracting data from the billing system and contact center into a data warehouse, the BI team was able to provide analysis that identified issues in the collection process and the way calls were managed in the contact center. This allowed for improvements in the processes, which led to a reduction in accounts receivable and improved call handling in the contact center. No strategic BI tools had been deployed: In most cases, the analysis from the data warehouse was done using Excel pivot tables. However, the success of these projects strengthened the case to deploy BI more strategically within Eneco. In 2002, Eneco adopted the balanced scorecard as a management methodology, but this was a paper-based, manual system. The BI team proposed the creation of a performance management solution in a more structured and integrated manner based around the balanced scorecard concept. The goal was to link strategic operational measures to financial outcomes in a solution that leveraged BI technology and applications rather than as a disconnected, manual exercise. The supervisory board accepted this proposal and became the sponsors of the project. Eneco created a framework of KPIs from a range of operational perspectives, which were informationbased marketing, operational excellence, finance management, risk management and worth creation. Scorecards provided channels of communication between the different areas of operation, and the company hoped this would be widely adopted and would create a performance management culture as the basis for reinventing its business. The enterprisewide project started in 2004 with the establishment of the data warehouse infrastructure, which provided a central repository of data drawn from operational systems, such as CRM, marketing, billing and finance. Balanced scorecards were initially implemented as a performance management tool in Eneco's retail division. This was successful and, in 2005, the balanced scorecards and associated reporting were cascaded across the other business units. The management team began using the balanced scorecard reports in management meetings, and Eneco also implemented a BI portal to allow self-service access to management information. In 2006, Eneco linked the balanced scorecard system to the budgeting and business planning processes and systems. The balanced scorecards were also used to communicate strategy more broadly to the entire workforce, and these were aligned to individual compensation and development plans. During 2006, Eneco also established a BICC. Eneco had a team of approximately 25 people working on this initiative, and used Cognos solutions (PowerPlay, Metrics Manager, Impromptu, Data Manager, ReportNet and Cognos 8 BI) as the foundation for the performance management applications. The data warehouse was built using Microsoft SQL Server in an HP environment and Oracle Warehouse Builder, although this will be migrated to an Oracle database in 2008. The total project cost was 2.5 million, of which 850,000 was spent on infrastructure, with the balance going to software procurement and labor Publication Date: 13 June 2008/ID Number: G00158605 Page 3 of 6
costs associated with establishing the architecture, designing the data warehouse and implementing the BI tools. The BICC focuses on business alignment and manages training, as well as release management, software support and data quality, and is now a permanent part of the organization, with a virtual team of 25 to 30 people. The annual budget of the BICC was approximately 5 million by the end of 2007. Eneco extracts actual data from its SAP system and feeds this into the data warehouse, along with operational data from other systems (such as the billing system). This provides a consolidated view of financial and operational data, and managers can enter their forecasts directly into the system to allow for forward planning (forecast data can also be passed back to SAP). This enables Eneco to proactively improve operational effectiveness, guide decision making, and assess the progress of objectives to meet goals and test new business strategies. Future initiatives will focus on expanding the solution to address other drivers of profitable revenue growth, including workplace competencies and skills, and a system of controls around targets and gaps. Results The implementation of a comprehensive BI and performance management solution has delivered some key benefits for Eneco. It now manages its business with consistent facts and figures across the organization because the BI infrastructure has created consistency between financial and operational data, allowing management to spend more time on decision making rather than arguing about whose data is right. Eneco has a comprehensive view of customer behavior and can focus on how its customers use its products (high and low margins), as well as track customer calls and payment behavior trends. This has enabled Eneco to manage customer turnover more effectively and provide better, more-efficient customer service. Eneco's management has access to reports and analysis that enables them to track their progress against strategic objectives and adjust strategy as needed. Operational performance is measured against a set of commonly defined KPIs. The system has become so widely accepted that only information produced from the Cognos solution is allowed to be presented in supervisory board meetings. There is no longer any discussion over whose data is correct. This project has also delivered quantifiable business benefits: Eneco saw a decrease in its accounts-receivable balance by approximately 10 million. Eneco can perform value- and need-based customer segmentation, with annual savings of 1 million in direct mail costs, and an increase in its marketing conversion rate from 10% to nearly 65%. Savings were seen of approximately 2.5 million through higher process efficiencies in its customer contact center and billing department. Critical Success Factors Eneco started with two projects in the retail division designed to yield rapid success. This "think big, start small" approach allowed the concept of using BI to improve performance management to be proved, and this success was then widely communicated to build credibility and act as a foundation and learning mechanism for the next steps. Executive buy-in and leadership was key to making this a successful enterprisewide performance management initiative. Commitment from the senior management team to use balanced scorecards to communicate and manage strategy was vital. Publication Date: 13 June 2008/ID Number: G00158605 Page 4 of 6
Eneco adopted a collaborative, cross-organizational approach (top-down and bottomup) to solution requirements gathering and system rollout. Managers across Eneco were consulted as to what data needed to be managed, helping to ensure that the performance management solution was generated from within the business and not imposed by the IT organization. This principle has been continued through the establishment of a BICC. Standardizing on a single BI and performance management vendor (Cognos) meant the IT organization had one platform to support, so skills could be readily and efficiently shared, and new functionality rolled out rapidly. Lessons Learned Implementing an enterprisewide BI and performance management solution requires a clearly articulated and sustainable vision. Adhering to the vision of a "single version of the truth" for decision making was fundamental, which meant bringing together financial and operational data. Managing to individual metrics and investigating individual data points does not create much value. Data must be combined and integrated to produce the business understanding that drives management decisions. Creating a consistent definition of KPIs and representing these in an enterprise framework through balanced scorecards meant Eneco avoided a myopic focus on particular data items. Note 1 Gartner BI Awards, 2008 Now in its fourth year, the Gartner BI Excellence Award is dedicated to promoting excellence in BI and performance management. Gartner BI analysts evaluate, recognize and reward the most successful, recent BI implementations by end-user organizations. The award, launched in North America in 2005 and alternating with Europe each year, was awarded to one of three finalists that presented their cases live at the Gartner BI Summit on 6 February 2008 in Amsterdam. This research is part of a set of related research pieces. See "Case Studies for Business Intelligence Excellence Award" for an overview. Publication Date: 13 June 2008/ID Number: G00158605 Page 5 of 6
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