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The effectiveness of BI tools on business performance

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Image: The effectiveness of business intelligence tools on business performanceImproving the productivity of knowledge workers is one of the most important challenges for companies that face the transition from the industrial economy to an economy based on information and knowledge.

Key to this transition for business is an understanding of the marketplace. However, most “business intelligence (BI)” efforts have failed to address this problem and have resulted in solutions for information management instead. Organizations have also failed to realize the full potential of implemented BI and other knowledge management tools to increase corporate performance.

Performance management and the BSC

BI is a systematic process, by which knowledge needed for an organization to compete effectively, is created, captured, shared and leveraged. The source of such knowledge may be internal or external, individual or collective, historical or forecasted. BI hence consists of a dynamic and continuous set of processes and practices embedded in individuals, as well as in groups and organizational structures. At any point in time, any part of a given organization may be engaged in several different aspects of BI that attempts to constitute a 360° view of its business health status. Thus, it is not discrete, independent and monolithic organizational phenomenon.

BI is often confused with IT systems and processes. Unlike information, knowledge resides in the experiences of people in different contexts. The aim of BI in an organization is to work within business processes that create, and transfer knowledge throughout the organization. If knowledge is created and transferred via human experiences then these business processes must encompass an understanding of how people learn and transfer their knowledge.

A poll of executives from 80 large companies in the USA, such as BP, Chemical Bank, Hewlett-Packard and Kodak, revealed that 80 per cent believed managing the knowledge capital of their organization should be an essential or important part of business strategy. Strategic goals and business requirements drive process requirements, which in turn determine knowledge requirements and BI initiatives will be effective when they are aligned with the performance goals and requirements of a business, its processes, and its people.

In the highly competitive global marketplace, it is also important to realize that BI plays a key role in business processes within the organization. BI goes beyond the sharing of database or policies but it also involves employee's sharing and expertise. BI tools combine IT and a knowledge-sharing culture to create a central repository of intellectual assets, helping the various stakeholders in the company to effectively discharge their roles and in achieving their strategic business goals. Hence, knowledge strategies can be a reflection of business objectives.

The balanced scorecard

The balanced scorecard (BSC) is a tool that tracks the execution of an organization's vision. It does more than just measure performance. It is a management system that focuses the efforts of people, throughout the organization, toward achieving strategic objectives. It gives feedback on current performance and targets future performance. Put in another way, the BSC converts an organization's vision and strategy into a comprehensive set of performance and action measures that provides the basis for a strategic measurement and management system. It is a still popular approach to measuring an organization's performance, and one that has been widely adopted in BI.

In summary, the BSC complements financial measures of past performance with measures of the drivers of future performance. The objectives and measures of the scorecard are derived from an organization's vision and strategy. The objectives and measures view organizational performance from the four perspectives: financial, customer, internal business process and learning and growth. These four perspectives and their accompanying objectives, measures, targets and initiatives provide the framework for using the balanced scorecard.

The BSC expands the set of business unit objectives beyond summary financial measures. Executives can now measure how their business units create value for current and future customers and how they must enhance internal capabilities and the investment in people, systems and procedures necessary to improve future performance. The BSC thus captures the critical value-creation activities created by skilled, motivated organizational knowledge. While retaining via the financial perspective, an interest in short-term performance, the BSC clearly reveals the value drivers for superior long-term financial and competitive performance.

The case of an IT consulting firm

The subject of the case research is an IT consulting firm which offers consulting and IT services worldwide. The firm's BI unit has the mandate to help consumer-oriented organizations efficiently and effectively utilize enterprise data to gain strategic and tactical advantage over its competitors. The unit was established in 1997 with strength of 288 employees. Headquartered in Singapore with subsidiaries in Malaysia and India, the BI unit has a strong brand reputation as a niche consulting player in the Asia-Pacific region with strong domain expertise in financial services and telecommunications verticals and strong consulting skills in all aspects of BI. Its list of clients include Fortune 500 companies in the Asia-Pacific, North America and Europe.

"The management thinking at the company was to use KM to leverage existing resources with appropriate tools and methods to increase corporate performance."

The IT consulting firm started internal KM initiatives to address the pain areas of its project managers and presales teams by filling the current information and knowledge gaps in 2001. These KM initiatives were specifically targeted for enhancing the communication among project management and presales activities. In 2004, these KM initiatives had spread its wings and shares information among all its employees. By focusing on employees' pattern of working and their business priorities, the company launched a series of KM tools which later evolved to a service line for clients.

Whether for itself or clients, the firm soon realized that all organizational knowledge could be utilized for competitive advantage. The management thinking at the company was to use KM to leverage existing resources with appropriate tools and methods to increase corporate performance. Naturally, there was specific interest in using KM tools for the purpose of BI for the firm, as well as its clients.

The expectation from clients of the IT consulting firm was one of physician, heal thyself. The firm therefore deployed nine fundamental tools for its knowledge work and to the practice of BI. Through the skilful utilization of the tools (often in combination) a 360° perspective of knowledge relating to finance, internal process, the customer and growth could be derived. And as would be expected for such a 360° knowledge mining exercise, these tools were utilized across codification vs personalization, individual vs group, internal vs external, historical vs forecast data. Brief descriptions of these nine tools are given as follows:

  1. Webinar (Web Seminar). A webinar is a presentation, lecture, workshop or seminar that is transmitted over the web. A key feature is its interactive elements – the ability to give, receive and discuss information in real time. Webinars offer exceptional convenience and are very cost-effective especially when travel is not required to attend such events. The firm deems this a critical personalization tool for collective knowledge sharing and diffusion.

  2. e-Learning. e-Learning provides consultants opportunities to learn and upgrade their knowledge online in an anytime, anywhere manner. E-learning is used interchangeably in a wide variety of contexts. In the organization, it is the preferred strategy to use the organization network to deliver specific training courses to consultants and clients. This tool is a key aspect of growth and learning within the firm's consultants.
  3. e-Buddy. e-Buddy is an online application concerning human resource management that connects an employee with the human resource department. The application covers human resource processes and thus, knowledge workers are able to track their personal human resource matters such as expatriate arrangement, career advancement opportunities. On top of this, it also performs as a recruitment tool to attract new talents through referral or recommendations from existing employees using their social capital.
  4. e-Library. e-Library provides consultants with efficient access to high-quality information to support their learning, research and analysis needs. Recognising the unique challenges of a consultant or client acquiring knowledge, the e-library is integrated with work requirements to provide seamless, single-sign-on access anytime, anywhere. In addition to templates, deliverables, best practices and how-to guides, the library collection comprises of full-text journals, White Papers and books on a broad range of subjects. The e-library is the most significant source of codified, collective knowledge in the firm from internal, as well as external resources.
  5. IT Service Desk. This is an online support 24×7 which provides solution to IT-related problems. Users may search and retrieve possible solutions from the knowledge base which is available on the web. If they are unable to get an immediate solution, a ticket will be given for a new technical issue being raised.
  6. Blog. This is a corporate blog that is published and used by the organization. The advantage of the blog is that the posts and comments are easy to reach and follow due to centralized hosting, and generally structured conversation threads. The organization's blog is an internal one that is generally accessed through the organization's intranet which any employee can view. These blogs are often used in lieu of meetings and e-mail discussions, and can be especially useful when the employees involved are in different locations, or have conflicting schedules.
  7. Technical forum. The purpose of the technical forum is to increase internal technical competency. Such a technical forum is a web-based discussion group to provide ideas, consultation and solution of technical-related problems. Consultants and clients will have a chance to interact with other members in the forum to learn and broaden their knowledge and shared their view when they encounter a problem from multiple perspectives.
  8. Collaboration World. The Collaboration World is a software platform designed to help consultants involved in a common task and achieve their goals through groupware or workgroup support systems. Collaborative management tools facilitate and manage group activities. Examples of such activities include: electronic calendars – schedule events and automatically notify, and remind group members; project management systems – schedule, track and chart the steps in a project as it is being completed; workflow systems – collaborative management of tasks and documents within a knowledge-based business process.
  9. Mentoring. Mentoring is an online personal development and empowerment tool. It is an effective way of helping people to progress in their careers. It is a partnership between two people normally working in a similar field or sharing similar experiences online. The mentor helps the mentee to find the right direction and develops solutions to career issues. Mentoring is a significant contributor to individual growth and development.

In principle, the effectiveness of BI tools must be guided by an organization's goals and bottom-line results. If BI tools do not contribute to an organization's business and performance, top management would not support further investments of time and resources for such initiatives in the near future.

October 2011.

This is a shortened version of “Realising the strategic impact of business intelligence tools”, which originally appeared in VINE: The journal of information and knowledge management systems, Volume 41 Number 2, 2011.

The authors are Ravi S. Sharma and Vironica Djiaw.