BI’s Impact on Business & Corporate Performance Essay

Nowadays various businesses are developing so quickly, they are so versatile and many-sided that it is more and more difficult to cope with this competition for many companies. As soon as they start to monitor and analyze their performance and work results, they come to the conclusion that they will hardly be able to reach the needed level without implementation of business intelligence technologies. Most of the modern companies are used to measure their performance with the help of corporate performance management (CPM) system. Other names of it are business performance management and enterprise performance management. Generally all these terms mean the combination of management practices and technologies, which have impact upon business performance. One of the most important places in the list of technologies is occupied by Business Intelligence and it is usually closely related to corporate performance measurement. At the moment unfortunately there is no enough information about all the kinds of influences of BI upon CPM, still most of the experts agree that it is rather strong and needs further studies and evaluations. 

Business intelligence includes a whole range of applications, which are able to extract and transform the information, received from different source systems, providing the possibility of visualization of this information for the users, presented in different dimensions. Nowadays there are a lot of debates about the application of IT technologies by organizations and companies, the volumes of their investments into IT technologies and so on. “In particular, Melville et al.’s (2004). IT business value model asserts that IT integrates with other complementary organizational resources to improve business processes, which in  turn  improves  organizational  performance.  The authors suggest that  sustained theorizing on the value of IT to organizations must include a definition of the types of IT and the complementary resources involved. Studies have examined the value of various enterprise information systems such as Customer Relationship Management (CRM), Supply Chain Management (SCM ), and Enterprise Resource Planning (ERP) systems.” (Dresner, 2009, p. 18 ). On the basis of evaluation of the stock prices of the company, there were studies conducted, aiming at revealing the information about the IT values and organizational performance. Certainly stock values could be considered only as general indicators of the performance rates of the company, still their analysis would still contribute to better understanding of the specific processes, which take place in marketing, human resource management and supply chain management. Some of the experts devoted a lot of attention to research of the impact of BI upon the operational processes, however without studying of the other complementary resources, which are important for all CPM management practices.

The impact of BI upon CPM management practices is evident, moreover taking into consideration the current evolution of BI. Still not all BI practices could be applied with the same degree of effectiveness. Depending on the tools and practices applied, they could be differently effective. At any rate Business Intelligence used to be the top priority for most of IT executives for a sufficiently long period of time already. This tendency is continued and along with the widely –applied basic concepts of BI, there are new appearing, which are responsible for storing of the data, reporting of the data, even serving as parts of decision support systems (DSS). Initially BI was treated by most of the experts as just a source of consultative services, later, however, its impact upon competitive advantage of the companies became evident. “The academic research community only gradually embraced the topic of BI, and today research on BI is still fragmented and sparse. While a research time lag on emerging IS concepts or innovations is a generally observable phenomenon, which can be explained by e.g. academic caution, risk aversion and publication time lags, we assume that the absence of a generally accepted definition of the term BI contributed and still contributes to this time lag.” (Cokins, 2004, p. 45). Rapid development and practical applications of modern BI technologies makes the process of analyzing of their efficiency rather complicated. To some extent it is helpful to base the research upon the definition of BI. Foley and Manon formulated their variant of the definition in the following way: “business intelligence (BI) is a combination of processes, policies, culture, and technologies for gathering, manipulating, storing, and analysing data collected from internal and external sources, in order to communicate information, create knowledge, and inform decision making” (Dresner, 2009, p. 22). The narrower definition of BI is concentrated upon its ability to help the users to gather and store the data, which would help them to make correct business decisions. Uniting these two approaches to defining of Business Intelligence, it is possible to identify the major purpose of it, as providing support for business decisions making. According to the Data Warehouse Institute BI plays also important role for combining and enterprising data warehouse and helps to transform the data into usable business information. This BI should be understood as an analytical process, which is applied for the sake of transforming of the gathered information into the data, which could be efficiently used for taking correct business decisions for a concrete organization. Business Intelligence is operating with implementation of software products, which are needed to support this analytical process. In addition there are BI tools and systems, which are developed for concrete processes of a concrete organization, allowing using the modern technologies with maximum efficiency.

Most of the researchers concentrate upon the role of Business Intelligence, as it is known that BI technologies are worked out with the aim of reporting about performance of the companies. There is no technology at the moment, which would comprise BI systems, but systems consist of various technology components. Before it was suggested that OLAP – online analytic processing – was one of the major technologies, supporting the business decision taking process, because it provided the chance to treat the information from different perspectives. “For example, a user might want to examine sales of a specific product then drill-down to better understand sales of this product in a specific region or over a specific time frame. This multi-dimensional exploration of performance information is complemented by tools that facilitate the distribution of online reports (some that also feature “drill to detail” capabilities), as well as scorecards or dashboards.” (Dresner, 2009, p.38). Thus these reports are able to present the information, needed for any manager in such a visual format that it would be quickly clear and easily perceived by the decision –makers. Due to the fact that Business Intelligence could be used for evaluation of the performance by the end users, without the need to request the similar reports from the IT departments, the access to this information is direct, more accurate and quick. At the same time the consequent analysis of the data and its applications could be done with higher speed and efficiency. Based on these facts it is possible to point out the main impacts of Business Intelligence upon CPM operating cycle. In the first line BI is responsible for quicker and more qualitative delivery and presentation of performance information to the end users, as it has its impact upon planning and measurement procedures. Via providing additional information-manipulation functionality, BI could have direct impact analytics. “Given the fact that the ultimate organizational performance driver is the effectiveness of operational business processes because these processes lead directly to the accomplishment of secondary organizational objectives such as customer satisfaction or supply-chain  efficiency,  we  position  operational  processes  as  the  ultimate dependent variable.” (Dresner, 2009, p. 38). The assumptions that BI technologies are able to impact the decision making process in organizations are relatively new and not thoroughly studied yet. Experts found out that BI had the impact upon internal efficiency, better relations with customers and business partners and business supplies. At the same time it was noted that BI tools contribute to better understanding of the outcomes of the organization’s operating by its managers. Sometimes it is possible to integrate BI tools into an operational process, which makes these parts of the process automating. Moreover, it is not enough to simply point out the outcomes of the processes, rather it is needed to build connections between these outcomes and business objectives, which belong to the general strategy of company’s development. “Therefore, within a CPM cycle, BI tools provide accurate up-to-date information on the accomplishment of objectives allowing managers to analyze performance gaps and take corrective action. These actions might include the modification of objectives (i.e.,  adjusting  plans  based  on  actual  performance),  or  they  might  include  taking  steps  to  improve processes to better accomplish established targets.” (Cokins, 2004, p. 49).

The modern business environment is nowadays characterized as utterly dynamic and sophisticated. There are a lot of regulatory changes and consolidation challenges. All organizations and companies are to develop within this conditions and challenges, thus they need to develop the ability to know about these changes and be able to adjust all the activities and strategies to them as quickly as possible. Often application of BI technologies and solutions contribute to making any company more adaptable and efficient. Some categories of the challenges are related to customers’ demands and expectations. In order to correspond to them, organization’s managers are to secure the growth of the volumes of organizational data and be able to leverage it with the highest effectiveness and certainty and within limited period of time. Under the condition of the absence of consistent master data, it is necessary still to manage the enterprise information and systems. In case the managers and workers of the organization fail to do these things, they would have a number of problems, such as for example ineffective business processing, inefficient utilization of the available technologies, absence of the optimization process, worsening of the quality of services provided, non-compliance issues. (Cokins, 2004, p. 49).

Irrespective of the fact that Business Intelligence technologies and their implementation need further research and studies, it is already evident that they are able to have significant positive impact upon the health of any organization. Problems might be caused by lack of maturity of BI initiatives and be challenging for business benefits.

These are already more than two decades, since BI platforms are widely applied in the managing of organizations with the aim of getting business benefits and reaching the objectives. “Traditionally, BI platforms have been spanning across Information Integration (e.g. ETL, EAI/ESB, CDC), Information Storage (e.g. Data Warehouse, Cubes, Metadata) and Information Analytics (e.g. Enterprise Reports, OLAP Reports, Dashboards and Data Mining) components.” (Cokins, 2004, p. 52). As time passed the landscape of Business Intelligence was changing, becoming more and more business integrated. This is not only the corporate world, where this change is taking place. Advanced Business Intelligence could be implemented in the work of police departments with the aim of reducing of crime rates, for military operations, in order to have a clearer picture, where the troops should be moved to. There are more examples of how BI systems could benefit people in various spheres. Talking about the business world, this is evident that BI is one of the most important initiatives, influencing positively the health of organizations.

Nowadays there are a lot of questions about the scope of the BI platform, related to the maturity of the Business Intelligence initiatives and technologies, which are used to bring business benefits. One of the key peculiarities of the modern business environment and market is the fact that it is developing so rapidly that even the today’s innovations might be out of use tomorrow. “E.g. change in the landline tariff didn’t happen for more than a decade, but mobile tariff and service plans are changing on an almost quarterly basis. To survive and grow in the vibrant market space, every organization is facing outrageous competition, business convergence, demand for profitable growth and intense pressure on cost. Organizations are becoming innovative in their approach to make business truly performance driven at Strategic, Tactical as well as Operational levels.” (Wade, Recardo, 2001, p. 235).

Any organization has the task to struggle for successful fulfillment of its strategic intentions, involving it into the day-to-day business decisions and steps. To achieve this aim, is it necessary to understand the pulse of the organization, apart of knowing about its financial state and problems and compliance. “Developing a strategic performance management approach drives sustainable performance by aligning the activities of the management team and employees with corporate strategy.” (Wade, Recardo, 2001, p. 247). Corporate Performance Management (CPM) is a framework, which is used in order to integrate the strategy of the company into the business operations. With the help of CPM managers are able to receive the complete and clear picture of the situation with the value chain and build the platform for the future development. Simple, but important questions are answered via involvement of CPM and it is clear what the situation is and how it is luckily to change in the future. Corporate Performance Management helps the managers to plan the optimization processes for their organization, via increasing of the efficiency of the data use and budgeting forecasts; planning, analyzing and reporting are the processes, which are supported by CPM to a great extent. Sometimes CPM is mixed up with BI, because both have serious impact upon corporate performance of the organization, still this is not the same.

Any organization exists and operates in the frame of its relations with the customers, suppliers, partners, of its managing the employees and strategies of development. Under the condition that behavioral analysis is done perfectly, there are all the chances to make the correct judgments and make the outcomes about the correct decisions, which need to be taken at a certain point of time with implementation of Business Intelligence. It could allow reducing of the costs and proper support for the business. It could be proved with a simple example. In order to correspond to the customer’s needs, it is necessary to know everything about his profile, which consists of socioeconomic, demographic, psychographic components. In case of using the system of cold calls, the cost could be higher and the risk of customer’s dissatisfaction grows.

Innovation could not be taken away from business, as this is one of the components of business excellence, still innovation usually means risk, and there is even the special term for defining it – the Risk Area. Correct implementation of Business Intelligence provides the possibility to predict most of the risk types, for example market risk, operational risk, credit risk. Predicting risks has high potential for increasing of the capital and avoiding of the possible problems during innovations introduction.

Such traditional technologies and tools as OLAP, Appliances, Dashboard and so on, are already well-known to the users and managers of the companies. At the same time there are new technologies constantly developing in the sphere of BI, as it was already mentioned that organizations and businesses are nowadays very dynamic. Globalization and consolidations are the processes, which cause the increase of the number of customers and products choice, which in their turn lead to data volume growth. Thus more data appliances and data compression are widely used. Different information was processed at a different moment of time, often using also different patterns; this doesn’t mean however that all the data storages and disk of the organization should be used in order to keep all this information safe and available in case of need. BI technologies allow keeping the important data easily reachable, whereas the rest information remains inactive.

Another important aspect is the delivery of the business information. Today there are serious changes in presentation of the information are taking place, in other worlds, there are constantly new visualization techniques developing and they are implemented for better understanding of the data. One of the examples of such innovations could be the application of GIS, google maps, they are widely used for decision making about the locality of the markets and products. Users are now able to perceive the data via flash-reports, this is a really fast method of information delivery, with involvement of the responsible in-memory features. With the help of it the data delivery channels are operating with much greater success and speed. Application of mobile phones and tablets contributed to mobility of the users, quicker reactions and decisions in business, better control and employees’ performance. “Text mining algorithms, to find trends in product service claims and alter the design to reduce the warranty cost, to find patterns of irregularity (black-spots) in telecom network elements and proactively fix them to reduce downtime, have changed the way organizations have been looking at their content.” (Wade, Recardo, 2001, p. 250). The efficiency of call centers of the organization is one of the aspects, which could be used to support its further development, thus voice data processing is also done with software and issue resolutions. Social communication sphere could hardly be imagined nowadays without the Internet. Huge amounts of different information are available through the Internet for the users and customers. People are able to analyze the products, the prices, communicate with other customers and get all the necessary information about the product. They are able to order these products, just from their homes and track the shipment of them in the Internet as well. Producers in their turn have the unique possibility to track the situations in different specific regions and make their judgments about the types of products, people need there or the ways, how their services should be provided there.

Most of the processes, taking place in the organization, are dependant upon the quality of the data provided. There could appear enormous problems in case the data is passed not correctly. “Not understanding the unique customer/household may result in escalated cost and incorrect perception about the customer and portfolio. ‘Garbage in – garbage out’ philosophy has been taken very seriously by organizations and hence there is more adoption of data profiling, data quality, data cleansing and master data management products.” (Wade, Recardo, 2001, p. 252). In addition timely delivery of data is utterly important for successful operating of the company and getting closer to its strategy.

Overall, modern world and modern business can not exist without the involvement of advances technologies; Business Intelligence is a sophisticated and multifunctional technology, which could have positive impact upon corporate performance, contributing to general positive development of the whole organization.

References:

Albescu, F, Pugna, I., Paraschiv D., (2007). Business Information engineering – an approach integrating business and information technology, 2nd International Conference Accounting and 2., Management Information Systems, Bucharest

Ballard,  C.  (2006). Business  performance  management  meets  Business  Intelligence  available  on  line. Retrieved from  http:/www.ibm.com/redbooks

Cokins, G. (2009).  Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics

Cokins, G. (2004).  Performance Management: Finding the Missing Pieces (to Close the Intelligence Gap)

Dresner, H. (2007). The Performance Management Revolution: Business Results Through Insight and Action

Dresner, H. (2009). Profiles in Performance: Business Intelligence Journeys and the Roadmap for Change

Ekerson   W.W.(2007).   “Best   practices   in   operational   BI   –   Converging   analytical   and   operational processes.” Retrieved from www.tdwi.org/

Paladino, B. (2007).  Five Key Principles of Corporate Performance Management

Pugna I., Albescu F., Zaharie D., (2008). Business Intelligence for strategic and performance measurement –Business Performance Management, 4th International Conference of ASECU- Development: Cooperation and Competitiveness. Bucharest

Wade, D.,  Recardo, R. (2001). Corporate Performance Management. Butterworth-Heinemann

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