b u s i ne s s s t ra t e g i e s

Business intelligence in action

Three examples of how it really works
In a previous issue of Management (April 2002), we briefly examined business intelligence (BI) tools By Kobana Abukari, CMA, and Vijay Jog and their role in value-added decision making. BI essentially supports a corporations transition from being data rich and information poor, to becoming information rich and capable of better fact-based decision making. Recent events have highlighted the importance of senior management having this operational and financial information. An effective use of BI should ensure that the right information is made available to the right decision makers at the right time.

A management initiative
BI is one of the most robust managerial initiatives that smart managers can employ to help their organizations create more value for shareholders. Other initiatives include activity-based costing/management (ABC/M), economic value creation (EVC) and the balanced scorecard. BI has been described in various ways. Below are a few examples: q BI is about having the right information available to the right decision makers at the right time to help organizations make better decisions faster. q BI is an effective way to link systems that traditionally dont communicate well, to ensure that the mountains of data in different legacy systems are converted into accessible information. q BI is a decision support system that employs a rational approach to management. It uses a factbased approach to decision making to ensure that an organization achieves a competitive advantage. In sum, BI is an enterprise-wide strategy that supports reporting, analysis and decision making on multiple levels. It supports organization-wide analysis, which in turn leads to insight, action, and the proper measurement of results. The BI approach has been successful at giving many leading companies an edge over the competition because it brings people and technology together to

solve problems. It is our experience that as a management initiative, the BI approach involves one major hurdle. Because it empowers decision makers, members of an organization who previously wielded power and influence by maintaining a handle on information have a lot to lose. Thus, the possibility of one or two people stonewalling a BI initiative and its successful implementation cant be completely discounted.

The method
To successfully implement BI, we recommend following a six-step approach: 1. Identify what needs to be addressed with a BI solution. A successful BI initiative cant exist in a vacuum. It has to be linked to business strategies and goals. 2. Identify the multiple data sources that currently exist within the organization. Most organizations are drowning in data that are kept
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in a multitude of databases, spreadsheets, flat files, etc. To build a solid BI system, identifying all the data sources that an organization currently has is essential. 3. Extract, transform and load (ETL) data to create a subject-orientated multidimensional cube. Information critical to fully understanding a particular customer may be stored in different databases. The sales orders placed by the customer may be kept in a sales order database under the control of the sales department. The complaints by the customer may be kept in another database looked after by the customer service department. Yet the finance department may keep the customers payment history. Its also our experience that often, different departments have different codes for the same customer. To create a customer subject-oriented knowledge repository, a BI solution needs to use the ETL process to ensure that all the relevant customer information is brought together and made consistent. 4. Help the organization choose a reporting engine (such as Data Analyzer, Excel, PowerPlay, Proclarity, Brio, etc.) to view and analyze the multidimensional cubes created by the ETL step.
Account Period Period Alt Year Division Division Subdivision

Three real-world examples

Existing research indicates that analysts and managers typically spend more than half of their time number crunching in Excel. More time is spent making the reports look pretty. These dont add value and are often boring activities, but they have to be done the reporting environment demands this time and energy investment. But a well-designed BI solution can free up this time for more stimulating work such as analysis and data mining. The following are real-world examples, although for confidentiality, the companies names have not been included. Their experiences are not unique and include valuable lessons for anyone considering a BI solution.

BI in finance
A leading government agency with over 5,000 employees spread across all the provinces and territories of Canada faced several challenges in its finance department. Among other things: q The agency had separate financial systems for more than 28 regional offices and had great difficulty obtaining a central, consolidated view of operations. q Finance department staff members spent several days constructing reports. q When simple questions were asked about the reports the department produced, it took even more time to provide answers (which were fraught with errors).

Region Region Province City

Dept Dept Item

Buyer Buyer Purchases

Manager Manager

Measures Actual Budget Actual (Previous Yr) Budget (Previous Yr) YTD Actual YTD Budget YTD Actual (Previous Yr) YTD Budget (Previous Yr)

Financial Year Statement Account Groups Quarter Account Month Subgroups A/c Categories Accounts

5. Create standard reports and undertake ad hoc analysis and data mining to gain insights into the key drivers of corporate performance. 6. Plan an enterprise-wide deployment to ensure that the right decision makers have the right information whenever and wherever they need it.

We recommended that the agency consider a BI solution and implementation. The table above shows some of the dimensions (account, period, etc.) and measures this agency currently has in its multidimensional cube. The dimensions, which represent broad groupings of descriptive data about major aspects of an organization, allow the agency to ana16
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lyze using several criteria. Using the dimensions, for example, the organization can look at financial statements (account dimension) by year (period dimension) and by province (region dimension). You will also notice that there are two period dimensions (period and period alt). This is the concept of alternative drilldowns, which provides a more direct navigation to the data and also presents different relationships across levels. Period Alt is an alternative dimension. To get to months from the period dimension, one needs to move from year to quarter and then to month. However, one can go directly from year to month by using the Period Alt alternative drilldown. Each dimension also has individual categories. Examples of categories within the account dimension are income statement and balance sheet. Categories are organized hierarchically within a dimension into category levels. Categories and category levels enable drilldown to any level of detail desired to support decision making. One can, for example, drilldown from income statement to revenues, then to the different classes of revenue and then to the various revenue line items. The drilldown capabilities support the informational requirements of different decision makers in the organizaYears Years Months Parts Part Classes Groups of Parts Part Items Customers Customer Groups Customer Types Individual Customers

q q

All in all, this agency is happy with its BI solution because: monthly multidimensional cubes it creates provide a consolidated view of financial performance across different locations; Decision makers are able to answer ad hoc questions in seconds; Reports are presented in user-friendly formats, and can be accessed on demand; and More finance department time is spent on value-added activities. The motivational effects of moving from routine repetitive tasks to more advanced analysis have been great.

BI in manufacturing
A premier manufacturer of products and materials derived from engineered, recycled rubber kept cost, sales and inventory data in separate mainframe and mini-mainframe proprietary systems. These systems used different IDs for products and processes. It was unduly burdensome to understand profitability and quality issues, let alone handling inventory control. The company had four staff just compiling data from various systems. On a monthly basis, a 20 x 8 wall of Excel pivot tables had to be generated to try to understand unit margins by product, vendor and customer. The information contained in the pivot tables was so overwhelming that it couldnt support managerial decision making. And it took a long time to generate reports. The BI solution for this manufacturing company was crafted in such a way that linking various systems automatically created monthly multidimensional cubes.
Departments Departments Resources Products Brands Products Material Usage Ranges Ranges Measures Order, Sale, Invoiced & Credit Amounts Order, Sale, Invoiced & Credit Quantities Labor & Material Costs Contribution ($) & % Produced & Rejected units Min & Max Quantities Inventories (Min & Max)

Geography Country State/Prov City

tion. While some decision makers may require information at the aggregate levels, others require more detailed information. These different needs can be satisfied by clicking a mouse.

Some dimensions of the cube (shown above) include periods (fiscal years and calendar years), parts used in manufacturing, customers, geographical information, etc. Measures included contribution ($ and %) and sales. The system also matched the companys own product numbers with product numbers of its key customers to aid
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electronic transfer of information. Individual cubes tailored to each sales person, sales territory, specific customer, specific part type, etc. could easily be created and deployed across the enterprise avoiding information overload while protecting information security. This BI solution also allows the company to: q Match purchasing and selling activities; q Calculate margins; q Maintain a level of control over inventory; q Perform more useful analysis; and q Generate reports reasonably promptly.

format that wasnt user-friendly; and Difficulty responding to many urgent and ad-hoc requests for information, including training courses taken, employment equity, succession challenges in specific management categories and geographical locations, employee turnover across specific locations, etc.

BI in HR
Effective and efficient human resource management is critical if an organization is to continue to
Pay Date Region Division Job Description Job Class Job Code Employee

By adopting this BI approach, all these problems have been effectively resolved. With its multidimensional cube (see table below), this organization is now able to do all sorts of HR analysis, such as skills gap analysis, succession planning, labour cost analysis, and core competency analysis. This BI solution allows the organization to: q Reconcile its HR system to the financial system; q Provide a comprehensive view of all HR information; q Provide vital HR statistics across its different locations; q Generate labor distribution and other reports and present (or
Personal Info Union Standard Rates Rate Class Rate Employee Mgmnt Category Mgt Category Employee Training Measures

Year Quarter Month

Region Province City Employee

Division

Language/ Union Age/Sex Employee

Course ID Employee

Labour Cost Hours Paid VacationPay CPP Head Count Quarterly Amount Quarterly Hours Ytd Amount Ytd Hours Pay Rate

innovate and grow. BI has helped leading organizations in both the private sector and public sector remain relevant as their environments change. The HR department of a large national organization faced multiple challenges including: q Difficulty reconciling salary information in the HR system to salary expense in the general ledger; q Difficulty getting information on vital statistics such as employment equity, training and development and other benefits; q Using several manual days to produce a labour distribution report (from the HR system) in a

publish on the intranet) these reports in user-friendly formats; and Answer ad-hoc queries and questions from managers and employees at a speed that exceed the expectations of employees and takes minimal time.

These three real-world examples show how an effective and systematic implementation of BI can transform data into information and information into knowledge to support managerial decision making and action. These examples also illustrate that for organizations that have good (even if these are proprietary) data capturing systems, a well-designed BI solution can effectively deal with the reporting and linking challenges in a cost-effective manner. s
Kobana Abukari, CMA, is a business solutions consultant at Corporate Renaissance Group in Ottawa. Vijay Jog is a professor of finance at Carleton University and President of Corporate Renaissance Group.

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