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November 2011

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1 Nov-

2011

Business Intelligence: The CEO & the Balanced Scorecard

In this article, second part of the Whitepaper that LITEBI is composing on the relation

between Business Intelligence and General Management, I will focus on one of the key

features of Business Intelligence, the Balanced Scorecard or BSC, that being one of

the most popular features of BI, is rarely found among the usual terms we usually think

of when talking about this area of enterprise software.

When talking about Business Intelligence it is normal to think about Data Warehouses,

OLAP analysis with multi-dimensional cubes, Dashboards or alerts, but less common

to think of the Balanced Scorecard as a critical feature of BI. However, to me, it is an

essential feature and the CEO should consider it as a basic tool in order to lead a

change in the way the company communicates, organizes and analyzes information,

as an instrument to guide the company towards a “metric-driven culture”

What is the Balanced Scorecard? It’s origin is not a technical one, as the rest of BI

tools. The BSC is a methodology to manage the business strategy designed by two

academics: Robert Kaplan and David Norton, that was first published by the Harvard

Business Review in 1992. It is something that could be implemented using a pencil and

a piece of paper (with great effort), but I think it should have its own space in the BI

toolbox.

Why? Because of the BSC’s emphasis on using all the information from all over the

company, because it makes a company go beyond the traditional management

control, based on financial information and indicators. The Balanced Scorecard

encourages the company to define and systematically control the business strategy,

organizing it through strategic initiatives, objectives and KPIs.

The BSC thinks of the business as a system in which not only the financial information

is important, but also defining what objectives I have in regard to the relation with my

market/customers, the behavior of my internal operations (production, logistics,

operations, R&D) or in the know-how and the human resources needed to achieve

those elements. At this point, we come up with the four perspectives through which the

BSC methodology recommends us to shape our business:

- Financial

- Learning and Growth

- Internal Processes

- Customers

The advantage of the BSC is that it considers the company as whole, an interrelated

structure, in which different areas affect each other through cause-effect relations (E.g:

I won’t be able to increase the revenue without increasing the number of customers,

EXPERT ARTICLE

November 2011

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2011

and I won’t be able to do this if I don’t improve my sales processes and I have the right

people to do so).

To be able to define a strategy systematically, we must have a clear idea about the

following elements:

- Strategic objectives: Based in our mission and vision (E.g: become the

market leader in 2 years) I will have to define what milestones I must reach,

control if they are being reached, and the relation between one objective

and other. Will I have to increase my revenue organically or will I need to

acquire other companies? Is my financial objective to get rid of a heavy debt

burden? Do I want to decrease the weight of the direct sales and expand the

distribution channel? Do I want to outsource my R&D department?

- KPIs: Key Performance Indicators. Numbers that indicate the evolution of

the company’s most important areas. Like the revenue of course, but also

the quality perceived by my customers, the average response time of my

customer support issues, the leads generated by marketing, or the

motivation and skills level of my team.

- Initiatives: In order to obtain the KPIs I want (revenue), to be able to reach

my objectives (be market leaders of a certain area), we can’t sit and watch

the traffic lights of our BSC turn from red into yellow and then into green, we

will have to carry out initiatives that we will need to define, communicate and

control: hire more sales men, launch new product lines, etc.

Screenshot 1. LiteSCORECARD Module - Balanced Scorecard

We will be able to control all these elements through time, monitoring if the real data

aligns with the objectives we had, if indicators are behaving as expected and if the

initiatives, besides being carried out, are obtaining the results we wanted. To

summarize, the BSC is a tool for the management to define the strategy and control its

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execution. A powerful allied for a CEO, Manager, Board member, etc. whose job is to

take the company where the stakeholders want it to be.

Seeing the importance that the BSC gives to indicators, to the transmission of

information (objectives, initiatives, expected indicators), to the team responsible of its

execution, it isn’t hard to see the tight relation with the rest of the BI tools, field of the

software that (at least today) I could define as a “tool to make the information useful

enough to optimize the company’s management”

The Balanced Scorecard methodology has reached its popularity because it is a tool

that enables to organize chaos in the fast-changing market we live in. Having clear idea

of who we want to be, how we are going to get there, and how we are doing it, will help

the CEO make the organization move better in this extremely volatile environment,

guiding it towards a “metric-driven culture”, which is the greater promise of Business

Intelligence.

Lastly, I would like to highlight again that, although most of the BSC deployments are

done with a specialized software (as LITEBI’s LiteSCORECARD module), the key is to

put people ahead of technology and invest our effort, once we have the adequate tool,

not in deployments, hardware or maintenance, but in aligning the business to a

methodology that, if well deployed, is capable of transforming organizations.

Screenshot 2. LiteSCORECARD Module - Design and monitoring of the strategy through KPIs

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2011

Written by Javier Gimenez, Business Intelligence expert and Business Development Manager at

LITEBI, leader in Cloud Computing Business Intelligence.

About LITEBI:

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