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��������� ��� SPECIAL REPORT | Friday November 27 2009

www.ft.com/intelligence

How to make senseof the pieces

INSIDE: What businesses need to do to turn datainto information that guides decision-making

2 FINANCIAL TIMES FRIDAY NOVEMBER 27 2009 FINANCIAL TIMES FRIDAY NOVEMBER 27 2009 3

ContributorsAlan CaneStephen PritchardJessica TwentymanRoss TiemanGeoff NairnJoia ShillingfordDan IlettFT contributors

Ursula MiltonProduction editor

Steven BirdDesigner

Andy MearsJoe MeePicture editors

Greg MeesonCover illustration

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The finalfrontier ofbusinessadvantage

Business intelligence,information intelli-gence, businessanalytics: whatever

you call it, all the evidenceis that ways of turning acompany’s raw data intoinformation that can beused to improve perform-ance and achieve competi-tive advantage is the topicdu jour in many businessleaders’ minds.

A survey carried out thisyear by the US-based con-sultancy Forrester Researchrevealed that of more than1,000 IT decision makerscanvassed in North Americaand Europe, more than twothirds were considering,piloting, implementing orexpanding business intelli-gence (BI) systems.

“Even in these tough eco-nomic times, virtuallynobody in our surveys saysthey are retrenching orreducing their businessintelligence initiatives,”says Boris Evelson, a princi-pal analyst for Forresterwith more than 30 yearsexperience of BI implemen-tation behind him.

What is BI management?It is not about the technicalnitty gritty of data ware-housing or cleansing tech-nology. While technologiesare important – and mostare good and effective,according to Mr Evelson –BI management is aboutways of systematically mak-ing the most of customerinformation – what it is andwhat you can do with it.

More prosaically, it is eve-rything that has to be doneto raw data before they canbe manipulated to facilitatebetter decision making.

It is also about under-standing the business andits processes well enough toknow what questions shouldbe asked of the data toimprove performance.

The basic idea was pio-neered more than a decade

ago by the US computermanufacturer Teradata,which combined supercom-puter performance withsophisticated software toscan and detect trends andpatterns in huge volumes ofdata.

But it was expensive andahead of its time. Today,high-performance, low-costcomputer systems andcheap memory mean thatenterprises can and are col-lecting and storing data inunprecedented amounts.

However, they are strug-gling to make sense of whatthey have.

In Mr Evelson’s words:“We have to find the data,we have to extract it, wehave to integrate it, we haveto map apples to oranges,we have to clean it up, wehave to aggregate it, wehave to model it and wehave to store it in some-thing like a data warehouse.

“We have to understandwhat kind of metrics wewant to track – times, cus-tomers, regions and then,and only then, can we startreporting.”

Everybody agrees there isnothing simple about theseoperations. “It is a verycomplex endeavour,” saysMr Evelson, “and that iswhy this market is veryimmature.”

The business opportunityfor BI software has not beenlost on IT companies andthere has already been sig-nificant consolidation in themarket, with IBM acquiring,among others, Cognos; SAPbuying Business Objects;and Oracle purchasingHyperion to add BI stringsto their respective bows.

Microsoft offers BI soft-ware called SharePointServer and there is consider-able interest in open sourceBI software from youngercompanies such as Pentahoand Jaspersoft.

IBM alone reckons to havespent $12bn and trained4,000 consultants over thepast few years to developthe tools and knowledgewhich will encourage intelli-gence management in itscustomers.

Ambuj Goyal, who leadsthe company’s informationmanagement initiative,

argues that it is a newapproach that will “turn theworld a little bit upsidedown”.

“Business efficiency overthe past 20 years was allabout automating a process– enterprise resource plan-ning [ERP] for example. Itgenerated huge efficienciesfor businesses but is nolonger a [competitive] differ-entiator.

“In the past two or threeyears we have started tolook at information as astrategic capital asset forthe organisation. This willgenerate 20, 30 or 40 percent improvements in theway we run businesses asopposed to the 3 or 5 percent improvements weachieved before.”

But revolutions are rarelypain-free. According to theForrester survey: “For many

large enterprises, BIremains and will continueto be the ‘last frontier’ ofcompetitive differentiation.

“Unfortunately, as thedemand for pervasive andcomprehensive BI applica-tions continues to increase,the complexity, cost andeffort of large-enterprise BIimplementations increasesas well.

“As a result, the greatexamples of successfulimplementations amongForrester’s clients are out-numbered by the volume ofunderperforming BI envi-ronments.”

In fact, more than twothirds of users questionedsaid they found BI applica-tions hard or very hard tolearn, navigate and use.

The business case for BImanagement is not helpedby the difficulty of making a

strong case for return oninvestment.

It is, for example, hard todecide which tools and proc-esses should be included inthe assessment – Microsoft’sSharePoint is much morethan a BI tool, for example,but separating out whichstrands are contributing toimproved revenues andwhich are not is a challenge.

As Mr Evelson notes:“The grey boundary linesaround which process andtools to include, the multi-ple BI components that typi-cally need to be customisedand integrated, and the fre-quent unpredictability of BIsystem integration effortsall make BI business casesan effort not for the faint ofheart.”

How, then, should execu-tives think about businessintelligence management?

Royce Bell, informationmanagement specialist withthe consultancy Accenturetakes a robustly pragmaticview: “Business is made upof processes. Some of themmay interact with the out-side world, but there is adefinite chain of events.

“All that business intelli-gence is supposed to inform,is any decision along thatchain of events. The ques-tion an executive should beasking is: ‘At this point inthe chain, what informationdo I need?’.

“Going through each andevery one of your processesto be able to ask that ques-tion is hard. People are dis-appointed because theyhaven’t been able to get wis-dom simply by piling all thedata in one place.

“That [data warehousingand mining] sounds more

exciting and more fun thangoing through your proc-esses to determine what youneed.”

Mr Bell believes thatmany executives are suspi-cious of the quality of theinformation provided by BIsoftware: they think thedata are “rubbish”, andthere is no doubt that trans-forming data into intelli-gence requires clean data.

Roger Llewellyn is chiefexecutive of the UK soft-ware group Kognito, whichhas responsibility for ana-lysing, among other things,telephone calls made by cus-tomers of British Telecomand store purchases thatuse the Nectar loyalty cardof supermarket chain, JSainsbury.

He says that up to 80 percent of the price of a newcontract can be the cost of

cleaning the data – convert-ing, in one case, 15 datatypes to a single standard.

The Sainsbury contractinvolves the analysis of the20bn items purchased in thechain’s stores every ninemonths – enough, if typedon paper, to make an in-traypile almost 17kms high.

How can this huge volumeof bits and bytes be turnedinto useful information?

Mr Llewellyn gives theexample of skin creams soldto counter stretch marks.Generally bought predomi-nantly by women, if particu-lar stores show high salesvolumes, there are likely tobe a lot of pregnancies inthose areas – an alert for thestore manager to stock upon maternity magazines,baby food and clothing.

And if most of the cloth-ing bought is blue, therewill be a lot of baby boys inthe region: “From buying ajar of stretch cream, I’vealmost got you for life,” MrLlewellyn beams.

James McGeever, chieffinancial officer of the UScompany NetSuite, whichmarkets BI managementsoftware, underlines theimportance of clean, unam-biguous data in breakingdown “silos” – data storedin different places and for-mats within an organisa-tion: “I believe that if thesame piece of data exists intwo places then one will bewrong.”

The NetSuite answer forits customers is to convertall the data to one consist-

ent type and store it in onerepository: “The physicalprocess of loading the datais not as tough as it maysound. It’s actually decidingwhat data to store there andhow to organise your work-flows that is the difficultpart.”

NetSuite provides execu-tives with tailored “dash-boards”, a visual representa-tion of the informationimportant to their jobs.

A well-designed dash-board providing the rightamount of pertinent infor-mation is a crucial part ofBI according to Peter Lum-ley and Stephen Black of PAConsulting.

They point out that it isoften forgotten that manag-ers have limited time toabsorb and act on informa-tion which, in any case, maybe imperfect – if it was per-fect, decision making wouldbe no chore at all. A well-de-signed dashboard can helpmanagers make the bestpossible decision fromincomplete information.

The information, ofcourse, has to be trustedand that is where technol-ogy can play an importantpart – in the automaticroll-up of data to a centralrepository: “Every time yougo through a stage withmanual intervention youhave the opportunity fortime delay and misinterpre-tation,” Mr Lumley argues.

And these mis-steps areprecisely what businessintelligence managementhopes to avoid.

Data store: at Sainsbury, the20bn items purchased in thechain’s outlets every ninemonths are analysed to spottrends and inform buying

Bloomberg News

Even in thesetough times, virtuallynobody saysthey are reducingtheir businessintelligence initiatives

Dashboard that can give a warning light on overspending

Law firm Clifford Chance has founditself learning about habits it neverknew it had since analysing itsspending trends through an onlineservice provided by Rosslyn Analytics, aboutique software company based inLondon, writes Dan Ilett.

“It’s very flexible,” says JulienCranwell, Clifford Chance’s procurementmanager. “You can look at your data toreduce spending. We’ve identifiedopportunities that we wouldn’t haveotherwise seen. It’s made us feel a lotmore confident of the data we’ve beenusing.”

The company, which has 29 offices in20 countries, used a web­based tool

called rapidintel.com. The service workslike a dashboard with charts andgraphs to give an overview of wheremoney has been spent.

“It aggregates and sharesinformation,” says Charles Clark, chiefexecutive of Rosslyn Analytics. “Weextract the data in a few hours andcategorise them so they go into certainbuckets. We then add other data suchas credit card or risk information.

“It’s presented as a ready­to­usereport. The data cube never changesbut they can see it from so manydifferent angles. It’s one view of allcompany­wide finance, procurement,accounts payable and spend data.”

“Some of the larger areas ofspending have been travel, catering andentertainment,” says Mr Cranwell. “Itshows where we have varying levels ofspending between offices. We are thenin a position of power because weknow much more about our spendingpatterns.

“We’ve also looked at a cost recoveryprogramme. Using Rosslyn’s expertisewe’re using a module that works oncontract management.”

The firm claims to have seen areturn on investment of 100 per centwithin two months. “The paybackperiod was very fast indeed,” says MrCranwell.

Editor’s note

Digital Business | Managing Intelligence Digital Business | Managing Intelligence

Good decision-making inbusiness relies on data,although organisationsencounter far more of itthan any human mindcan handle.

Which is why theyneed technology togather information,analyse it, and serve itup in a meaningful,usable form.

In this multi-mediaDigital Business digestwe are examining thisprocess in print, withextra online content,including audio andvideo.

One video featureinvolves a panel of

experts answeringquestions about thelimits of businessintelligence; anotherstudies how a citycentre regenerationscheme uses businessintelligence to maximisethe benefits to allparties. And audiopodcasts highlight casestudies of best practice.

This audio and videocontent will be added towww.ft.com/intelligenceover the next threeweeks to build avaluable body of work.

Peter WhiteheadDigital Business editor

Alan Cane on thechallenges ofextracting usefulinformation fromhuge volumes oforganisational data

All editorial content in this supplement is produced bythe FT. Our advertisers have no influence over, or priorsight of, the articles or online material.

4 FINANCIAL TIMES FRIDAY NOVEMBER 27 2009 FINANCIAL TIMES FRIDAY NOVEMBER 27 2009 5

Digital Business | Managing Intelligence

Finding a home for all that data

When companiesstarted to buildthe first enter-prise data

warehouse and knowledgemanagement systems, in thelate 1970s, there was littledoubt that these wereprojects that demanded sig-nificant investment in bothtime and resources.

The early data warehousesystems certainly requiredmainframe resources, andrunning queries took days,if not weeks.

But advances in comput-ing power, as well asimprovements in program-ming, have done much toreduce the infrastructuredemands of business intelli-gence (BI). It is now quitepossible to run small-scaleBI queries using little morethan a data source, a laptopcomputer and a spreadsheetprogram.

Some businesses – espe-cially smaller ones – doindeed manage their dataanalysis this way.

However, BI experts cau-tion that this approachstruggles to scale up to sup-port the larger enterprise,and can raise real difficul-ties in areas such as datagovernance and lead to com-panies having multiple mas-ter data sets, or “multipleversions of the truth”.

“Many people start withsomething small in scope,and there is nothing wrongwith that,” says Jeanne Har-ris, a BI specialist at Accen-ture’s Institute for High Per-formance Business.

“But if marketing, andfinance, and sales have theirown scorecards, based ontheir own data, it will be aTower of Babel. Very feworganisations have done agood job of creating a singleview of their data.”

Nor is the hardware chal-lenge one that chief infor-mation officers – or users ofbusiness data – can com-pletely ignore.

Although processingpower has increased in linewith Moore’s Law and datastorage has also fallen inprice, the growth of busi-ness data is faster still. Vol-umes of data are reckonedto double every 12 to 18months, twice as fast as justthree years ago.

Some businesses are react-ing by moving to grid-basedsupercomputers, or byoffloading BI processing toprivate or public “clouds”.Others are deploying solid-

state hard drives in theirdata warehouses, because ofthe superior data through-put they offer.

But such systems areexpensive and large organi-sations, in particular, arebeginning to struggle withthe time it takes to loaddata into a warehouse or aBI system, especially if itcomes from multiplesources.

“With data warehousingappliances [dedicated com-puters for data processing],the bottleneck is not thespeed of the box or thequantity of storage but thetime it takes to load theinformation, especially ifyou are dealing with demo-graphic information,” saysBill Hewitt, president andchief executive of Kalido, a

data management company.“Even at data loading

rates of 10 gigabytes anhour, there is one companythat is looking at 39 weeksto load its data.”

This is leading some com-panies to consider alterna-tive approaches to analytics,such as stream-basedprocessing. It is alsoprompting businesses tolook at BI tools, as well asbroader-based technologiessuch as enterprise search,that can examine data insitu, rather than requirethem to be loaded into awarehouse and then proc-essed.

Such technologies couldalso help businesses to over-come their reliance on datafrom operational systems,such as customer relation-

ship management or enter-prise resource planning.Such transactional data arealmost always historic, andleads to BI acting as a “rearview mirror” for manage-ment, rather than as an

accurate predictor of trends.“Most organisations don’t

use external data but relyon [data from] their opera-tional systems to solve spe-cific problems,” explainsEarl Atkinson, a BI expertat PA Consulting Group. As

a result, the data will onlybe as good – and as timely –as the information held inthose underlying systems.

Before companies canbuild enterprise-wide knowl-edge management or BI sys-tems, they also need to workon the quality of the data.Data can also be accuratebut partial, or misleading,especially if they were origi-nally gathered for a differ-ent purpose.

“A customer, for example,can exist in multiple IT sys-tems,” points out TonyYoung, CIO of Informatica,a data management technol-ogy vendor. “You need tohave a common agreementon who the customer is, forexample, if you want to lookat their history.

“If I ask a financial person

who the customer is, it isthe person you bill. Market-ing will say it’s the personwho responds to a cam-paign. For sales it might bethe person signing thecheque. These are all cor-rect, but they are not com-mon. You have to agree howyou are going to treat thatinformation.”

This, more than hardwareassets, network capacity, oreven the ability to writecomplex algorithms to ana-lyse data, goes to the heartof the debate around theresources needed foradvanced business intelli-gence.

Organisations need todecide, early on, whichinformation they are goingto use, and be honest aboutthe completeness, or other-wise, of their data sets.

If they do not, the resultscan be disastrous.

“In the run up to thefinancial crisis, institutionsknew that there were threecategories of risk but theyonly had data for one. Sothat was the one theythought about,” says Accen-ture’s Ms Harris. “You needto understand all of the riskvariables and how theyrelate to each other, andthis needs different technol-ogies and capabilities inmodelling, and in experi-mental design.”

Organisations also need toconsider whether conven-tional data sources, such asthose produced by back-office IT applications, or bymore specialist tools, suchas a retail point-of-sale sys-tem or a supply chain man-agement system, really givethe full picture.

Increasingly, companiesare looking for ways to minethe information held in“unstructured” data, suchas e-mails, presentationsand documents, or evenvideo clips or recordedphone calls, to provide abasis for BI, and hence bet-ter decision making.

“As much as 80 per cent ofthe information in a com-pany is unstructured,against just 20 per cent thatis structured,” notes BobTennant, chief executive atRecommind, a company thatspecialises in using searchtechnology for informationrisk management.

“Most business intelli-gence is focused on that 20per cent of structured data,as it is pretty high valueand easy to deal with. Butthere are a lot of useful,unstructured data that arenot being taken advantageof.”

Tapping into that unstruc-tured information might notbe easy. But it is the best,and for some companies,probably the only way tomake more use of existingresources, in order to makebetter business decisions.

RESOURCES

To cope with leapsin informationquantity, businessesshould focus onquality. StephenPritchard reports

‘There are a lot ofuseful, unstructureddata that are nottaken advantage of’

Q&A ING Lease UK

ING Lease UK is part of the ING Group– one of the largest financialcompanies in the world. In 2004, thecompany acquired three businessesfrom Abbey National Group.

With 300 employees and 100,000customers, the company has to ensureits reporting and market perception isas accurate as it can be.

Dan Ilett, for Digital Business,questioned Chris Stamper, chiefexecutive of ING Lease UK, about howit creates useful intelligence from itsinformation.

Digital Business What did you do toimprove internal reporting?

Chris Stamper We turnedconventional wisdom on its head. Wefound a tool that allowed the businessto assemble all information from

disparate data sources into oneplatform. This allowed us to makedecisions in real time.

We ignored the “start small andlearn” approach and took the “start bigand understand” approach by focusingon the most fundamental question weneeded answering which was “where dowe make our profit and why?”.

DB What has been your return?CS As an example, analysis of

secondary income opportunity hasdriven £600,000 of additional annualincome.

DB How has using “internal” businessintelligence helped?

CS First, it has given us the ability tomake decisions based on fact ratherthan intuition or perception and hasprovided complete transparency when

understanding profit and loss levers.We have now moved to a “nowhere

to hide from the facts” culture, the ITdepartment has been removed from thecritical path to information andeveryone in the organisation has accessto answers. This encouragescollaboration and end­to­end thinking.

DB What lessons did you learn fromthis? What would you tell others to do?

CS That perception­based decisionmaking is a characteristic of sales­ledorganisations. That culture can be veryquickly moved with the right tools andenvironment.

We now have a strong focus on realdata quality.

A full version of this interview is at:www.ft.com/intelligence

Everything in its place: with data warehousing appliances, the bottleneck is the time it takes to load information dreamstime

6 FINANCIAL TIMES FRIDAY NOVEMBER 27 2009 FINANCIAL TIMES FRIDAY NOVEMBER 27 2009 7

Digital Business | Managing Intelligence

Search goeson for a‘single viewof the truth’

The idea that you can keeptabs on how an organisa-tion is performing from adesktop display while also

focusing on its strategic directionis hugely appealing.

Every day, many of us do pre-cisely this in a car: the dashboardmonitors its systems and speed,while helping the driver safelynegotiate the obstacles of a jour-ney. Could similar displays nothelp in running a company, asales department, or a group ofhospitals?

In theory, they can.Most industrial processes today

are run by mouse-clicks – fromnuclear power stations to cloth-cutting machines. Corporate sys-tems store every digit of data cre-ated, whether by the sales stafflogging their calls, the accountsclerks issuing invoices, themachines doing the manufactur-ing or the purchasing managerplacing orders for materials.

Yet these glorious, information-rich data are so often compart-mentalised in fragmented systems,each designed to serve a particularbusiness or organisational func-tion. Bolting them together to turndata into information about corpo-rate or organisational performancecan be an IT chief’s nightmare.

It might seem as though a fewwires and some simple softwarecould enable data to flow seam-lessly between systems, enablingthe chief executive to see thebasics, such as sales, deliveries,and how much cash the businessis using, when they log-on in themorning.

Yet Bill Fuessler, IBM GlobalFinancial Management Lead forbusiness consulting, says this canprove stunningly difficult. “One ofthe biggest issues is getting com-monality of data definition,” hesays. “And that problem will lastfor several years more.”

Standards, and even digital defi-nitions of commonplace businesswords, may differ in the salesdepartment from those used inmarketing, or finance. Combinethe data sets, and the “informa-tion” simply doesn’t add up. Whatchief executive would drive a carwhose dashboard said it might –

or might not – be overheating?Software companies, however,

understand the issues and areworking hard on how to extractinformation from data and reachwhat Richard Neale, marketingdirector of SAP BusinessObjects,calls “a single view of the truth”.

For mid-sized companies unen-cumbered by a long tail of legacysystems and data, or those willingto start again at square one, thereare software-as-a-service special-ists, such as NetSuite, capable ofproviding a state-of-the-art systemcontaining every byte of corporatedata, fully integrated, on a com-mon set of definitions, accessibleat will.

But abstracting information fora corporate, not-for-profit, or evenpublic sector dashboard display isalso attainable.

First, you have to discover whowants, or needs, to know what.

In a car there is a speedometerand a fuel gauge, possibly withinformation on fuel consumption,or distance until you next need tofill the tank. But most of the otherdashboard data are displayed onlyif needed, as an alert – such aswhen the cooling system fails or aseat-belt is unbuckled.

Business intelligence displaysneed to follow the same precepts.They have to provide appropriate“mission critical” information forall; to enable users to call up infor-mation relevant to their role ortask; and to provide appropriatealerts when things go wrong.There is no one-size-fits-all system.

In a car, every driver is engagedin a similar task, but in a com-pany, some users – typically thechief executive or finance chief –need access to a broad range ofinformation, while a departmentalhead might be interested in partic-ular sub-sets of data. Almost eve-rybody also needs alerts relatingto their own areas of responsibil-ity.

That information, as distinctfrom data, may have to reachthem wherever they are. Mr Neale,at SAP, says that increasingly,dashboards are being deliverednot just on desktops, but onmobile devices, including smart-phones.

The latest generation of SAPBusinessObjects software enablesusers to have “widgets” on theirdesktops that highlight particularfeatures of organisational perform-ance.

It can also deliver a sophisti-cated alert to a smartphone, as agraphic display that enables the

user to “mine” the information,calling up detail to establish thenature and cause of the problemto which they are being alerted.An alert could relate to inventorylevels, risk, cash balances or evena cost or time over-run on aproject.

That list highlights the impor-tance of delivering relevant infor-mation to the responsible individ-ual. To be valuable, it has to con-tain signals that the recipient mayneed to act upon. The IT boss mayneed to know if the system is

likely to crash, but it’s the financedirector who cares about the cashbalances, while the IT departmentoverrunning its budget may mat-ter to both.

The desktop remains the presen-tation location of choice becausethe size of its display permits a lotof information to be shown.

Historically, many organisationshave relied on Excel spreadsheetsor Microsoft Office tools to presentbusiness information to users.

Today, using modern software,the information can be displayedin the form of gauges, pie-charts,

graphs, thermometers, heat-maps– just about any format the userprefers.

What business intelligence dataadd is the ability to explore theinformation easily with mouseclicks to discover what happened,where, and why.

A typical NetSuite display ispresented on a series of tabs, withpages that might include a meter,top selling items as a bar chart,key performance indicators thatprovide pop-up graphs, and com-parative sales as a chart with vari-able time-spans. If you have relia-ble real-time data, you can sortand display it any way you like.

As IBM’s Mr Fuessler says, if aretail company’s sales fall, it ishandy to be able to uncoverquickly that it happened becauseof a holiday in Boston that closedthree stores, for example, and isnot the start of an alarming trend.Inadequate information can leadto false conclusions.

Nigel Rayner, research vice-pres-ident at Gartner, says: “When youget the dashboard in, that is whenyou start to get awkward ques-tions. The chief executive can seerevenue is going down, or up, butdoesn’t know why. Dashboards arealways about reporting. Theydon’t help you make decisions.”

By definition, dashboards onlypresent current or historic data.But decision-makers want to beable to predict the future. Peoplerunning large companies, public-sector organisations and even not-

for-profits want the IT equivalentof the forward-looking radar thatsome car-makers have trialled.

As Mr Rayner says: “You needmore performance managementapplications to help people modeloptions.” This is where a lot ofcorporate IT investment is nowgoing, he says.

But if you are going to startmaking decisions about businessstrategy based upon conclusionsdrawn from computer softwareyou need clean data, and answersto current questions, rather thanwhatever the system was set up tomeasure five years ago.

“Most organisations have far toomany metrics, without being ableto plot cause and effect relation-ships,” Mr Rayner says. “Theseare pure business problems, andmore technology is not theanswer.”

So departmental bosses have tosit down together and agree thequestions they want answered,and what they want to measure toget them.

To move from mere dashboardsto directing the course of anorganisation by drawing on all theinformation squirreled within itssystems, Mr Rayner elaborates afour-stage process. Start by moni-toring performance, set up anenterprise metric framework, andadd analytic and modelling capa-bilities with performance manage-ment applications. Only then, hesays, can you go develop a pat-tern-based business strategy.

DISPLAYING THE INTELLIGENCE

Ross Tieman says that,first of all, organisationsmust find out who wantsor needs to know what

‘Most organisationshave far too manymetrics, without beingable to plot cause andeffect relationships’

Eyes on the dial: simple ‘dashboards’ can be a useful way to see real­time performance data dreamstime

8 FINANCIAL TIMES FRIDAY NOVEMBER 27 2009 FINANCIAL TIMES FRIDAY NOVEMBER 27 2009 9

Digital Business | Managing Intelligence Digital Business | Managing Intelligence

Lighting up the road ahead

Running a business with-out business intelligence(BI) is often likened toflying an aeroplane with-

out instruments – you can getaway with it in clear skies andwith a following wind. But mat-ters can take a turn for the worseif you hit clouds, or turbulence.

Few businesses, of course, riskflying blind. The question iswhether the instruments theyhave give them the full picture ofwhat lies ahead. A good pilot canfly with instruments and a map,but most of us are much morecomfortable in a craft equippedwith radar and GPS.

In a business, monitoring dataas they move through the organi-sation provides the equivalent ofthe aircraft’s GPS co-ordinates,altitude and air speed. Advancedanalytics takes on the role of theradar, pointing out what liesahead.

But creating accurate real-timepictures of where a business is, letalone predicting where it is going,is stretching the capabilities ofconventional BI, and forcing ven-dors as well as data analysts tolook at emerging technologies inorder to sift through ever-largerquantities of information.

In some fields, businesses areturning to stream computing,where powerful machines analysedata in real time as they movethrough a system, looking for trig-ger points or anomalies.

A stream computing systemdeveloped by IBM, known as Info-Sphere, is already being used toanalyse “space weather”, a phe-nomenon that creates interferencewith radio communications.

Closer to earth, brokerage TDSecurities is using stream comput-ing as the basis for an optionstrading system it believes is theworld’s fastest.

In the area of advanced analyt-ics, significant work has alreadybeen done by governments in pre-dicting what could happen in thefuture, for example in the field ofcounter-terrorism.

And companies are lookingbeyond relatively simple tools,such as regression analysis, toidentify complex patterns in dataand make increasingly accuratepredictions of customer demand,the movement of market prices, oreven traffic patterns.

Retailers are using trend spot-ting software to enable them topredict what will be in fashionnext season, and the technology iseven being used by Hollywood stu-dios and their financial backers topredict the next blockbuster.

These systems use pattern anal-ysis, often mining non-conven-tional sources such as consumersentiment or weather predictions,to provide forecasts and advice.

Attractive though these projects

are, however, there are downsides.The greatest is the sheer cost of

building systems that can providereal-time information to manag-ers. Another is the human abilityto respond to real-time signals.

There is little point in spendingwhat can easily be $1bn, or more,on a BI system if the organisationit serves is not agile enough to acton the insights provided.

Some experts go as far as to saythat real-time systems only have arole to play in decisions that canbe made entirely without humanintervention.

“There is a case you can make,for automated decision-making,where real-time [analysis] is neces-sary,” says Jeanne Harris, a BIspecialist at Accenture’s Institutefor High Performance Business.

“A tsunami warning system, ora credit card fraud detection sys-tem, needs to work in real time.But the number of cases, com-pared with these that work in‘nearly real time’, is small.”

Information management profes-sionals draw a distinction betweensystems that genuinely need towork in real time, and thosewhere the information is merelytimely, or has to be delivered atthe “right” time.

Often, the immediacy and valueof information changes throughthe business process, creating a

further challenge when it comes todeveloping advanced, analytical orprediction systems. Informationneed not be real-time to be timely.

Areas where the value of infor-mation changes over time includeperishable goods and commodities,such as airline seats or hotel beds,as well as the information that is

used to synchronise other busi-ness processes, such as in a deliv-ery company, or when a retailerplaces a stock order.

An airline looking to fill its cab-ins will need increasingly timelyand accurate information as thenumber of seats fills up, in ordernot to overbook and face payingcompensation to passengers.

A distribution company willneed to deliver goods to a super-market’s hub or to a factorywithin a narrow time window, orface financial penalties. But if ittakes two days to deliver an itemby truck, information needs to beat its most accurate as the deliv-ery window approaches.

In a similar way, a retail storemanager ordering goods made inAsia might need to do so sixweeks before they are required, toavoid running out of stock.

Placing the order too earlymeans tying up cash and valuablestock room space. Whereas, plac-ing the order even a few hours

late risks missing the replenish-ment window.

“Information and the time takento make a decision can be perisha-ble,” says Bill Hostmann, aresearch vice-president at Gartner.

“There are examples where itdoes pay off: Continental Airlinesis an example of a company thathas to make real time decisions,for example if a plane is forced todivert. They spend millions but itkept them in business,” says MrHostmann.

At Continental, better businessintelligence made for better com-munications with passengersaffected by delays and diversions,and this helped the companyretain the loyalty of its highest-spending passengers, the frequentbusiness travellers.

But at the same time, Mr Host-mann concedes that managementteams can quickly becomeaddicted to faster informationflows. “The latency [the timedelay when data are sent fromplace to place] is an important dis-cussion.

“But if information is monthly,they want it weekly or daily; if itis daily, they want it hourly,” hesays.

As organisations act to reducelatency, and to push that throughtheir monitoring systems so thatmanagers can act on it, costs usu-ally increase.

This is a real barrier to movingto advanced analytics, when ITbudgets are constrained, and busi-nesses are no longer willing tospend multi-million dollar sumson enterprise-wide IT projects thattake five or more years to deliver.

There are exceptions: accordingto Jeff Jonas, chief scientist atIBM’s Entity Analytics business,some of the latest analysis sys-tems become not only more accu-rate, but faster, as they processmore data.

“The problem of trying to applyan algorithm to an individualtransaction is like trying tosqueeze knowledge out of a pixel.So we allow organisations toweave together different pieces ofdata from across the enterprise.”

Again, the idea is not so muchto provide real-time data, but toremove latency or delays that canlead to less than optimal decisionmaking.

However, the complexity andcost of such systems has tended tolimit their deployment to specificcircumstances where the cost isjustified, such as complex finan-cial trades, security, or frauddetection.

Some of the more advanced fea-tures, such as faster processingand better scenario planning, arebecoming part of mainstream BI.But by no means all emergingmonitoring technologies will doso, not least because businesseswill only benefit from them if theycan act on the information.

“You don’t want to invest inreal-time information infrastruc-ture if you have a batch decision-making process,” warns Gartner’sBill Hostmann.

“If you can’t pull the levers, andcan’t respond in real time, don’tmake the investment.”

MONITORING

Advanced analytics givea view of the future butcan prove costly andcomplex, reportsStephen Pritchard

‘If you can’t pull thelevers and respond inreal time, don’t makethe investment’

Leading the way: retailers are using trend­spotting software to predict what will be in fashion next season Getty

IT aims to overcome the blind spots

A lack of visibility into sys-tems data is the number onechallenge facing supplychain professionals today.That’s the main findingfrom a 2009 IBM survey of400 supply chain executivesworldwide.

More than two-thirds (70per cent) reported that mak-ing sense of “overwhelmingand fragmented data” aboutsupply chain performance iscostly, difficult and tootime-consuming.

According to SanjeevNagrath, global supplychain management leaderfor IBM’s global businessservices arm, that creates“blind spots” at many com-panies, causing them to fallbehind on customer orders,with potentially damagingconsequences.

Business intelligence (BI)technology provides ananswer to this lack of visi-bility, he suggests, by col-lecting critical informationabout supply chain perform-ance from disparate sys-tems, consolidating it andpresenting it to supplychain managers in the formof meaningful reports andmetrics.

But in IBM’s survey, only16 per cent of respondentssaid their organisationswere effective at integratingdata across the supply chainin this way. “Cost andresource issues are largelyto blame,” says Mr Nagrath.

It is only at companieswhere the supply chainoperation is seen as a criti-

cal boardroom issue withdirect links to financialresults – rather than a back-room operation – that imple-menting BI to improve it isseen as a priority.

Those that do embark onsuch projects often find thatapplying BI to supply chaindata is inherently morecomplex than applying it todata in other departments,such as the finance office,according to KevinO’Marah, an analyst withAMR Research.

“To date, BI has beenmore widely taken up inparts of the business whereinformation is more readilyavailable and often held in adepartmental database. Insupply chain operations, thedata you need may not be inthe system at all or be heldin numerous disparate sys-tems, both internal andthose of your key supplychain partners, such as sup-pliers or freight companies,”he says.

“That makes it very diffi-cult to answer key ques-

tions: Where is a specificshipment? When did it leavethe warehouse? Is the ordercomplete?”

A vital step before BI toolsare chosen, is discussionsbetween employees fromaround the company – notjust supply chain operations– on what data are required.

“True supply chain visibil-ity needs to be a cross-de-partmental initiative if it isto get the significantly bet-ter results that are achieva-ble,” says Mathieu Clerkx,an executive advisor to TataConsultancy Services (TCS)and a former senior vice-president specialising insupply chain operations atelectronics giant Philips andmicroprocessor companySTMicroelectronics.

He has worked with TCSto offer its clients in mar-kets such as retail a hostedanalytics platform thatincludes information aboutprocurement and financialspending, supplier perform-ance, inbound and outboundlogistics, inventory plan-

ning, manufacturing andorder fulfilment.

Increasingly, he says, cli-ents are using this kind ofplatform not only to assesscurrent performance butalso using for its simulationcapabilities to model“what-if” scenarios thatdemonstrate the likelyimpact of a disruption to thechain.

Another approach is to

use one of the growingnumber of BI tools offeredon a software-as-a-service(SaaS) basis. This is whatBill Coyne, director of pur-chasing and logistics atWelch’s, the US food manu-facturer, has done.

The company, which proc-

esses approximately 50,000customer orders a year forits grape-based juice andjelly products, had run upagainst what Mr Coyne sawas shortcomings in thetransportation and logisticsmodules of the company’sOracle enterprise resourceplanning (ERP) system anddifficulties in integrating itsbespoke freight pay systemthat it uses to track trans-portation costs.

Mr Coyne had workedbefore on supply chain prob-lems with Bill Copacino, for-merly group chief executivefor global business consult-ing at Accenture, where hespecialised in both BI andsupply chain management.

When he heard that MrCopacino had beenappointed chief executive ofOco, a small but fast-grow-ing BI-as-a-service company,he was quick to make con-tact. Together, teams fromOco and Welch’s built ahosted data warehouse thatdraws data from several keyback-office systems.

“We take every order,every bill of lading or ship-ment, and every freight billthat’s paid, and in the mid-dle of the night, we transmitthat electronically over toOco, where it’s used to pop-ulate our mini data ware-house,” he says.

This, he says, has enabledWelch’s to tackle a numberof problems – not leastannual spending of about$50m on transportation anddistribution. For example,staff use the data warehouseto build full truckloads car-rying as many cases and asmuch weight as possible, sothat trucks are not headingout to retailers half-full.

“By analysing the numberof orders and volume by dayand comparing overloadeddays with days wheretrucks were lightly laden,we found we could reorgan-ise our shipments to evenvolume out across the daysof the week and to send outfewer, better utilised trucksper week,” he says.

If supply chain visibilityis still an issue for manycompanies, it isn’t forWelch’s – or for the compa-nies that make up AMRResearch’s Supply ChainTop 25, an annual assess-ment of best practice amongsome of the world’s biggestcompanies.

Topping the list are Apple,Dell, Procter & Gamble, IBMand Cisco and one of themajor traits they have incommon is their use of BI toanalyse supply chain data,says Mr O’Marah of AMRResearch.

“These companies aremasters of ‘balanced excel-lence’. What they are able todo is slice and dice data tofind ways of running theirsupply chain in such a waythat costs are low but cus-tomers stay satisfied.”

SUPPLY CHAIN

Smoother operationscould lower costsand make customershappier, saysJessica Twentyman

Passengers waiting at Shanghai Pudong International Airport inspired Joakim Franzen of Roxtec, a Swedish manufacturer, to install plasma screens dispaying the flow of goods Alamy

Please check the arrival and departure screens for your goodsTwo years ago, while scanning thearrivals and departures screens atShanghai Pudong International Airport,Joakim Franzen had a moment ofinsight, writes Jessica Twentyman.

As chief information officer forRoxtec International, a Swedishmanufacturing company, he’d beenlooking for a way to make its internalsupply chain conditions more visible toits employees around the world.

“It occurred to me that passengersarriving and departing on flights aren’tso different from the inventory thatarrives at our company daily and thefinished products that we ship out toour customers,” he recalls.

With that in mind, he has since setup 15­inch plasma screens around thecompany’s offices that display the flow

of goods in and out of Roxtec, withcolour­coding to indicate how eachindividual order or delivery has beenprioritised. The data that feed thesescreens comes from its IFS enterpriseresource planning (ERP) system, viabespoke business intelligence (BI) toolsbuilt in house at Roxtec by MrFranzen’s team.

Roxtec makes sealing systems forcables and pipes that are laid in someof the world’s most unforgivingenvironments, including offshore windfarms and oil rigs.

With a specialised product set and aworkforce scattered around 13subsidiaries, making sure everyone isaware of any problems that arise in thesupply chain is a challenge, he says. Toaddress the issue, the company

completed an upgrade of its ERPsystem and one of the main aims wasto improve supply chain visibility.

The first screen was placed betweenthe desks of employees from thepurchasing and customer orderdepartments. “There were sometensions between these two groups,” herecalls.

By erecting screens that displayedpending orders and inventory levels, thetwo departments were able to work outpotential issues as soon as they arose.

“Now, there’s no chance of pick listsand shipment information getting lost,because it’s all up there on screen,”says Mr Franzen.

A full version of this feature is at:www.ft.com/intelligence

‘True supply chainvisibility needsto be across­departmentalinitiative’

Historians asked tobecome forecasters

The biggest challenge inaccounting intelligencecentres upon the mis-match between the data

and the changing role of the chieffinancial officer (CFO).

Since the days of ledgers andquills, the accountant’s role hasbeen essentially that of financialhistorian, preparing reports topresent a year-end snapshot of thestate of a company’s finances.

With the advent of IT, corporateaccounting systems were thereforedesigned to capture data and dothe adding up. In recent decades,market demands for more infor-mation – statements of cash flowand more detail on liabilities –added to the data crunching task.

But the financial crisis has crys-tallised a fundamental shift inexpectations of the CFO’s role: col-leagues want the historian to turnforecaster.

“For far too long, accountinghas been historic,” says AndrewMeade, managing partner forfinance and performance improve-ment UK and Ireland at advisoryfirm Accenture.

“Companies spend too muchtime sorting out and reconcilingtheir history before trying to sortout future trends . . . The real

value finance should bring to thetable is helping businesses lookforward.”

Bill Fuessler, IBM Global Finan-cial Management Lead for busi-ness consulting, concurs: “In thelast 10-15 years most companieshave put in some kind of financialsystem for general ledger.

“But the past 18 months havepushed the CFO to the forefront –they have shown it is importantalso to have information aboutbusiness risk and metrics. Peopleare looking for forward-looking,predictive measures.”

In a business environment ofunprecedented uncertainty, execu-tives want every clue they can get

to likely changes in their operat-ing environment, and contingencyplans to respond to possible sce-narios.

Many of the key unpredictablefactors are financial: changes incommodity prices, currency valua-tions and interest rates, for exam-ple.

The abruptness of the credit cri-sis unleashed by the collapse ofinvestment bank Lehman Broth-ers in September 2008 showed thateven banks with the most

advanced accounting systems,were unable to produce real-timedata on fundamental metrics relat-ing to risk and counterparty expo-sure.

Yet business trends have hugelymultiplied the scale of risk. NeilMcGovern, Director of ProductStrategy at financial systems spe-cialist Sybase, points out that“markets have speeded up five-fold in the past 10 years, so theydo the same amount of trading ina day that they used to do in aweek”.

By simple arithmetic, any trad-ing institution that is not there-fore checking its value at risk (ameasure of the probability of loss)five times more often has seen theVAR increase.

The need for real-time account-ing data is particularly acute infinancial markets. Regulators andrisk managers are demandingmuch closer monitoring of VARand counterparty risk.

Yet data volumes are so hugethat until recently, uploadinginformation to accountants in themiddle-office only took place over-night.

Many corporate accounting sys-tems are also inadequate for show-ing accurately the state of thebusiness today, let alone providingclues to future performance.

Financial data are often stuck infunctional silos, cannot be recon-ciled, and quality is in any casecompromised by “sclerosis” – thefailure to modernise systems oreven simple data definitions, tomatch organisational changes.

A simple example of sclerosis isa failure to attribute new codes tonew types of materials purchased,or even expenses claimed byemployees, which leads staff tomake “approximate” entries underthe most-similar existing code,leading to budgets appearing togrow even as real spending on aparticular item is falling.

As a result of fragmented legacysystems, poor data quality, lack ofstandard definitions and so on,many companies simply do nothave reliable internal financialintelligence available to theC-suite executives, analysts say.

Even when the data are there,Nigel Rayner, research vice-presi-dent at Gartner, says: “Our esti-mate is that only about 20 per centof companies with the capability

regularly use business intelligencefunctions.”

Many finance chiefs still rely onold-fashioned spreadsheets to keeptabs on the company’s finances.No wonder providers of businessintelligence systems report stronginterest from potential clients.

Clearly, the first task of boardsand IT chiefs is to find ways tomake a harmonised and accurateset of data available, preferably inreal-time. Then directors have tochoose their key metrics and lookat how to answer the questionsarising about the future of thebusiness.

In the first instance, a financedirector needs answers to currentquestions: how much working cap-ital is tied up in the business?How much in the supply chain?

ACCOUNTING INTELLIGENCE

Many companies cannotproduce reliable internalfinancial intelligence.Ross Tieman reports

How much are we owed, and whatare the numbers and trends inaccounts payable and receivable?

But as James Fisher, seniordirector of solution marketing atSAP says, as soon as current infor-mation is available, directors wantforward indicators, from sales,marketing and production, so thatthey can extrapolate future finan-cial performance.

Only once future financialtrends in the business are clear,can directors start to monitor indi-cators and model strategies toimprove future performance orreact to challenges such as fallingcustomer satisfaction.

“You have to include monitoringand build in remediation plans,”says Mr Fisher.

“Many organisations are not

achieving this closed-loop.”Today, he says, technology ena-

bles companies to start posing thequestion: “What if?” – that is, tomodel what would happen to salesand profitability if they raised orlowered prices, reduced a productrange, or added a new line withina particular price bracket.

It is only once data become use-ful information of this sort, saysAccenture’s Mr Meade, that theCFO can really start adding valuein the way boardroom colleagueswant.

With the right financial informa-tion, he says, a finance chief couldhelp them make better decisionsacross the organisation, fromreshaping business models to sign-ing tomorrow’s stars in the musicindustry.

‘Only about 20 per centof companies withthe capabilityregularly use businessintelligence functions’

The collapseof LehmanBrothershighlightedshortcomingsin riskmanagementacross thesector Bloomberg