Five Key Elements of a Business Analytics Strategy in a Weak Economy

Choosing the right strategy, executing against it and ensuring you’re on the right path demands the access to the information and insight that modern business analytics delivers

Information Management Newsletters, November 19, 2009

Eric Yau

A company’s margin for error shrinks dramatically in uncertain times. While a bad decision in good times may cost market share, a bad decision in bad times can cost the market.

Today's economic climate yields new challenges for companies in their day-to-day business, such as compromised cash flows, the impact of fluctuating demand on inventory management, and, more often than not, declining or unpredictable sales, revenues and profits. These challenges are intensified by an explosion of business data. Many business leaders resort to using this data the way they did in the past in an effort to become a winner in the new economic reality. Rather than harnessing this powerful information stream to better benefit business, they struggle to keep pace with the breadth of this deluge and are increasingly challenged by the relative inability to manage it effectively in real time.

With nearly 15 petabytes of data created each day, business analytics strategies and tools exist to help business leaders alleviate their information management woes. These capabilities extract relevant business data and help organizations transform it into new intelligence and actionable knowledge that will drive smarter decision-making in tough economic times.

In fact, business analytics is a bright spot in an otherwise subdued technology market. Market researcher IDC forecasts a relatively healthy 4 percent growth for a $25 billion market for business analytics software in 2009. IDC has also forecast 2 percent growth in the $45 billion analytics consulting business, which until recently has been focused on installing software rather than helping companies transform the way they use information. In fact, the business analytics software and services market was estimated to be a $59 billion market in 2008, according to IDC.

According to the 2009 IBM Global CIO Study, 83 percent of respondents identified business intelligence and analytics - the ability to see patterns in vast amounts of data and extract actionable insights - as the way they will enhance their organizations’ competitiveness. Five key elements of a modern business analytics strategy can help businesses position themselves for growth in the new economy and continue to work smarter in managing costs, improving profit, identifying new opportunities, driving cash flow and managing risk for more effective decision-making.

1. Scorecards/dashboards. By using scorecards and dashboards, executives are able to monitor data efficiently, better understand performance gaps and quickly drive opportunities with more strategic decision-making.

Understanding how business is performing against predetermined targets is crucial. As companies become increasingly agile, executives simply do not have the time to sift through stacks of reports to discover how their business is performing. Business leaders can look to measurement tools, such as scorecards and dashboards, to monitor data and help manage strategy and performance goals. There are different scorecard types that provide distinct characteristics to help decision-makers, including those focused on strategy management, business process performance management and basic performance monitoring. Regardless of structure, their impact on decision-making is even more significant. For example, scorecards let executives link individual and team performance to organizational strategies. This helps employees understand at a glance how their individual roles drive company-wide performance. With digital scorecards that are tied to key financial and operational data, business leaders don’t have to sift through spreadsheets or paper-based reports. They are effectively able to monitor and manage their strategies as well as make smarter decisions to execute company objectives.

2. Reporting and analysis. Reporting and analysis abilities allow decision-makers to assess and communicate how their company is performing in the industry and take immediate action accordingly.

Reporting and analysis helps executives see how they are operating in different regions or across product categories, as well as better understand the state of their market sector and industry competition. With business analytics, Web-based reporting sits on top of core transaction systems so decision-makers can take immediate action on recent financial or operational information. Reporting and analysis creates a common context for decision-making across departments and staff levels and helps companies make data more actionable.

3. Financial performance management. Deep insight into financial and operational data helps companies streamline business operations in order to increase profitability and sustainability.

Business analytics software for financial performance management helps executives streamline the complex process of tough decision-making by enabling users to evaluate financial results across countries, currencies, general ledger systems and legal entities. This deep insight helps finance make smarter decisions about which assets, resources, initiatives, locations, products or customer relationships may no longer be sustainable. Armed with detailed financial analytics, business leaders can quickly evaluate how results change over time, in different regions and across various product categories. The ability to identify key financial and operational trends is always vital. By drilling down to transactional-level detail, trends can be spotted more easily so decision-makers can better understand resource requirements and plan accordingly.

4. Continuous planning. Replacing rigid planning cycles with business analytics software enables businesses to build intelligent plans for future development and growth.

Business analytics software for enterprise planning can help companies replace and revamp rigid annual budgeting and planning processes that tend to make minimal impact on business growth. This type of business analytics technology fosters continuous planning on a monthly, weekly or daily basis, positioning companies to achieve higher performance in both strong and weak economies. With real-time visibility into up-to-date data, executives can create rolling forecasts that consider a broad range of potential future scenarios. This type of what-if analysis enables business leaders to develop intelligent action plans for variable future outcomes, thus boosting the agility and responsiveness of the company.

5. Continuously monitor performance targets. Monitoring performance targets on an ongoing basis lays the foundation for future growth, providing organizations with a realistic performance outlook based on actual business and industry developments.

Companies should not seek shelter from the stormy clouds brought on by the recession, but rather take careful, intelligent steps to better manage costs, improve efficiencies, reallocate resources and streamline supply chains so that the foundation for future growth is established. Instead of setting targets at specific numbers, company decision-makers need to link performance targets to events, trends and risk factors. This allows for more realistic performance targets based on actual business and industry developments and provides more flexibility to adapt to changing market conditions. The strategy will require a commitment to rid the company of inefficient processes in favor of intelligent systems capable of driving continuous performance.

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