Learning how to transform the raw ingredients—in this case data—into a product that can feed the corporate knowledge chain is essential. Today, the pressures of modern business dictate that every department—finance, operations, sales, legal and HR—serves as a strategic center of excellence capable of affecting change, both internally and externally. Understanding the relationships and interrelationships of people and processes is imperative. But unless you know how to manage and exploit data, you could easily find yourself providing half-baked solutions.
According to a statistic often quoted by IBM Corp. in Armonk, New York, a typical company harnesses only 2 to 4 percent of the data that resides in its systems. The rest sits in databases and never sees the light of a computer monitor. Says Richard W. Lewis, vice president of Business Performance Management for Stamford, Connecticut-based Meta Group: "Many companies are sitting on a gold mine, but have no way to mine the gold."
Adds Glen Marianko, chief technologist at Progressive Strategies Inc., a New York City-based consulting firm: "The ability to truly understand markets, competitors and processes is extremely powerful. Business intelligence can make that happen."
BI can help you sift data and spot trends.
Business intelligence (BI) is emerging as an essential tool in the corporate arsenal. BIis a group of software tools that provides a wide range of analytical capabilities. Using data warehouses, datamarts (specialized repositories of single subject data), and analytical tools on the desktop, it’s possible to sift through data and spot trends and patterns that can be turned into highly focused business solutions.
Trying to figure out which employees are likely to leave the company unless they receive additional compensation or benefits? BI might help you find an answer. Want to know which employees are most likely to up their 401(k) contributions without costly training and ongoing mailings? You might want to consider the benefits of business intelligence.
BI isn’t a new concept. For decades, savvy executives have found ways to beat competitors through lower prices, better service, and more efficient manufacturing, sales and marketing. They’ve pored over ledger sheets and spreadsheets in order to spot trends that could be transformed into business actions.
But in today’s electronic workplace—where systems, software and databases manage vast reservoirs of data—business intelligence is taking on a new meaning. Companies like SAS Institute and D2K, that specialize in data warehousing solutions, have made the process of data extraction easier than ever. The former has introduced more than a half dozen different tools capable of slicing, dicing and mincing data into every conceivable form. Its Executive Information Systems (EIS) software offers a multidimensional data viewer, an expanding report with drill-down capabilities, and multicolumn reports, which let users glean information with only a few clicks of a mouse. D2K’s software integrates with PeopleSoft and SAP to automate a wide range of functions. It can deliver data in HTML, Java charts, Microsoft Excel or ASCII text.
With the advent of these new technologies, BI has emerged as the tool of choice for sifting through data and finding the proverbial needle in the haystack. Indeed, many departments other than HR already have discovered the value of business intelligence. They’re finding the most profitable customers, zeroing in on the most effective marketing techniques, and identifying parts and equipment that can be replaced before something breaks.
In some cases, companies are boosting the ROI for specific projects by 400 percent or more, simply by understanding what’s going on beneath the surface and directing resources to the point of maximum return. Even when the ROI can’t be measured in dollars and sense, BI fuels improvements by making data available on demand.
The Futures Group, a Glastonbury, Connecticut-based consulting firm, found 60 percent of large companies surveyed used BI in 1997. A study by Stamford, Connecticut-based Gartner Group pegged the BI software market at $600 million a year, including decision support systems (DSS), executive information systems (EIS), online analytical processing (OLAP), and other data-mining techniques that provide a high degree of interactive analysis.
Unfortunately, HR too often is the caboose trailing the train when it comes to adopting these capabilities. Instead of understanding which group of employees provides the greatest return on salary or how to identify gaps in departmental skills, HR winds up shoving paper into out-baskets that eventually buckle under the weight of dead trees.
Data mining doesn’t have to be complicated.
Of course, part of the problem is that HR remains mired in administrative work, which prevents key executives from taking the time to innovate. Another nagging issue is that HR often doesn’t understand the technology, which can be complex by nature. Yet neither of these reasons is a legitimate excuse for veering away from data warehousing, datamarts and business intelligence. Today, spreadsheets and paper just don’t cut it. By the time you’ve conducted your analysis, you could wind up hearing the sonic booms of competitors rocketing past.
By collecting, storing and distributing data—and becoming a key part of the corporate data flow—it’s possible to find solutions where they previously didn’t exist. That means understanding how data warehouses and datamarts store and organize information in a format that makes in-depth analysis and queries possible. It means putting powerful query tools and analytic capabilities in the hands of managers so they’re able to dissect data and make informed decisions based on the latest information.
"The myth of data mining is that you find hidden nuggets that you didn’t know existed," says Gary Saarenvirta, principal consultant for Loyalty Consulting, a business intelligence consulting firm based in North York, Ontario, Canada. "The reality is that it helps you understand and act on things you already know." For example, an HR department might know 20 percent of its employees use 80 percent of the services, but it can’t determine which 20 percent. Business intelligence can help find that segment and devise programs to cut costs and increase productivity. In fact, using complex algorithms, it’s possible to tie behavioral issues to factors such as shareholder value, growth strategies and other business concerns, Saarenvirta says.
Although IT might be responsible for assembling the technology, it certainly isn’t the driving force behind a BI initiative. The conceptual framework has to come from HR. Douglas Hackney, president of The Enterprise Group Ltd., a Hudson, Wisconsin, consulting firm, has examined the successes and failures of companies embracing data warehousing and datamarts for an upcoming book, The Seven Deadly Sins of Data Warehousing (Addison Wesley Longman, expected release in 2000). His conclusion? The lack of success is not driven by technology, but by soft issues, including culture, politics, ownership, process and boundaries. "The challenge for many large companies is that data crosses every boundary, every fiefdom and every function. No department is an island unto itself."
Too often, HR departments miss a tremendous opportunity to become strategic and provide valuable consulting capabilities by overlooking—or at least underutilizing—data warehousing, datamarts and business intelligence. Just as knowledge management can boost capabilities when it comes to collecting and sharing the expertise people have, business intelligence can put the data to work. Putting all the pieces in place is no easy task. By nature, it’s complex and sometimes downright frustrating to ensure that data are accurate, that it flows correctly and people know how to use the analytical tools sitting on their desktops. But when business intelligence works, you’re likely to discover the recipe for success.
Workforce, January 1999, Vol. 78, No. 1, pp. 103-104.