Knowledge Seekers - "The Focus of BI (Business Intelligence) is changing.."
Bill Steenburgh was expecting some misgivings when he presented his plan for a new information system to the board at Inco Co. He wouldn’t be disappointed. Inco is one of the world’s premier mining and metals companies and the world’s second largest producer of nickel. Although the benefits of the system he was proposing seemed like no-brainer stuff – it would allow key employees to have quicker and improved access to vital information about orders, shipments, invoices and inventories; in short, just about everything – there were skeptics. “We’re a very conservative mining company,” says Steenburgh, the director of corporate planning at Inco. “So this sort of stuff, guys don’t really catch on too quickly. It’s not really their thing.” There were also concerns from some of the regions – 80 per cent of Inco’s business is outside North America – about having their information transparent for the entire company to see. Worse still was that Inco’s IT department had a less-than stellar reputation. “There were a few blown projects,” he says. So, naturally, the first question out of the moth of Inco’s president was: “What makes you think you can pull this off?”
The most obvious difference is that Steenburgh is not from the IT department. He’s an old marketing and business hand – in other words, he understands the business imperatives for having improved access to critical company information.
That experience helped Steenburgh make his case, especially when he laid out the considerable project costs. He won the mind of Inco’s chairman, who banged his hands on the table and said, “We’ve got to do this, we have to move ahead.” Although the company had a great deal of capital tied up in other projects, the chairman recognized the importance of the new system. “Not everybody knew what it was, but they knew instinctively they had to do it,” says Steenburgh. Thus began Inco’s business intelligence project.
Is there a more precise-sounding IT solution than business intelligence (BI)? But what’s in a name? After all, such a simple phrase is burdened with decidedly complex technologies – take your pick among databases, data extraction tools, data “scrubbing” technology, end-user query software. But understanding the business needs behind BI need not be so complex. Business intelligence, according to Graham Hislop, managing director of GHI Technologies in Toronto, “is about finding knowledge. It’s as simple as that.” Hislop cites a typical organizational problem to trace BI’s history. “The whole concept (of BI) evolves from the fact that a lot of companies over the years as they grew, they just basically threw in a database wherever it was needed.” The result: a slew if disparate systems housing different company information. “But all the information pertains to the same company,” says Hislop. “To be able to analyze your company effectively, you need to have all the information from these different systems into one workable system.” Data capture is one thing, he adds, but it’s the insight coming out that provides the real value.
At one time, business intelligence was synonymous with data warehousing, an unfortunate and undesirable association. Stories about failed warehousing projects were de rigueur in the IT trade press. A typical news hook: a company spending millions of dollars on a system that either didn’t work or wasn’t used. Fortunately, few of those stories made it past the IT press and into the mainstream business pages. As a result, BI doesn’t carry excess baggage – it’s been given a fresh start.
Still, BI hasn’t been an easy sell. In an IDC Canada report published late last year, BI did not fare well as a top-selling technology. Few organizations were actively building or using a BI solution. The news wasn’t all bad, however. BI’s projected market growth – BI technologies represent a market that’s expected to grow to over $1.4 billion worldwide by 2004, according to IDC estimates – is proof that business intelligence is big business.
The report also found that the leading areas for new BI and data warehousing solutions were Internet-enabled data access and data mining. In other words, organizations implementing BI solutions are going beyond its staid warehousing beginnings and evolving to the next generation. It’s not your mother’s data warehouse anymore.
That’s certainly true at female apparel manufacturer and retailer Nygård. It’s BI system, which implemented two years ago, is entirely Web-based. “That means you can be on the road, at your hotel or at home, and you can connect and get yourself the information that you need,” says Len Nicolas, director of IT at Nygård.
What’s more, sales reports that use to take a week to generate now take about 10 minutes.
The company has always had some serious ambitions when it comes to technology. Founder and chairman Peter Nygård’s vision – WHERE FASHION MEETS TECHNOLOGY– has made the company a high-tech leader in it’s industry. “We’re No 1 in e-commerce in fashion and retail, ahead of everybody else,” he says. The company has backed that vision with an ongoing investment in technology, earmarking $60 million over three years in 2000.
“We realized we wanted to change the way we did business, and change the way our retailers did business with us,” says Nicolas. The company uses a very simple axiom to explain its BI system: Show Me. “Show me how well we’re performing in the store,” say Nicolas. It uses business intelligence to track the order histories and, based on certain trends, to better forecast its designs for the future.
It works this way: When a customer buys a garment at one of Nygård’s stores or at one of its other retailers (such as the Bay and Sears in Canada), that information is fed into the system.
As a result, says Nicolas, “we know what we’ve shipped to the customer and we know how well it’s selling on the floor. When that information is reviewed, it allows the company to put out more stock immediately and helps them design the lines for next year based on the sale of current designs. This is particularly important in the fashion trade", says Nicolas, “since we’re always working 12 months ahead.”
Initially, it was to be an internal tool used solely by Nygård’s own retail operations, which number around 200 stores across Canada.
It’s evolved to the point where its retailers (approximately 20 major retailers in North America, as well as 500 independent retailers) are requesting access to the system. Because the system allows Nygård to compare the same products within its own stores and its other retailers, it can better understand why popular garments may not be selling as strongly in other stores.
“We can find out that maybe it’s not displayed properly, or maybe it’s not even displayed at all but is in the back room,” says Nicolas.
Down the road, Nicolas says, the information from the BI system will generate greater sales for the company – especially as the system evolves to the point where it can drill down even deeper into the data to get more information about what garments are selling the best within regions, even within individual stores.
“Has it increased our sales from the get go?” asks Nicolas aloud. “Maybe not, but what it’s done is allow us to put the product in the right place. I’m sure it will increase our sales in the future because the more you put out the right product, the more sales you’ll get in the future.”
The focus of BI is changing – away from the pure nuts-and-bolts technology that excites an IT department, to the more practical discussions on how the technology solves business problems.
This is particularly true of the executives who sign the cheques on new IT systems: they want to understand why it is they need a BI system, and the business value they’ll derive from it.
The good news is that as BI continues to mature, the talk is moving beyond the technology. As in the case at Inco and companies like it, BI projects are spurred by those outside IT and inside the business – in other word’s the people who recognize the value of being armed with improved information to make better and more-informed decisions.
As a result, senior-level personnel are spearheading BI projects. “Nothing happens unless somebody in the company believes that it will provide some value,” says Hislop. The people in IT – “The ones that deal in zeroes and ones,” says Hislop – are not true decision-makers.
“The true decision makers are the business owners, the departmental owners, the CEO who’s tired of making decisions based on gut feel. Those are the people you target because they’re the ones that need to know what’s going on.”
Take Inco, for example. Steenburgh says that pre-BI, it didn’t have a strong handle on its profitability.
“We didn’t know which products were the most profitable, or what area was most profitable,” he says. With its BI system – it went live in October 1999 – it can now look at profitability in greater and granular detail.
“We can look at products by region and customer,” he says. That helps determine which orders and customers are unprofitable. It has also altered perceptions of certain products.
“We took a product that was known to be profitable, but using the system we demonstrated that there’s a significant portion of the material that was being sold at a loss. Everyone was shocked at that.”
It’s changed the way the company does its planning as well. Previously, planning processes at Inco were crude.
“The data was all there, but there was so much of it that unless you tediously analyzed it order by order, you just couldn’t keep up with it,” says Steenburgh.
For example, Inco as four sources of nickel: from its mines in Ontario, Manitoba and Indonesia, and it buys nickel from the London metal Exchange. A key success factor is to get the nickel from the best source and maximize profit on it.
“We really didn’t have any kind of clean way of understanding of who should get the nickel and from where,” says Steenburgh.
He says the BI system has made profound changes to that process, and to know the company distributes the nickel from its different sources.
It’s also made an indelible impression in the company’s corner offices. Steenburgh says one of Inco’s vice-presidents recently pointed out that this is the first year the company has been able to look at information in such detail and make decisions about where to best distribute product for the sake of profitability.
Making life easier for senior executives is one of BI’s most obvious advantages.
“Executives are busy people,” says Ludwig Melok, vice-president of sales and marketing at Montreal-based Tenrox, which implements BI solutions in the project management sector.
“They just want you to come in and say, “Show me.’ They want graphics and colours. Red, yellow, green.”
Some have referred to this concept as a “digital dash-board.” Solutions have got to the point where the typical users don’t need to have strong computing skills – they just need to understand how to use a mouse and know where to click.
No need for skepticism.