Suppliers and consumers have tightened their belts under current economic conditions, sending businesses scrambling for cost-cutting methods. Small and medium businesses (SMBs) have turned to business intelligence (BI) tools in response to these pressures.
Aberdeen’s July 2009 report, “BI for the SMB 2009: How to Slash Cost and Empower the Business User,” found that SMBs were investing in technology solutions to automate BI processes and identifying areas of the business where the most rapid ROI for BI could be obtained. Several vendors have developed solutions specifically geared toward the SMB market. Targeted products such as IBM’s forthcoming Cognos Express suite are addressing the small-market challenges of data collection, assembly and delivery.
This Aberdeen Analyst Insight investigates the SMB market’s usage of BI tools. While these organizations are typically working with fewer resources and less-developed IT skill sets, their need for business insight through tools like BI is just as prevalent, and many organizations are driving substantial performance improvements through efficient BI usage.
Self-Service BI for Increased Visibility
BI replaces spreadsheet-based static reporting methods with dynamic tools that put data at a manager’s fingertips. The best data in the world, however, is useless if managers cannot interpret, access or manipulate it without help from the IT department. If the IT staff is responsible for producing BI reports for management, the BI suite’s power is reduced to what the IT staff can deliver. Aberdeen research emphasizes that, to be useful to the SMB, BI must be delivered in a self-service capacity to non-technical users (Figure 1).
While no one strategic choice can ensure a company’s Best-in-Class status, as Figure 1 shows, BI delivered in a self-service, non IT-assisted way, is overwhelmingly more likely to be a Best-in-Class strategy.
Self-service BI offers management greater visibility into operational processes. This improved visibility then allows managers to cut costs and improve profitability (Figure 2).
SMBs with Best-in-Class BI implementations realized a 29 percent average growth in organic profits during 2008, more than seven-times the growth in organic profit among Industry Average companies, while Laggards saw their organic profits shrink by 17 percent. Even in a pleasant economy, realizing 29 percent organic profit growth is noteworthy; in the current economic climate, it is remarkable. In the next section, we will explore some of the key organizational and technological changes SMBs have made to realize these gains.
Think, Then Measure
When it comes to the SMB world, the key advantage that BI implementations offer lies in the visibility they provide into daily business operations. BI, however, is not a fire-and-forget tool. Rather, it represents a radical step forward in the way companies relate to their data and think about their line of business. The best reporting technology is useless if managers have not decided what Key Performance Indicators (KPIs) matter for their business. Like a genie’s three wishes, a BI implementation offers a great deal of power, provided that the user asks the right questions. The data shows that Best-in-Class SMBs are significantly more likely to leverage several organizational capabilities in order to better manage their BI implementation (Figure 3).
Aberdeen research has shown that Best-in-Class companies are more likely to engage in corporate introspection as they implement BI, determining what insight they want to glean from their tools:
- Best-in-Class companies prioritize data for user access, ensuring that the right data gets in the hands of the right users.
- Best-in-Class companies ensure their corporate strategy is founded in quantitative goals, and the success of that strategy can be measured by individual business units’ performance.
Having asked the right questions, Best-in-Class businesses use their BI tools to collect and present the answers in a manner that makes intuitive sense to managers (Figure 4).
Dashboarding tools provide moment-to-moment analysis of business performance across a range of metrics. Once businesses take the time to determine what performance metrics best support their corporate strategy, they can employ dashboard tools to rate business performance on these metrics.
Best-in-Class businesses, unsatisfied with simply knowing their company’s present status, have implemented dashboards which evaluate their success against short-term tactical goals and against their overall strategic plan. Here the importance of clearly defining tactical KPI at the business level becomes clear, as well as the importance of founding corporate strategy on quantitative metrics. Leaders who can measure their company’s success can take steps maximize it.
With the arrival of BI tools geared specifically for the midmarket, like the recently announced IBM Cognos Express platform or SAP Business Objects’ Explorer product, SMB users should keep the following points in mind as they approach their business:
- Have a process in place for determining what you want your BI solution to tell you. Otherwise, you won’t be able to use it to its fullest extent. Best-in-Class organizations are twice as likely as Laggards to prioritize data for user access and to have clearly-defined business unit KPIs that roll up to corporate strategic goals.
- Create and nurture a culture of data at your business. Aberdeen research has shown that buy-in from the executive level down to line of business management is a key ingredient of Best-in-Class BI strategy. Seventy-eight percent of the Best-in-Class have executive level buy-in to their BI plans, and 64 percent have established a corporate culture that values timely delivery of data. Constant communication from executive stakeholders will help ensure employees and managers understand that a few extra minutes spent on reporting and analysis can result in direct and tangible business gains.
- Understand that BI is not “fire and forget.” Constant innovation will reward the effort put into its installation, its upkeep, the education of employees in its use, and its innovation as business dynamics change over time. Best-in-Class companies are half again as likely as the Industry Average to establish BI training programs and to regularly review the use of their BI tools.
Max Gladstone is a research associate in business intelligence at Aberdeen Group.