I want to talk about something that’s come top of mind for me, how business intelligence evolves as companies evolve. The reason this came up is I have been going to conferences and talking to people. I think that one of the misconceptions about business intelligence is that it’s this elaborate solution that only the most, well-financed companies can afford, or only the largest companies can take advantage. So, what I wanted to do is just step through how every company uses business intelligence. I’m going to start off all the way from before a company is a company (pre-launch) and talk about how that person or group of people might be using business intelligence. Then, go all the way through to the large enterprises.
Business Intelligence for Company Start Up
So, let’s start off with that pre-launch company. As soon as someone has an idea about building an organization, they’re going to need to vet that idea. One of the things that needs to happen is market research. This market research involves pulling data together and trying to ascertain whether or not the concept is going to be viable.
Let me step back and talk about the words, “business intelligence”, according to Forrester Research. This is how Forrester Research defines business intelligence.
So basically, this pre-launch company is going to perform business intelligence because they’re going to use raw data to determine whether their idea is likely to succeed. So how is that actually going to happen?
Let’s just say we’re starting a restaurant. Some of the things we need to know are, how many restaurants are there in this metropolitan area where we are deciding to start a restaurant? Or maybe we don’t know which area we want to start a restaurant. We’re going to look at numerous possible areas to figure out where there’s the least amount of density of restaurants, least number of restaurants per capita. So, we might go out and pull some census data so we can see how many people live in each of these areas. Then we might find some information on the number of restaurants in those areas. Then we’re going to need to marry that information up to get to a per capita number. We might also want to try to figure out if there are actually restaurants like the one that we’re envisioning in these areas so we can get an understanding of the competition.
We may want to figure out which areas are growing. So, some type of growth numbers would be important. We may also want to get some building information, like where is new housing occurring so we can figure out how to position this restaurant in a location that’s likely to be expanding in the future. All this stuff that we’re talking about, pretty much every company is going to do before they launch. They’re going to collect raw information and they’re going to figure out if that raw information supports the concept to build a business or not. That is business intelligence. It’s not the business intelligence, I believe, that most of us are thinking of in these large enterprises where you have teams of people. It’s probably just one person doing the best that they can do to pull data together, probably in a spreadsheet and create some graphs, maybe some trends to understand the situation. In other words, to gain insights so that they can make a decision about whether or not to open this business, and if so, where to place the business.
That’s the pre-launch. Before we start the organization officially, we’re doing business intelligence, we have a business intelligence solution. A business intelligence solution, again, is not defined by the types of technology that we’re using to perform this analysis. To me, the key thing about the definition of business intelligence is that you’re using data to gain insight. And then hopefully you’re using that insight to make good decisions or decisions that have desirable outcomes.
Let’s move forward here and talk about the post launch phase of an organization. So you’re just getting started. You’re opening the doors. And of course, this could be a restaurant, it could be an online store, it could be an insurance agency, it could be a new healthcare clinic. It could be anything that we’re talking about.
In every one of these situations, there are similarities how you use business intelligence at these different phases of your business. Once you launch, what’s typically going to happen is you’re going to use whatever tools you can possibly find to support your business. What I mean by that is, for your finance tool, you’re probably going to go open up an online QuickBooks account. And for keeping track of inventory, you’re probably going to just use Excel. If you have a point of sale or a shopping cart, you’re probably going to use a Shopify shopping cart or you’re going to use maybe the QuickBooks point of sale, for example. The point is, you’re going to use whichever tools are cheapest, the ones that you can afford, because you aren’t generating revenue yet, you’re just opening your door. So you’re going to try to keep the cost of those tools as low as possible.
That makes a lot of sense, but it also creates some amount of challenge because you do need to understand how your early stage business is operating, what’s succeeding and what’s not succeeding. But at this point, it’s not very hard. You may have no sales whatsoever to track. You may have very, very few operational efficiencies to capture, if any. So it’s a very simple business at this point, hypothetically. The people involved with making those decisions are probably the same people doing the implementation work. The methods used are very similar to the pre-launch methods in that most of the work involved with making decisions based on data or building the business intelligence solution is just manual. So let’s talk about the tools a little bit more.
Business Intelligence Tools
Now you have tools like QuickBooks. QuickBooks is a financial system. All of you’re probably aware of this and it offers the ability to create some amount of reports. You can create your financial reports like canned reporting. A lot of business applications will provide reports directly within the business application. You don’t have to extract data, you just go to the application, click on the report’s module, select the report you want, and maybe there’s some customization abilities. Then, you have a report. And what is that report doing? Well, it’s just aggregating data in a way that relays some type of message or enables you to understand what’s going on in your business. At this launch stage of your business, there’s not much data to review. But you still need to know, especially in these early stages, what’s selling, and what exactly is working in this business. Is anything selling? And that can be done directly through the business applications that you choose to use.
In the cases that’s not possible, you’re likely just going to use Excel. You’re going to extract data in some type of exported format from these applications. Maybe one export from your point of sale, one export from your financial system and you’re just going to do a VLOOKUP in Excel. Then your data is integrated. That is business intelligence. That is using your data to figure out what’s going on in your business so that you have that information and understand what’s working and not working. Monitoring your business by aggregating data or aligning these different data elements is essentially business intelligence. You’re monitoring so that you can make good decisions. The decision may be to continue doing the same thing you’re doing. It doesn’t have to be a change of decision, but monitoring enables you to understand what’s going on in the business and it will enable you to know when something does need to change.
So, this is the launch stage. Again, the people involved at this point are very much going to be the same people starting the business. The methods used are going to be very manual. You’re going to have a couple of tools at this point. They’re going to help you pull some basic reports together.
Business Intelligence During the Early Stages
Now, let’s move on to what I would call the early stages of a business. At this point, you’ve got a little bit of traction, you’re generating some revenue, you’ve got off of the ground here. You may still be using some of those early stage tools at this point. You’re still very much concerned about keeping expenses low, because it’s not like we’re out of the woods. We’ve just got a little bit of traction and now you’re going to have to start thinking about things like forecasts.
If you see that you have a little bit of traction in the business, how are you going to expand this? How quickly can we expand this? What does the forecast look like? Now you have some different things that you need to deal with at this point in the business. Here is a personal example from LeapFrogBI. At LeapFrogBI, we build business intelligence solutions. That’s our job. And as part of that job, we have to monitor every production process that we have in place. In the early stages of our business, we did that in Excel. We just have a line for every production process and every day, somebody, typically me, would go out and see if that production process succeeded or not. That’s a report. That’s data that’s being captured in Excel, that was in our very early-stage business.
I can then see, of course, the nuts and bolts of what succeeded, and what didn’t succeed. That allows us to act on those failures that might occur. It allows us to report back to our clients and tell them what’s working, what’s not working, what are the uptime rates, etc. But it’s just been done in Excel and it’s largely done manually at this point. It’s unlikely that, well, at least in our case, we would be able to go out and hire someone to do this for us. It really wouldn’t make sense because the value opportunity wasn’t there yet, at least not for this example that I’m giving you. In this early stage of our organization, the business intelligence solution is often still going to be done by the people that are building that business, the few people that are in the organization.
Now, that’s not always the case. You have certain businesses that are more directly tied to data. What if their business is data? An example would be a marketing and analysis company. Often, marketing is about, it depends on the organization, aggregating data from various industries and then selling those reports off to interested parties. Well, that is a bit of an exception because the whole organization is about business intelligence. It’s about making that business intelligence available to other organizations at an efficient price. However, in the early stages, most organizations are going to continue doing business intelligence internally. Meaning, you’re going to do it yourself, you’re going to use the tools you have available. You’re not going to go buy expensive business intelligence tools. You’re certainly not going to hire a team of people to build a huge solution for you.
Business Intelligence During Company Growth Phase
Let’s move forward in the organization and talk about the growth stage. These are abstract stages of a business. This is where we have a working formula, the business is growing. We probably have a little bit of time behind us and we probably now have increased the headcount in the organization. Now, we’re concerned about expanding this concept, this idea, which is working. We’ve got a formula, it works, and we want to expand the organization to leverage that success. Things begin to look a little bit different because now we’re a little larger organization. It’s probably more than just one or two people. Maybe, maybe not, it depends on the type of organization, of course. Generally, it’s going to start to grow in headcount and we’re going to have some additional complexities. We’re going to start adding people to very specific functions in the organization. We will, at this point, begin to hire marketing people, we will have salespeople. You may even have some C-level executives at this point..
The organization is growing and with growth, there’s going to be some complexities. And with growth, there’s going to be opportunities to do things better. One of the ways we do that is through business intelligence.
I will go back to my little example. When LeapFrogBI got to a certain point where that Excel spreadsheet was taking an hour or more per day to go through all of the processes and figure out which processes are succeeding and which are not, it was a pretty clear indicator that spending an hour a day could be automated. It didn’t make a lot of sense. Of course, we automated that solution so that we have reports now that tell us we don’t have to go check every one of these 100s of processes. It’ll tell us which ones have succeeded, which ones have failed. It will automatically tell us through time. It will show us a trend of each process, what their success rates are. It’ll tell us how all of the clients’ processes are working.
Automating that solution at this growth stage of our organization removed the need to constantly be managing this process as closely. We still have to manage it, but we don’t have to do it manually. It enabled us to move to the next level. Now we’re not limited to just 50 or 100 processes. We could easily deal with thousands of processes and not have a bottleneck in our organization that’s going to add risk. This is an example of a pretty typical value proposition in a growth phase organization. You’re doing something where the way you’ve always done it, let’s say, we always were using Excel to track these processes. It was that way all the way from the launch phase. But now it’s not the most efficient way of doing things anymore. So, we need to find a way to automate those processes and make things run more efficiently and enable us to scale.
That’s not the only reason that you’re going to use business intelligence at a growth phase organization. We talked about adding functions, and specific resources at this point. If you’re going to have marketing people, well, you need those marketing people to also have the insights they need to make good decisions. They need to know, what campaigns are being run, are those campaigns successful? Are they not? At the basic view of things, it’s success or not success. It’s also very helpful to be able to break those things down and to correlate the activities with the outcomes. The same is true for each function in your organization. Finance is going to have it’s responsibilities. If you’re managing inventory, there are going to be certain things that need to be monitored as well. But in this growth stage, this is really where we’re moving from doing everything manually like we did in the early stages and using only the reports that happened to come with the tools we chose to use.
We’re moving into something that is more like what we commonly think of as a business intelligence solution. We may or may not be creating a data warehouse at this point. We may or may not be using one of the BI front ends, like Power BI, Tableau, etc. We’re starting to build business intelligence solutions in the organization to do the things that need to be done to enable us to operate efficiently and to scale. That’s what this growth organization is focused on. Now, a growth organization may be doing all those things in-house, especially in early growth, but maybe in later growth. You may or may not be doing all these things yourself, it really depends. It doesn’t make sense for an organization that’s trying to build a successful restaurant business to go and hire a team of business intelligence people so that they can have a fancy Cadillac business intelligence solution. That doesn’t make sense.
And that doesn’t make sense because in that hypothetical situation, the value opportunity is not there. But the need is there. There is value opportunity in these growth stage businesses. That restaurant business that’s now off the ground and growing, there are certain things that they can probably start to do better. They can start operating more efficiently. They can start getting more out of the resources that they’re hiring. They can look for ways to reduce their cost of goods. There’s a lot of things that can be done at this point and who’s doing it begins to change. It often changes from the people that started the organization, they’re doing everything in Excel to someone else doing these things. Initially, it might just be someone that’s following a process, that’s extracting data from various systems and cobbling it together in a prescribed way so you can get this report in front of you to monitor the business. That is a very common scenario.
But eventually in this growth stage, we’re going to want to get more sophisticated about how this is happening. We’re going to want to create processes that can keep pace with the business. As the business grows, we’re going to want to be able to monitor that growth as a bare minimum. We’re going to want to find the things that actually are drivers for success and monitor those things closely. The methods used again in this growth stage vary. It might start off as just very manual processes and it might grow to something a little more automated, sophisticated. However, you want to put it in this growth stage.
Business Intelligence During Scale Growth Phase
Once you get past early-stage growth and you’re now trying to scale the organization. All of these are arbitrary phases. I just make them up basically, as I see organizations evolving. In the scale phase, this is really where you’re still growing, you’re trying to scale the organization. But you’re often adding a lot more focused resources. People are focused on a particular function in the business. You might be at an organization that’s now at 20 plus people. You’re not in the early-stage growth. You’re now really trying to grow this thing in a sustainable way. You may be at 100 people, you may be at 500 people, I don’t know. It depends on the type of organization. The point being that we’re trying to scale this organization now. We’ve got a proven formula. We’re past this early stage. We’re past the initial growth. Now we’ve got a substantial business going that we’re trying to scale in a much larger way.
At this stage in the business, there’s going to be quite a few more opportunities to get a lot more sophisticated about your business intelligence solution. You may, at this point, start benefiting from having a dedicated data storage area. It may be a data warehouse, it might be an operational data store, or it might just be a staging area. Often, at this stage in an organization, you’re going to have enough history and you’re going to have challenges in getting the information you need directly from your business applications. It’s going to just make sense to get all that information in one place so you can actually use it as a model or a repository that you’re able to answer questions. You’re able to ask, what is the trend of my month over month revenue look like since I started this organization? That’s a simple question, but it’s often not easy to answer, especially at this point in an organization where you may have changed tools a couple of times, you might be combining exports from various tools together in order to create a single view of your organization.
The people that are involved often at this point of an organization are maybe even dedicated people to this type of solution. You might have one or two people at least in the early scale stage that are focused on nothing other than making sure that people in the organization have the information they need to succeed. Their job is to get reports out. Hopefully, those reports are being focused on things that can help the business succeed. At this point in an organization, you might start to have a data solution that’s focused on making that work more efficient. More importantly, making that work more valuable. When you do begin to have a data solution that is the central repository that describes your business, it becomes a very valuable thing. Now you have all of this at your fingertips, you’re not constrained.
If you think back to the early stages of the organization, when you had to go into each business application, export data, and try to integrate them on the fly in order to get a bit of information. It’s a daunting task to think about doing such a thing for a larger organization or an organization in the late growth or scaling phase. You might just not do it. Instead of that, instead of not doing it, instead of not capturing that value, you have a dedicated team. Now, it makes sense to invest in that team and that team’s responsibility to make sure that everybody has the information they need to operate efficiently.
Business Intelligence in Larger Enterprises
Past this point in an organization, you will get into the larger enterprises. That’s where undoubtedly every organization at this point is going to have an internal business intelligence, data warehousing, data analytic. There are a lot of names for these different business units, but there is going to be a team of people that are going to be focused on this purpose. It is a business function that will grow with the business.
As that business becomes more complicated, the things that need to be done, or the influencers on decisions become more complicated as well. If you have a multinational organization, and that organization has all the business functions, from marketing to sales to shipping to inventory management, all these things are in this organization, and it becomes a very complicated situation. That complexity uncovers opportunity. Whenever there’s complexity, things are happening often inefficiently, and we can improve on those inefficiencies by using data to provide people with the information that is needed to operate efficiently. Often though, when you get into these larger enterprises, you can do things without ever giving data to an individual. You start doing process automation, which also can be driven from a business intelligence or a data warehousing solution.
Business Intelligence is Used for All Phases of Company Growth
We stepped through from before we start a company all the way to large enterprises. At all phases in this process, we are using business intelligence. While we use technology often to implement these solutions, technology is not the defining aspect. The defining aspect of business intelligence to me is that we see a value opportunity. We see, first of all, that there is an opportunity to improve and we are going to use data. And data is what has happened. It is the facts, it’s the history. We are going to use data to help us capture that value opportunity. We pretty much do this every day at all phases of an organization.
Now, if you think about business intelligence in the more traditional sense where you have a business intelligence front end tool, you have a data warehouse, you have ETL processes, well, those things usually don’t come into play in the pre-launch phase of an organization. They often won’t even come into play in the launch phase of an organization. But when you get to the early stages and definitely the growth and the scale, and absolutely the large enterprise phase of an organization, you will begin to implement these business intelligence solutions because it will just make sense. You will see an opportunity out there. If you are in insurance, you might see that you are above the industry standards for your loss ratios. If you could reduce that to the industry standard, you have a $2 million a year opportunity. Well, that’s a value opportunity. And capturing that value opportunity can be made more possible or enabled through business intelligence. Providing people with the information to understand, first of all, what is the loss ratio? And second of all, what correlates to this high loss ratio? Then we’re going to begin asking the questions why, who, where is this happening? How can we improve that? All of those questions are supported by data. If we have that data, we can often make decisions that are going to have the outcomes we’re looking for. Well, I hope this has been helpful. This is a question that comes up quite a bit, “when is business intelligence appropriate for an organization?” Answer: It is always appropriate, all the way from pre-launch, all the way through the life cycle of an organization.