2D December 2008 I DM Review www.dmreview.

com
 Measuring the Value of
ntelligence In
Business Intelligence
By Soumendra Mohanty

I
ntelligence is the ability to solve
problems. It is also commonly
referred to as practical sense or the
ability to get along well in all sorts of
situations. People cannot see, hear, touch,
smell or taste intelligence. On the other
hand, the more intelligence people bave,
the better their ability to respond to situ-
ations around them.
On a similar note, we can define
intelligence in business intelligence (BI) as
the ability to realize business success with
easy access to actionable mformation
througb timely and accurate insight into
business conditions. It is crucial to exam-
ine BI initiatives from the perspective of
the value created. If decision-makers do
not understand the economic benefit gen-
erated by BI, they may grow to distrust
the recommendations it generates. They
may return to strategy by intuition and
prioritization based on a hunch.
How are data, information, intelli-
gence and BI interrelated?
' Data generated by business events is
raw witbout context, like customer
data, product data and transactions.
' Infonnation is data with context and
meaning; for example, information
about product purchases made hy the
specific customers.
' Intelligence is actionable mformation
insight and is used hy various informa-
tion consumers to achieve business
objectives: Which group of customers
buys which products? Is there a trend
customers? How can we use the trend to actionable insights.
predict what will happen in the future? The economic benefit of BI is often com-
' BI is intelligence based on business plex and difficult to quantify. Several faCTors
information, past actions and strategies may contribute to the overall revenue or prof-
for the future. itability statistics tbat an organization needs
BI is all about achieving greater prof- to measure. A common factor in determining
itability by analyzing huge amounts of economic benefit is ROI on BI strategies or
data and numbers - presenting them, other metrics that quantify the number of
qualifying tbe assessments, finding trends sales, number of new customers acquired, etc.
and issues hidden in them, empowering These numbers tell us how many and how
action to resolve issues and providing much. Other faaors sucb as customer cen-
Figure 1: Intelligent Business Paradigm
Data Business
Structured. Drivers
Unstructured, Forces that
Quantitative, cause the need
Qualitative to act
Information Business Goals
Facts, Metrics Desired Outcomes,
Actions
r • •
Intelligence (tnformation+Action) Business Strategies
Trends, insights, Discoueof, Planned means to achieve goals, :
Decision Enablers Actions to implement strategies •
Predictive Outcomes Business Results
Value
Performance, Profitability ^ •••'

in purchases of tbese products by these

www.dmreview.com Review I December 2008 21

tricity, lifetime value and wallet share are also Figure 2: Closed-Loop Business Performance
critical. Negative economic impacts like Measurement and Optimization
losses due to char^e-offs and fraud should
also be measured and considered. Additional Transactional Systems Data Analytical Systems
pertinent questions include: (Business Operations Focused) (Business Strategy Focused)
' Are we doing the right things? What is Transactional Data, Detail Oriented Aggregated Data
proposed for what business outcome,
and how do we know which initiatives
within the program contribute to the
achievement of business strategy?
' Are we doing them the right way? Closed-Loop
Information
Performance
What management and operational Actionable Insights
Measurement
practices have we put in place to max-
and Optimization
imize our chances of success? Have we Process
moved from intention to realization,
and is the information accessible to the
right people at the right time?
• Are we getting them done well? Are we
applying the defined practices in the (Decision Enabiers)
optimal way and monitoring them to Alerts, Business Intelligence
Recommendations, Applications
ensure that they remain effective?
Decision Automations Actionable Insights
• Are we getting the benefits? How will
(Intelligence Nuggets)
the benefits be delivered? What is the
value of the program? How do we
measure it? What factors influence suc- Intelligence

cess or failure?
Answers to these questions He in
monitoring business operations, learning
from past performance and then feeding
the learnings back into transactional sys-
tems, thus forming a closed-loop per-
formance measurement and optimization
process. Tbe output of BI applications
(actionable analytics) gets routed to busi-
ness users in the form of business alerts
and recommendations (such as product
pricing changes, marketing campaign
modifications or identification of fraiidu-
lent transactions) for identifying and
addressing specific business issues.
In order to do this, tbe BI system must
provide easy-to-use self-service intelligence
nuggets that enable rapid decision-making,
ideally leading to decision automation
through decision trees. There should also
be a methodology ¡either formal or infor-
mal) to help organizations assign respon-
sibilities to specific business users for
handling BI applications and to define
actions to be taken when the intelligence
nuggets identify business problems that
require urgent attention.
Accessibility to information and
exchange of information across the enter-
prise provide early insight to business
opportunities and disruptions, thus lead-
ing to business agility. Information archi-
tecture is a key component to achieving
business agility, and it must underpin
clear metrics measuring tbe impact of

Figure 3: Key Components of Enterprise BI Platform Linking to Business Drivers

Foundation for Business Intelligence

Data Data Business Business Drivers

Management Integration Intelligence
Operational
Business Excellence
Data Data
Modeling Warehousing Reporting
Corporate
Governance
Data Data Business
Ouality Migration Analytics
Customer
Intimacy

Data Content Business

Governance Management Modeling Product
Leaderstiip

Process your data

Understand and Measure and
to actionable Useaciionable
value your data improve your
informaiion Intormatiofi to...
business

22 December 2008 Review vmw.dmreview.com

 Figure 4: Business Agility Index for Banking
X 4
5b
Cross- Cross- I Enterprise-1
2 channel channel I wide SOX I
<u
credit risk new I compliance I
W)
s framework product
œ 1 rollout
Banking Processes
information to agility. How can organiza-
tions best evaluate information agility?
While there is no easy answer, this does
not mean that companies need to tall
back on gut-feel decision-making.
After selecting and applying meas-
urements meaningful to the organiza-
tion, the final decision may come down
to a single question. And that question
is not, "What Is the hest way to evalu-
ate the impact of BI initiatives?"
Rather, the question is, "What is the
best way for the organization to evalu-
ate whether a BI initiative can help
identify and move the organization
toward the goals more rapidly or with a
greater Hkelihood of success.^"
Measuring Information Agility and
the Intelligence Quotient
Business conditions are constantly
changing, and opportunities are emerg-
ing more rapidly than ever. In this
dynamic environment, information
agility provides a distinct edge,
enabling enterprises to:
' Determine how changing conditions
and competitive pressures affect their
hasic business strategies,
' Identify strategic refinements and
' Leverage technology to support and
drive new or adapted strategies.
Enterprises have accumulated huge
amounts of data about customer needs,
market trends, the competition, regula-
tory requirements and their own business
operations. The volume of data has been
growing 3t an accelerating pace. This
huge volume of data bas made business
analytics more important tban ever. A
major distinguisbing factor tbai separates
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AML I Basel II: I KYC:
detection I operational I complete-
across all I risk, I ness,
lines of accuracy
products
agile enterprises from their less successful
counterparts is tbe ability to leverage
the data they have amassed to make
informed decisions by delivering the
right information to the right people at
the right time. This requires:
' Delivering aggregate information on
key performance indicators (KPIs)
for decision-making purposes, con-
tinuous improvement and regulatory
compliance.
' Speeding the dissemination of infor-
mation regarding business decisions
throughout the enterprise and, when
necessary, beyond.
< Protecting this sensitive information
from unauthorized access and per-
sonalizing its delivery.
Companies have employed popular
ROI calculation principles to judge the
value delivered by BI initiatives as a gen-
eral rule. However, to measure the
impact of intelligence, one needs to dig
deep into the various dimensions of
information exchange, beyond the dollar
value calculated by traditional methods
of ROI.
In meeting these challenges and
requirements, information must have
certain quahty-based attributes, includ-
ing: authenticity, reliability, accuracy,
completeness, timeliness, security, avail-
ability, understandability, usability and
relevance. Only by having high quality
information to rely on can organizations
achieve intelligence in decision-making
throughout the enterprise.®
Soumendra Mohanty is senior manager with
Accenture Information Management Services
(AIMS). He may he reached at
soumendra.mohanty@accentHre.com.
Business
Drivers of BI
The importance of managing
information as an enabler
demands sharper focus as the
result of:
• The growing need by business
users for high quality, 24x7,
location-Independent informa-
tion that can be trusted.
• The challenges in responding
to the information and reporting
requirements of complex horizon-
tal initiatives spanning multiple
initiatives, business processes
and applications.
• The increasing need to
exchange information across the
enterprise as a shared service.
The information has to be rele-
vant, simple to understand and
accurate for business to use it
effectively.
• The increased attention to
management and regulatory-
compliance accountability as a
result of Sarbanes-Oxley (SOX),
fraud, capital adequacy, etc.
• The increased costs incurred
in coping Vifith large volumes of
unmanaged information (e.g.,
unstructured data).
• The recognition that the value
of information can accrue over
time, thus leading to new knowl-
edge creation.
• The challenge of managing the
loss of business knowledge and
corporate memory due to attri-
tion of knowledge workers.
• The need to be agile to
respond to competitive pres-
sures, which means the enter-
prise should be prepared with
high quality, complete, accurate
and relevant information in the
right format, in the right location
and at a time of need.
Review I December 2008 23