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Intelligent by design

The current spike in demand for business intelligence (BI) software being
driven by the need to comply with the more stringent reporting demands of
directives such as Basel II and Sarbanes-Oxley, is a common and, in many
instances, correct claim.

But an increasing number of finance directors are now turning to the
technology to provide competitive advantage and help grow their business, rather
than just aid with box ticking. The technology, when used properly, can help
companies plan and forecast far more accurately, which leads to better informed
business decisions.

However, FDs have learned valuable and often hard lessons from large-scale IT
projects that have routinely failed to live up to their expectations. This has
made them somewhat sceptical over claims for what, on the face of it, can sound
like just another buzzword. The fundamental question that FDs need to ask is
whether BI can offer their company a cost-effective way of improving access to
company information and in so doing improve competitiveness.

David Rowling, chief information officer at Punch Taverns, which rolled out a
BI system eight years ago when the company was founded, has no such scepticisms
and describes the technology as “one of the strategic strands” upon which the
business is operated. “We would say that business intelligence is fundamental to
the competitiveness of our business,” he says. “It is one of the strategic
strands where we invest. Business intelligence allows firms to fundamentally
understand the profile of their business and to understand the key drivers that
will make them successful, or otherwise, in the future.”

As a practical example of one of the simplest uses to which Punch puts its BI
systems, Rowling describes the process of buying a new pub. Before purchasing a
new site, the company needs to estimate its return on investment. Businesses
that make this assessment the quickest and the most accurately will be best
placed to bid the best price. If it is known that ROI will be at a certain
level, it is possible for Punch to bid higher than its competition to secure a
promising acquisition, or alternatively to only bid at a relatively low level
for a business that is expected to perform less strongly. In short, companies
that can share information and react in the timeliest manner to that information
are the ones that will be the most competitive and most likely to succeed.

Information sharing

Punch also strives to make information available to senior managers who can
promote and facilitate action. Rowling says that a decision is just the
beginning of a chain of events. He explains that BI is valuable not only for
helping single decisions to be made, but also to assist Punch’s managers to work
out what will be the ramifications of such decisions, so that they can go on to
develop a strategic action plan.

“It may be that you are looking at a sales promotion, so you start by looking
at your past history of promotions. You can make decisions about a future
promotion based on the success, or otherwise, of previous history. Or you could
decide to terminate a promotion based on this data. These are all examples of
information that help promote the right actions,” explains Rowling.

Moving up the acquisition scale from single pubs, Punch has relied heavily on
its business intelligence systems to help with a series of recent pub chain
acquisitions. For example, when it bought Pubmaster at the end of 2003 it knew
the company it was buying had a recognised strategy of not investing
substantially in its individual properties.

“We loaded the Pubmaster pubs onto our business intelligence system and
started to track their performance compared with our own. As we invested in each
of these properties we could track the improvement so we could show that our
acquisition was being beneficial,” says Rowling. “This means we could
demonstrate the upside of our acquisition and investment programme to our
backers and because of this, confidence is engendered in our investors, so we
can borrow more money next time to buy the next company. You can only do this if
you are tracking closely at pub level. Business intelligence solutions are very
good at rolling up this kind of information.”

He notes that business intelligence technology over recent years has become
more sophisticated and, as a result, more useful. An important trend is seeing
core BI applications being integrated into corporate intranets so that reports
can be communicated very quickly across a business.

Read it and weep

Whereas drivers for BI adoption on the operational side include getting
up-to-date information into the hands of managers, Crispin Read, chief marketing
officer of business performance management software company Cartesis, claims
that on the finance side, compliance is still a common driver for upgrading some
of the financial performance management applications such as consolidation,
management reporting and planning. He points out that, as the European accounts
modernisation directive (EAMD) comes into force in EU member states, corporate
financial guidance statements will need to be audited, so increasing demand for
BI systems further.

Graham Walter, vice president EMEA of business intelligence company Cognos,
agrees that recent moves by companies to meet the requirements of tighter
compliance regulations has helped spur adoption of BI. “There are a lot of
regulatory pressures. All of these are placing pressure on finance departments
to have greater transparency and confidence in the numbers they produce. These
requirements are driving the need for better reporting systems for finance
departments,” says Walter. However, compliance is only one half of the story.
It’s just as much about understanding the information a company already holds
better and, crucially, more quickly.

Adding complexity

Given the fact that all the information a BI system can provide already
resides within a company’s systems it can be argued that there is dubious value
in adding an extra layer of complexity to IT systems by deploying business
intelligence technology on top of a firm’s existing infrastructure.

Rowling dismisses such charges claiming that the technology is key to
improving performance. “The real value with business intelligence is speed.
Business Objects [which is the BI technology deployed by Punch] and comparable
products allow companies to write a report or find an answer in a matter of
minutes, compared with perhaps days to produce the same report from a more
technical system. It is a much more efficient way of getting information out of
the business,” he says.

In addition to speed considerations, BI allows companies to ask different
questions and pose different scenarios such as “what ifs?” Because these can be
done quickly, it’s possible to rapidly develop the scope of any report so that
it can be used to explore different scenarios and conclusions. Trying to get
this data without BI technology from an enterprise resource planning (ERP)
system, or by using more traditional methods would be next to impossible as the
process would simply take too long.

BI allows firms to ask broader questions with different dimensions depending
on what decisions are being assessed. In the case of Punch Taverns this means
that the technology allows the company to get a sales report for a single pub,
or for a specific region or, indeed, the entire country. The same type of
reports can be generated with multiple dimensions – for example, over the
company’s own infrastructure, or across the infrastructure of one of its
suppliers. Other useful dimensions by which reports can be segmented are by time
or geographic region.

One of the Punch Tavern’s corporate objectives is to understand the
environment in which it operates, the needs of its consumers and performance of
its suppliers in order for it to “take appropriate actions to grow the

Rowling argues that corporate knowledge is only useful in a business sense to
companies that intend to do something with it. He describes Punch’s philosophy
as trying to ensure that knowledge is available “at the point of decision”. In
line with this philosophy the company seeks to develop information systems that
can deliver knowledge to help senior managers make any decision, at any time and
relating to any geographical part of the business.

No need for ROI

Despite the easing of compliance pressures and the business and operational
benefits that adoption of BI systems provide, working out return on investment
estimates for the technology can still prove extremely problematic.

Rowling says that Punch Taverns did not make ROI studies before rolling out
its system: “We did not go in for a return on investment argument, which is why
I make the statement that business intelligence is a strategic fundamental
question. If you are to understand how your business is operating and want to be
able to change this performance rapidly, then you need to have the right
information. In terms of business agility you need to have this data. How do you
put a value on business agility? It is fundamental to your competitiveness.”

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