Business Analytics for Managers. Thorlund Jesper
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an IT technical perspective – that just means seeing the organization as nothing but a system technical landscape, where another layer of costs is added. It is essential to look at the organization as a large number of processes. For instance, the primary process in a manufacturing company will typically consist of purchasing raw materials and semimanufactured products from suppliers, manufacturing the products, storing them, and selling them on. In relation to this primary process there are a large number of secondary processes, such as repairing machinery, cleaning, employing and training staff, and so on.
Therefore, when working with BA, it is essential to be able to identify which business processes to support via the information system, as well as to identify how added value is achieved. Finally, it's important to see the company as an accumulation of competencies and train staff, some of whom undertake the technical solution, and others who bridge the technical and the business‐driven side of the organization focusing on business processes. Added value can be achieved in two ways: by an improved deployment of the input resources of the existing process, which means that efficiency increases, or by giving the users of the process added value, which means that what comes out of the process will have increased user or customer satisfaction. We'll discuss this in more detail in Chapter 3.
In other words, successful deployment of BA requires a certain level of abstraction. This is because it's necessary to be able to see the organization as a system technical landscape, an accumulation of competencies, and a number of processes – and, finally, to be able to integrate these three perspectives into each other. To make it more difficult, the information systems must be implemented into an organization that perceives itself as a number of departments with different tasks and decision competencies, and that occasionally does not even perceive information systems as being members of the same value chain.
We have written this guide to BA in order to provide:
• A guide to fuel what we refer to as the analytical age, which, as the title of the book indicates, is to take business intelligence (BI) beyond reporting. In this book, we will introduce terms like lead information, which is the innovative decision support needed in order to revolutionize the processes landscape – typically done via BA. This should be seen as opposed to traditional BI producing lag information in the form of reports that help users to monitor, maintain, and make evolutionary improvements of their processes. These two types of decision support should be seen as supporting sets of information. However, as shown in Exhibit I.1, the value from a business perspective is different. We can compete on lead information, where lag information to a larger extent is maintaining and optimizing already existing processes.
• The ability to make an information strategy, which basically is a plan of what the BA department should focus on according to company strategy. After you have read this book, you should have a framework that allows you to make a link between your overall organizational strategy and which specific data you should source in your data warehouse. You need this framework not just for standard reporting, but also to support your company's ability to innovate in the future by using analytics in Chapter 8.
• An understanding of BA as a holistic information discipline with links to a business's strategy, source data from the operational systems, as well as the entire value chain in between – not just IT. BA is a combination of IT, human competencies, and organizational processes.
• An understanding of the ever‐increasing role of BA, a role that today is aimed at optimizing at a business process level but that, we believe, in the near future will be aimed at optimizing individual human behavior, as discussed in Chapter 9.
• A reference work containing the most frequently used BA concepts, definitions, and terminology. We have developed a BA model that gives a helicopter perspective and that provides the company's employees with one common frame of reference for objectives and means – and that clarifies the individual contributor's role and the interaction in the process. Our BA model constitutes the analytical framework, which is the pivot of the subsequent chapters. The model focuses on BA as an interaction of IT, strategy, business processes, a broad spectrum of human competencies, organizational circumstances, and cooperation across the organization.
Exhibit I.1 The Stairway Chart: Emphasizing the Difference between Lead and Lag Information
The book is relevant for all businesses that want to define information strategies or fine‐tune existing programs with a view to maximizing their effect. It's written for anyone working with the implementation of information systems – that is, project managers, analysts, report developers, strategists or CIOs, CEOs, CFOs, CxOs, IT professionals, social media specialists, and database specialists. But we should add that the book is of relevance to anyone working operationally with these information systems, since it will highlight the role of these systems in terms of the overall strategy of the company. Thus, the book is also for everyone in business‐focused functions in sales, marketing, finance, management, production, and human resources who works at a strategic level.
If, for instance, you are working with customer relationship management (CRM) and wish to focus systematically on customer retention via churn analyses, you need the involvement of product managers, who, based on the customer profiles to be retained, must develop retention products. Customer service functions such as call centers need to be integrated in the information flow, too, when handling campaign response. The communication department that designs the dialog with the target groups about their needs via text – and basically any creative universe – needs to be working systematically with the given customer profiles. In addition, there's a data warehouse that must be able to present and store relevant information about customers over time, as well as customer information that continuously must be adapted based on a mix of customer behavior and company strategy. Even though we often look at our organization through an organization chart, where some people work in marketing and others in procurement and production, it makes more sense to see the organization as a large number of processes that, across the different departments, create value chains to satisfy the organization's customers and their needs.
One example of a traditional value chain could be procurement of raw material, manufacturing, sales, delivery, and follow‐up services. The mere fact that someone is part of this value chain means that he or she is measured at some point. We may not be calling it BA, but instead performance targets, budgets, or key performance indicators (KPIs). Regardless of name, these are measuring instruments established to inform management functions about whether the established processes are achieving the organization's various targets.
BA is relevant in both large and small businesses. As shown in the BA model in Chapter 1, it doesn't say anywhere that a company must be a large financial institution with hundreds of data warehouse tables placed on large and expensive mainframes to deploy BA. Small and medium companies are known to carry out excellent BA, using the most popular BA tool in the world: spreadsheets (as do large companies).
We have endeavored to make this technically complex discipline more easily accessible and digestible to a broader group of readers. Students at business schools with a couple of years' work experience should therefore be able to obtain maximum benefit from the book, too.
The book is structured in a way that shows the role of BA in the individual parts of this process and explains the relationship between these parts. You may read the chapters out of order, depending on the area that is of particular relevance to you. The intention of the book is to describe BA coherently and comprehensively while at the same time offering each chapter as a work of reference.
Compared to other publications on the subject, this book is less about describing the individual small subelements of BA, and more about demonstrating the link between