Caught In The Middle? Harness The Power Of Business Intelligence
Published by MBA Skool Team, Published on July 21, 2012
Business leaders around the globe are driven by a single most important factor – continuous growth for their organizations. The various strategies adopted by companies seek to increase revenue, decrease costs, increase customers, streamline processes, fight competition or diversify. However if you observe closely all the strategies address a single point – growth.
But what if an organization is caught in the middle? What if the organization does not know where to go next? What if the organization has reached where it had to or at least thinks that way? What if survival is more important than the processes? What if the management fails to take the most appropriate decision? While many organizations would have faced or are facing such questions, in this article we would typically look at the Small and Medium Enterprises in India, many of which yet to go the “tech-way”. We will look at what Business Intelligence (BI) means for them and how can they harness the power of BI for their business growth.
To start with let me briefly give to you an idea of the SME sector in India. According to Small & Medium Business Development Chamber of India and CII, in the Indian economy, SMEs contribute to 45% of industrial output, 40% of exports, 42 million in employment, creates one million jobs every year and about 8000 quality products for both the Indian as well as international markets. These facts not only underline the importance of SME sector in the Indian economy but also give an indication that the SME sector is quite a large and it becomes imperative to protect this sector.
In this respect we need to take a look at some of the issues that this industry faces on a daily basis. Increasing raw material prices, fluctuations in dollar prices, limited customers, everyday competition from large organizations, operational issues, lack of technology and expensive financing from banks are just some areas which heavily decrease the profit margins for these organization and stunt their growth. It is here that the power of business intelligence might prove to be a saviour. Let me elaborate.
The world today is driven by information technology. From buying an article for daily use to life saving drugs, information technology is omnipresent. If you look at the successful companies around the globe, technology has played an important part in their growth story. However, these technologies were considered to be quite expensive and knowledge intensive sometime back. But today, even if one may not realize it, information technology has touched life in every sphere. So, will just information technology implementation alone help a business to survive and grow? The answer probably is no. Information technology is just an important aspect of running a business successfully and for SMEs in India it is still in quite a nascent stage with just 12% (source: pluggd.in) of the them using it for their business needs. What really matters is making right and insightful business decisions.
A business leader for a SME organization is faced with a multitude of questions on a daily basis. Faced with skilled resource crunch, he does not have the luxury of a team of experts to help him take strategic business decisions. He must invariably rely on his own instincts and business acumen to make the right decisions at the right time. It is here that the technology of business intelligence comes into the picture. According to pluggd.in, around 90% of the SME who use Information technology use it just for document processing. One major reason for this is budget and infrastructure limitations. However, today the situation is changing rapidly and the global IT service providers have realized the immense business potential that this sector presents to them, resulting in cost-effective, efficient and innovative solutions aimed at helping SME businesses to grow. Business Intelligence is one such solution.
Business Intelligence if explained in simple terms would mean providing data in a timely fashion and also analyzing the data in order to provide the key performance indicators for the success of a business. The key requirement in order to make any business decision is information. The information can vary from the internal operational aspects of the business, to competitor analysis to supplier analysis to sales performance to a combination of all these. On most occasions, information technology might be used; however most information remain trapped in the systems used.
To most business decision makers in the SME sector, this critical information is not presented properly if not presented at all. The existing information could have helped a decision maker to take informed decisions and strategize better. Rather, lack of information analysis leads to missed opportunities, inability to analyze things, losing out the competitive streak or slowly reaching a stagnant growth. What really is required by business managers and professionals is access to relevant information at the right time with the right kind of analysis to gain real business value from them thereby leading to a high Return-On-Investment. This is exactly what Business Intelligence provides.
Business intelligence solution normally involves the implementation of computer software which fetches data and makes access, analysis and sharing intelligence easier. It represents information in a smart and user friendly manner which generally comprise scorecards, analytics, data mining, dashboards, reports which are interactive and have drill down features etc. IT solution providers who used to deliver such tools were out of the financial reach for most of the SMEs sometime back. But today, with a great degree of IT innovation and the lucrative potential of technology in the SME sector, there are competitively priced alternatives which have made comprehensive business intelligence solutions affordable for the SME sector.
Business Intelligence can now be delivered either online, or through software as a service platform of even through the traditional licensing system. For SMEs which have some kind of ERP package already implemented, this solution can be seamlessly integrated with their existing system thereby lowering costs even further. Not only are there mid-tier software companies providing cost effective business intelligent solutions but even the bigger players like IBM and SAP have now devised solutions catering to the SME sector in India. SAP’s Business One solution is just one example which is delivered to the customers through their numerous regional partners.
The question is, would it make sense to invest in a business intelligence solution for a SME? Why not just use the available tools like excel to do a what-if-analysis, pivot table, graphs, charts etc.? Among other reasons, one is that this traditional approach uses numerous formulae and references that one makes while working on excels. Also, there is always the chance of committing a mistake and that mistake having a cascading effect on all the analysis.
But most importantly, the spreadsheets are person-specific. What if the person building and maintaining these spreadsheets leaves the organization? This poses the risk of dependency on an individual and also effort and time someone else has to invest in order to unravel the existing logic. For key business analysis and decision, there is need for a solution which is robust, reliable, maintainable and nowadays – affordable. Business intelligence solution would help an organization to accurately define its critical success factors. Generally, entrepreneurs carry expertise in one specific domain. They may be oblivious to the in-depth and holistic business performance.
Balance sheets, profit and loss statements or even the financial ratio analysis may not be able to convey the whole picture for devising strong strategic plans for the organization. A business leader of a SME would be more interested in knowing who are his best customers, which products offer him a larger profit margin, which products should he manufacture when and in what capacity, what pricing strategy should he use to kill competition, how is the sales commission and operational costs affecting his bottom line, where is money wasted, which regions are doing well, what more products can he sell etc.
The answers to these questions already lie with the entrepreneur, but it is rather in a convoluted state. It needs an expert in business intelligence to study the current systems, draw out information from him, his employees, his competitors and other various macro-economic factors and design a blue-print before implementing the business intelligence software. Implementation of any business intelligence software is the easiest part after the upfront work on requirement gathering and tool selection.
For SMEs in India who already use Information systems, business intelligence should be their next strategic step. For those who don’t, they must sit down and study the benefits of investing in such a system. While BI will help a SME side-step the “Caught In the Middle “ fall, however, a successful BI solution has some ground rules. Aligning business and information systems, starting small but thinking big, time frame, ease of use, flexibility and adaptability and reduction of total ownership costs of implementing this solution are some key indicators that a SME must analyze before powering its business with “Business Intelligence”.
This article has been authored by Sandeep Kumar Ram from XIMB.
Views expressed in the article are personal. The articles are for educational & academic purpose only, and have been uploaded by the MBA Skool Team.
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