Tag Archives: Business Intelligence

Business analytics & the Innovator’s DNA

Creativity

Chris Barez-Brown, author of "How to have kick-ass ideas"

The other day, I wrote about how Business Analytics can help create innovative businesses. For some reason, the topic kept hovering in my mind and I pulled out an interesting six-year study conducted by INSEAD professor Hal Gregersen, Jeffrey Dyer of Brigham Young University and Clayton Christensen of Harvard. It is called ‘The Innovator’s DNA’. The authors of the study found that creative and innovative people tend to have five key characteristics. When looking at these characteristics, it seems that Business Analytics can indeed have a very positive impact on each one of these. Let’s take a look:

  • Associating: Creative people are able to connect seemingly unrelated pieces of information. Military camouflage, for example, stems from ideas created by Cubist artists. Business Analytics allows us to analyze data from various different angles. We can compare different aspects of our business, observe trends and create what-if scenarios. Analytics can therefore help us make new associations between different data sets.
  • Observing: Creative entrepreneurs tend to be keen observers. They have a high level of awareness. Business Analytics can help us raise our own level of awareness: we have the ability to stay closely connected with our business. We can observe trends in great detail. We can obtain information without too much difficulties. We find new trends.
  • Experimenting: No big surprise – innovators are good at experimenting. They try out different things. They fail, they succeed. Business Analytics allows us to try out different things. We can ask what-if questions? We can test assumptions. What would be the impact to costs, if I hired new managers in location A instead of location B? What if we shifted production from one plant to another?
  • Networking: Innovators seek interaction with diverse people to further their thinking. They try to discuss problems with different people outside their normal teams. Business Analytics allows us to connect with people across our organization. Using collaboration features we can share insights, seek input and observe what other people are thinking.
  • Questioning: This is a core skill. Creative minds ask lot’s of questions. They don’t just assume. They explore. Business Analytics helps us ask a lot of questions: How are we doing? Why is that so? What should we be doing? What if we increased our travel budget.

LET’S FOSTER CREATIVITY AND INNOVATION

Creative Powerhouse: Walt Disney

Don’t get me wrong. Business Analytics is not going to turn all of us into creative powerhouses. Although, it could and should….But if anything, it lowers the barrier towards creative thinking. The worst thing we can do today is to just sit there and work with the same type of information over and over again. It gets worse when people are afraid to look beyond the normal standardized paper reports. A classic case of tunnel vision frequently occurs.

INNOVATION IS THE DRIVER

There is a lot of opportunity in the markets today. Actually, much more opportunity than ever before. But global competition forces us to find new and better ways. But to stay competitive and to leverage these opportunities we all need to foster innovation and creativity.

If used right, Business Analytics will make a serious contribution towards success. Try pushing yourself and your users. Also, start considering the above mentioned points in our business case. We sometimes focus on the hard facts such as cost savings. But creativity and innovation can lead to something much bigger. Once again, think about the successful companies out there!

Related Posts:

How Business Analytics can drive creativity & innovation

Last weekend I was reviewing my recent photography portfolio. I noticed an interesting theme: my favorite photographs seemed to be clustered around certain months. There are a few months when my activity was low and the resulting photos were not that great. That raised an interesting question: Do we get more creative by being more active?

CREATIVITY IS FUELED BY INPUTS

Simply taking more photographs will probably not increase your creativity. But, there seems to be a clear connection between being curious and immersed in a certain field (e.g. photography). Indeed, several creative minds have confirmed this link.

The path towards creativity & innovation

In his excellent eBook “The Inspired Eye” Master photographer David duChemin says:

“Creative people are raw material gatherers, they hunger for ideas and go outside of the camp to find them. You must increase your inputs, the more ideas and influences you ingest, the more your creative being has to work with – the more Lego blocks your inner creative has to work with.”

In other words, the more we experience, the more interesting things we see, the more we try new things, the higher our creativity will most likely be. That explains why me taking more photographs, me being engaged in the process probably led to better results.

THE SECRET OF STEVE JOBS’ SUCCESS

How does this relate to business? Let’s look at Steve Jobs. Most of us admire Apple for for it’s enormous amount of creativity. In his book ‘The Innovation Secrets of Steve Jobs’, Carmine Gallo looks at several factors that are responsible for Apple’s tremendous success at delivering innovation. Turns out that Steve Jobs and his team are indeed fueling their brains with multiple experiences. They hire diverse people with different backgrounds. They study the designs of ‘boring’ products such as rice cookers, blenders, cars. Steve Jobs studied calligraphy during his student days which ultimately resulted in Apple’s huge focus on beautiful design. To back up how and why this results in higher creativity, Gallo quotes neuroscientist Gregory Berns:

“To see things differently than other people, the most effective solution is to bombard the brain with things it has never encountered before. Novelty releases the perceptual process from the shackles of past experiences and forces the brain to make new judgements.” 

BUSINESS ANALYTICS & CREATIVITY

If you think about it, Business Analytics is an ideal platform for driving creativity and innovation. The technology allows us to to effectively ‘bombard their brains with new things':

  • We are able to explore and to relate
  • We are able to slice and dice
  • We are able to drill-down
  • We are able to quickly identify and analyze trends
  • We can create what-if scenarios on the fly
  • We can probe, we can test

Business Analytics - the better approach

Do you see the connection? But not only that – Business Analytics software also lowers the barrier towards asking new & different questions. The ability to view data from different angles, to ability to associate new sets of data has the potential to create new insights. People are no longer afraid to analyze their business from a different perspective: they don’t have to wait and they don’t have to go through a complicated process to obtain the data.

In her excellent article “Data dive reveals and ocean of trends’, Lynn Greiner states:

“BI software gives you the ability to dive into data and find trends and relationships you may not have considered, or to find the cause of anomalies you’ve noticed.”

Keep this in mind!  Business Analytics can make a big contribution towards higher creativity. Just take a look at some of the really successful companies these days…chances are they are very analytical! What are your thoughts and experiences?

Related Posts:

Is data valueable?

“How can data be so valuable?” That is the provocative question a friend asked me a few days ago. We had a good discussion about life, work and other fun things. My friend is an artist, by the way. Not a business person. And that created a bit of a challenge: how do you best explain the value of data in layman’s terms? Well, I ended up telling him a story that happened to me a few days before.

THE FREQUENT TRAVELER

It had been a long week. Four cities in four countries in four days. It was right around 11pm when I got to the hotel. All I wanted to do was sleep and forget everything about that day. It had been a tough day. Endless meetings, missed flights. In other words: I felt like reaching for the reset button. But things changed. At the hotel, I was greeted by a friendly front desk manager. He commented on the fact that I must be pretty tired (obvious observation – it was 11pm). We had a quick chat, he wanted to know where I came from. And without me really noticing he mentioned that he really admired frequent travelers like myself (huh? How did he know). He continued: “We are thankful for people like you. It is because of you that we are in business.” “Wow“, he said. “You must be one of our top customers. The are very few people that check in here that have spent as many nights in our hotels as you have.” He then gave me a nice upgrade to a fantastic room with great views. How do you think that made me feel? Well, it made a big difference and that is why I am so loyal to this hotel chain. This wasn’t the first time this had happened to me.

THE DATA IMPACT

Even a simple number can tell a great story

You are probably wondering where the connection with data is? Very simple: the hotel chain obviously has the data about all my stays in their systems. A very simple number. Not some fancy set of variances or complex data. Just a simple double-digit number for any given year. A simple SELECT sum(NIGHTS) from CUSTOMERS; Nothing more. But this business encourages its employees to look up this number and to actively use it to make their customers feel appreciated and special. That’s what the front-desk manager did. And guess what: This simple number allows the hotel to communicate three important things:

– We do know how much time and money YOU spend here
– We appreciate YOUR business
– We care about YOU

DATA IS THE NEW OIL

If a simple double-digit number can empower an employee to make a difference, think about the potential that lies in your ocean of data. What could you do with a few simple numbers to turn your customers and business partners into true fans? I believe we have a huge opportunity on our hands. As we continue to collect more and more valuable data we need to get started and continue to refine this data into real insights. And we have only scratched the surface so far. Why don’t you take a few minutes today to think about a single thing you could do with your data? Are there unexplored opportunities? What could you do today to make a difference?

Related Posts:

Waterfall charts, pareto analysis and beyond

Waterfall Charts?

Do you like pies? I do! But not for analyzing data. Pie charts are just too busy and too hard to read in most situations. Yet they are the frequent tool of choice for visualizing the composition of a certain variable. Take a look at this example: I want to find out how total revenue is split between different product categories. The easy choice would be to create the following chart:

A product pie - created with IBM Many Eyes

Personally, I don’t like this! You constantly jump around the different pieces and it is really tough to obtain the overview that we are looking for. Pie charts work for few variables that account for larger pie slices. Another and better option is to use a bar chart. To make it easy for the viewer, I ranked the values in IBM Cognos 10:

Ranked bar chart - much better!

Isn’t this much better? You can quickly identify the best performing products. It is easy to read the individual contribution of each product. But I am not able to see my total revenue amount. Good news – there are different ways to perform this type of part-to-whole analysis

CHASING WATERFALLS

Waterfall charts (sometimes called Progressive Charts) allow us to visualize the composition of the a value along different segments. In plain English: Total revenue can be visualized as a build up of the different individual values of the products. Take a look at the example below. The values are once again ranked:

Waterfall Chart

A classic waterfall chart: Total revenue across products

Notice how quickly you can see the segment revenue along with the total revenue of roughly 540 million. I personally like the clean and uncluttered look. Reading the individual values is a bit harder than in the traditional bar chart. But IBM Cognos 10 allows me to hover over each segment to obtain the actual value. It’s personal taste which chart is more effective. Here you can see both versions side-by-side.

Which chart is your favorite?

Waterfall charts are great for any kind of part-to-whole analysis: revenue/ margin across products, customers, channels.  Composition of Profit across the P&L, etc.. There are a few interesting examples on Wikipedia.

THE PARETO CHART

There is yet another great option for displaying this type of data: Pareto Charts. They are are named after the Vilfredo Pareto who proposed the 80/20 principle. This chart simply enriches the bar chart we saw earlier with a cumulative percentage line. Take a look:

Pareto Chart

The Pareto chart: The cumulative percentage line adds further context

This graph allows us to quickly answer questions such as: Which products create 80% of my total revenue? (roughly everything up to Alpha Bronze). In other words: the pareto chart allows me to identify the most important items.  IBM Cognos 10 allows different customization options which I would highly recommend looking at. Hiding one of the axis is not a bad idea, for example. The use of colors could be helpful here to identify the main product categories:

Colors allow the user to identify the main product categories

Waterfall Chart vs Pareto Graph?

Seems like a lot of options, right? Which one is the best? Can’t say. It really depends on the situation. I like all of them. There are slight differences and it depends on the user. Waterfall charts are probably better suited for executive dashboards. Pareto charts are more likely useful for analytical purposes. And the classic bar chart is always is a winner. Try to add these charts to your tool-box! And drop those pies.

Related Posts:

Scatter charts – Good for relationships

SCATTER CHARTS – THE BASIC IDEA

One of the interesting and really fun things to watch is young kids learning about cause and effect. They pull on a string and music starts playing. They giggle. They push a car and the car begins to roll. And so we learn to be curious at an early age and we learn to look for cause and effect relationships. And this an especially useful skill to have in business. The discovery of relationships can help us make better decisions: what happens to our revenue, if we increase marketing spending, what happens to our customer inquiries if we lowered the price of our top product? Answers to these questions can provide valuable insights.

WHAT IS THE RELATIONSHIP?

How can we go about testing and identifying these relationships? One option would be to combine two data sets in a chart. Let’s say we wanted to analyze the relationship between our price and customer inquiries. How do customers react to a price increase or decrease? We could create a combination chart for our products which outlines the price (red line) and the inquiries (green bars):

Product Alpha - Is there a correlation between price & inquiries?

The product Charger - higher correlation?

When you look at these charts it seems that there is a loose relationship between price and inquiries for Alpha but a stronger relationship for the Charger product. But it is hard to really tell. Especially for Alpha. Overall, this chart is not all that useful. We need more information.

SCATTER CHARTS

This is where scatter charts come in handy – they allow us to quickly analyze the relationship between two numeric variables. We basically take a regular Cartesian 2D coordinate system with our two numeric variables plotted on each axis. The general norm is to plot the independent variable (in this example the price) on the horizontal axis and the dependent variable on the vertical axis (customer inquiries). Here is a simple example that I created with IBM Many Eyes:

Scatter charts

Marketing Spending and Revenue

The dots represent the values for individual marketing campaigns. We mark the amount of  spending on the x-axis and the resulting revenue from the campaign on the y-axis. We can easily tell that there is a relationship between marketing spending and revenue – we could almost draw a line between the dots. There is just one outlier on the bottom of the right-hand side.  By the way, it is really easy to create these charts with IBM’s Many Eyes tool. Check it out when you get a chance!

PRICE AND INQUIRIES

Back to the initial problem. Let’s see how price sensitive Alpha and Charger are. Let’s take a look at the resulting scatter plots. We have created these charts in Cognos 10 using the same data set. We have also included a trend line to make it easier to see a potential correlation:

Scatter charts in Cognos 10

Same data in a scatter chart. This makes more sense

Both of these graphs now tell a clear story: Alpha’s dots are literally scattered throughout the chart. There are plenty of outliers. This shows that there is just a weak correlation between price & inquiries. The picture is different for charger: The dots are more clustered and we can draw a good line, i.e. the correlation is pretty high.

SO WHAT?

Scatter charts are pretty simple to create and they do tell a good story if used for the right purpose. They are also ideal for large data volumes. However, they do ignore time. The combination charts I showed above would do a better job at that. But if we want to focus solely on the relationship, the scatter plots are better suited. Even though scatter plots are relatively easy to read, I would not recommend using them in an executive dashboard. You definitely need to know how to use them. They are probably better suited for analytical people. Also, keep in mind that while these charts help identify relationships pretty well there might still be other influence factors. But that is really common sense. So, next time you want to explore your data in a different way try scatter charts!

 

Related Posts:

Three lessons from the Flip story

Did you read the news the other day? Cisco is shutting down it’s Flip business unit.  I was a bit stunned. They had just bought them for around 590 million USD two years ago. The first Flip hit the markets less than four years ago (2007). And it was (and still is!) a huge success. In his book ‘The Innovation Secrets of Steve Jobs‘, Carmine Gallo states:

“The Flip changed everything. From 2008 to 2009, the video camcorder market grew by 35 percent. Flip products represented 90 percent of the growth.”

What is going on and what can we learn from this story?

THE FLIP

Simple enough! The Flip

In case you don’t know the Flip: it is the simplest camcorder available in the market. Its inventors took a highly complex product (that was probably collecting dust in the camera bags of millions of people) and made it super simple and easy to use. The Flip only has a few simple buttons and even a kid can learn how to use it in under a minute. The quality of the recordings is excellent for most situations. This simplicity lowered the barrier to shoot high quality video and people starting buying and actually using the Flip everywhere.  The Flip has been ranked as one of the bestselling items on Amazon for a long time. I am personally sad to see Cisco shut down this business. But I believe that there are three lessons we can all learn.

EMBRACE SPEED

This story is an excellent reminder of how quickly things can change these days. Product lifecycles are getting shorter and shorter. It supposedly took the radio over 38 years to reach 50 million users. The iPod did that in just about three years. A different camcorder I bought just four years ago now has a market value of roughly 5 Euros on eBay. Businesses need to embrace this speed. They need to be prepared to deal with this. Complacency is no longer viable. What worked yesterday doesn’t have to work tomorrow.

STAYING ALERT AND AGILE

Smart phones & tablets push out the Flip?

The other lesson of the Flip is that all businesses need to stay on their toes. Competition for products and services can come from completely unexpected areas other than our traditional competitors. The Flip for example was not threatened by the traditional camera manufacturers like Canon or Panasonic. No, the biggest competitor is/ was the smart phone. Why bother with a Flip if you can use your iPhone to record decent video? And the smart phones threaten some other product categories as well. Just like Cisco, the traditional GPS producers have been trying to figure out how to compete in this new smart phone world. Traditional media like TV stations and newspapers are now facing severe competition from Twitter, blogs etc.. In other words, we all need to stay agile and aware. We also need to encourage our organizations to keep innovating. If we stop doing that we will most likely loose out. If you look at some of the successful businesses these days, you will find that most of these are known for its agility and innovation: Apple, Gore, Google to just name a few.

DECISION MAKING

April 19th, 2011 - The Flip is still popular on Amazon.com

But the biggest lesson for me here is that all companies need to get better at decision making. It is easy to believe that the smart phones have pushed the Flip out. But as of today (April 19th, 2011) the Flip is still one of the top-selling products today. No, there must be more to it. The reason for Cisco’s decision is probably caused by either a wrong decision they made two years ago or by a sound forward-looking decision they made last week. Many people were surprised when Cisco announced the acquisition of Flip. It just didn’t seem to fit into their portfolio and the smart phone market with integrated video was just taking off. This raises the question whether Cisco really went through the proper decision cycle including a thorough market analysis and also proper scenarios techniques. But another way to look at this is that Cisco might be really good at making decisions: the Flip is still selling well but the outlook of small camcorders being replaced by better smart phones is on the wall. Either way, given today’s rate of change it is ever more critical for all businesses to have situational awareness (how are we doing and why?) and to have the ability to think and plan ahead. Business Analytics help us make those critical business decisions.

RIP FLIP

Too bad about the Flip. I love it and still use it frequently despite my iPhone. Lessons learned here: Embrace the speed; stay agile & creative. But most importantly: let’s get better at making sound business decisions. Cisco spent 590M USD on this specific decision. Too bad!

 

Related Posts:

Vienna calling!

Harald Hornacek

A famous host: Harald Hornacek

Greetings from Vienna: home of the schnitzel, yummy dumplings and lot’s of amazing history. But Vienna is also the hub of many successful companies. Today is the third European IBM Finance Forum 2011. We have had a great day so far. Lot’s of attendees from the Finance & IT departments of different Austrian businesses and government agencies. The agenda here is once again packed with Finance content. And as in all the other locations, we also have some great speakers. The event in Vienna is hosted by Harald Hornacek, chief editor of the popular business magazine Succeed. The magazine is distributed by Austrian Airlines and flyers love it for its fresh and meaningful content. Harald is quite famous in the Austrian and European business community for exactly that reason. The attendees have a great time listening to his insightful comments and questions. But let me back up for a quick second. There was another Finance Forum in Zurich last week.

HIGHLIGHTS IN ZURICH

The Dolder Hotel, Zurich

The Finance Forum Switzerland was held at the famous and gorgeous Dolder Grand hotel. It is situated high above the city with breathtaking views left and right. Steve Morlidge, the author of ‘Future Ready‘ delivered a refreshing keynote about best practices in forecasting. He will be speaking at many different Finance Forums across Europe this year. We also had a customer speaker from a 500 year-old company (can you believe that?): Mr.Binzegger from Orell-Fuesseli talked about their innovative use of SPSS software to develop highly accurate credit ratings for companies. We also heard Mr Wirth from Nycomed talk about how to build an effective reporting and information strategy in a global environment. The Dolder Hotel staff also served up some amazing food and coffees during the break. Great event.

VIENNA CALLING

Back to the event here in Vienna. It’s been a bit of a mad rush for me in the background. I left home on Sunday morning to run two Rolling Forecast workshops with close to 40 CFOs from different companies in the Middle East on Monday and Tuesday. Wednesday morning we found out that one of our customer speakers in Vienna ended up calling in sick and I jumped in with a different presentation last minute. We are about to start a panel discussion between different customers and experts.

NEXT STOP BUCHAREST

Hopefully you will get the opportunity to join one of the IBM Finance Forum events in the next few months. As you can see, we always have great speakers, great content and also lot’s of valuable discussions. Knowledge exchange and networking is a critical part of this. My next event is scheduled for May 4th in Bucharest. To see more photos from all the different events click HERE. See you soon!

20110414-015537.jpg

Vienna: Vista 3 - The location fro Finance Forum

20110414-015607.jpg

Finance Forum: Many great discussions

20110414-015715.jpg

Collaborative BI: A real-life scenario

Related Posts:

What cartoons can teach us about information delivery

A picture says more than a thousand words, right? Managers drown in pages of numeric reports. But as John Medina, author of the famous book ‘Brain Rules’ clearly pointed out: “Vision trumps all other senses“. In other words: we are much better at absorbing information through visuals than we are at reading numbers and letters.

To see how effective visuals can be at delivering complex information we just have to look at something that we are all surrounded by: Cartoons. They are in newspapers, they are on websites, they show up on twitter. Cartoons are drawings. A single picture that tells a humorous or critical story. Once you look at them carefully you will notice how deep and smart they can be: They tell a thoughtful joke or story in a single picture.

Talk about the power of visualization! Remember the scandal about the Danish cartoonist a few years ago? A single picture set a huge scandal in motion. To convey the same message, a writer would have to fill a lot of pages. And those pages wouldn’t be all that powerful.

To learn more about cartoons I ended up watching this short Ted presentation by Patrick Chappatte. It is quite entertaining and it highlights the power of visualization. We should all strive to learn something from this. Shouldn’t we all use more visuals in our daily lives? Should we toss those endless 2-dimensional reports and replace them with good, solid visuals that tell a clear story? You know my answer.

 

Related Posts:

Why bubble charts are cool

Things can be complex. Especially when we look at multi-dimensional data-sets. The objective of charts is to visualize data in the most effective and easy way. You shouldn’t need a PH.D. degree to decipher a complex chart. But it happens. There are a lot of complicated and useless charts out in dashboards. And it happens more often than we think. For example: Once we reach more than 2 dimensions, many people reach out for 3D charts. Let’s say we want to analyze market size, market share & margin. Many people are tempted to simply create a 3D bar-chart like the one below:

Chart 1 - Is this useful?

There are a lot of obvious problems with these type of charts: The dimension have different scales and it is therefore impossible to decipher. And let’s be honest – this looks super ugly. I could not, would not make a decision based on this chart. The other option is to break this out into multiple charts. But that requires a lot of space – and space is tight in a good dashboard. Analyzing numbers would also be more difficult in that setup as we have to shift our view from one chart to the next.

THE CASE FOR BUBBLE CHARTS

There is a better way to display this type of data. My boys loves this chart type: Bubble charts (all kids love bubbles!). Bubble charts allow us to visualize three different measures at the same time. And not only that: they are easy to read and they allow us to make critical associations between these measures. Let’s have a look at an example: This is a classic bubble chart that displays three different measures: Late shipments, damaged shipments and shipping cost for different carriers. The first two measures are obvious – they are represented by the x and y axis. The shipping costs, however, are visualized via the size of the bubble.

Bubble Charts

Chart 2 - A classic bubble chart

Notice how easy it is to read this chart (which vendor has the best performance?). Depending on the problem that I am trying to solve, I could simple look at the top right area to find the black sheep that are super later and also careless. Or, I could first focus on the size of business that we do with each carrier by picking out the large bubbles. Pretty simple. Also notice how this chart allows me to combine three measures with different types scales: percentages and absolute values. The traditional 3D bar chart was useless.

THERE IS MORE

In Cognos 10, we can also turn any bubble chart into a quadrant chart. This is useful if you want to categorize your data a little further by using a common layout like it is used in a SWOT or market attractiveness analysis. Take a look at the bubble chart that we created using the data from the first Excel 3D example:

A classic bubble chart

Chart 3 - A quadrant bubble chart

This puts the data into further context and makes it really easy for managers to spot specific key points. For example, the attractive markets (high margin & high market share) are up in the right upper corner.

Cognos 10 also allows you to hover over each bubble and you will get the numeric details behind each bubble. This makes it really easy to explore the data.

Chart 4 - Use your mouse to explore

THE LIMITATIONS

As nice as the bubble charts are, they are certainly not perfect. Take a look at Chart 3 above and focus on the intersection of 11.5% Net Margin & 2% Market Share. There is a bigger bubble covering a smaller one. That can easily happen. A superficial glance over the chart can therefore be problematic because we would not notice this. Careful color choice could potentially help uncover these cases. This probably also highlights that bubble charts might not be an ideal solution for large data sets as there would be too many overlaps. But nothing is perfect, right?

cognos slider

A slider - easy to use

Also, keep in mind that bubble charts in their pure and simple form only provide a snap-shot in time. Time-series analysis has to be done in a different manner. But the good news is that Cognos 10 offers us sliders. We can use these sliders to walk through history and easily discover changes in the data.

LAST BUT NOT LEAST

One person who has really popularized the bubble charts is scientist Hans Rosling. He literally makes data fly. If you haven’t done so, make sure to watch one of his famous TED presentations.

Take a look at bubble charts! Consider them for your next project. They are easy to understand and they allow us to make critical associations. Chances are managers who have attended business school will certainly like them.  A friend of mine always says that managers are like kids. And kids like bubbles, right?

[twitter-follow screen_name='cpapenfuss']

Related Posts:

The great productivity leap?

THE GREAT STAGNATION

Last Wednesday evening while waiting for a connecting flight at Vienna airport, I came across an interesting eBook by Tyler Cowen: ‘The great stagnation. Thanks to the iPad, I ended up reading the entire short book on the flight back home. To keep things short, Tyler Cowen looks at some of the reasons why the US economy is in a slump. One of the key points of the book is that the US (along with the majority of the Western world) have hit a technological plateau that results in slower growth, slower increases in median income and also slower productivity gains. While some of the earlier innovations such as the steam engine, refrigerators, air travel or TV had a huge impact on our overall quality of life and also our productivity, many of our recent innovations like the internet have had less of on impact (compare having or not having a fridge with having access or not having access to the Internet, or look at the options that air travel opened up for international trade).

PRODUCTIVITY

This blog post is not intended to be a book review, although I do highly recommend this quick and insightful read. But there is an interesting aspect that Cowen mentions: productivity gains are slowing down. We have already grabbed the ‘low-hanging fruit’ by exploiting machinery for example. This got me thinking: What about all the great technology that we have implemented in the past 20 years? Could it really be that we are not experiencing substantial productivity gains by using this technology in a smart way? The statistics apparently say no (Cowen points out that the productivity surge in the US from 2009-2010 was mostly driven by a substantial reduction in headcount). And what about Business Analytics? Shouldn’t that help us be more productive and to drive profitability?

ARE WE REALLY PRODUCTIVE?

To answer that question let’s take a look at a very simple example: the office of finance. A few weeks ago, I posted the results from a survey we conducted. It showed that many professionals still conduct their work by copying and pasting data into spreadsheets. And that type of activity is error-prone and takes a lot of time. As a matter of fact, many finance professionals still spend a solid part of their week loading, scrubbing & massaging data. And the resulting reports often leave a lot to be desired. They are static and not interactive. The result? A bunch of highly qualified and highly paid individuals do work that they shouldn’t be doing. Wikipedia defines labor productivity as “amount of goods and services that a worker produces in a given amount of time”. Spreadsheet maintenance hardly qualifies as a service or good, wouldn’t you say? In other words: whether we like it or not, many of us have a very low level of productivity.

BUSINESS ANALYTICS AND PRODUCTIVITY

Business Analytics has a huge potential to help us increase productivity. And I would argue that there is plenty of ‘low-hanging’ fruit. Think about a story that happened to me a short while ago: A CFO decided to implement a dashboard of about 50-60 KPIs (let’s not start arguing about that part…). His team was excited and started building a 65 page Powerpoint master template. The CFO was delighted. Guess what – three people spent almost two weeks per month on preparing this dashboard. Lot’s of time was wasted on extracting data from different source systems. Lot’s of time was wasted on creating Excel lookups, queries and charts. To sum it up: A big waste of time. The low hanging-fruit came in the form of a traditional BI platform. We hooked up the source systems, created the reports once, linked different charts to Powerpoint and voila: the monthly reporting book. It took one person about a day per month to check & refresh the data (there was still some manual labor involved). Consider the difference: three people for 10 days vs 1 person for 1 day. 30 man days vs 1 man day. Not bad?

THE BEGINNING

Based on my own experiences, I would argue that we have a huge opportunity on hand. Many companies have started Business Analytics projects but a lot projects are still highly focused and not pervasive. Once we start pushing capabilities out to a broader audience, we should be able to see significant increases in productivity. And this is not only about driving efficiency. This is also about driving effectiveness: just imagine what we could do, if we had the ability to understand our customers better. Just imagine what we could do, if we clearly understood which products are truly profitable. Business Intelligence allowed us to get to a lot of this valuable information. But I believe that we have only scratched the surface. The addition of predictive analytics to the mix offers completely new opportunities for all of us. I frequently work with some clients that have done some amazing stuff with the software. And their overall corporate performance is very impressive. I highly recommend reading the IBM CFO study which provides some great examples and insights about this topic. We just have to get started! What are you thoughts?

Related Posts: