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Mon, Jan 12, 2009 16:20 EST

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Posted by: Thomas Wailgum in News Topic: ApplicationsBlog: Enterprise Software Unplugged
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The gut. That amazing piece of the human body's digestive system has influenced personal and business decision-making for centuries.
And apparently, the gut is still alive and well as a business tool inside today's corporate environments—even with the server farms' worth of enterprisewide business intelligence (BI), CRM, ERP and supply chain data that companies have amassed over the years.
According to recent research from Accenture, nearly half (40 percent) of major corporate decisions are based on the good 'ole gut. Accenture surveyed more than 250 executives in July 2008 about their companies' use of and investment in business analytics to remain competitive.
So why is the gut still so in vogue? Of those respondents who said their companies still make decisions based on judgment rather than business analytics, 61 percent said it was because good data was not available, and just over half (55 percent) said their decisions relied on qualitative and subjective factors. Other reasons related to workforce challenges: 23 percent of respondents said "insufficient quantitative skills in employees" were a main impediment at their company, and 36 percent said their company "faces a shortage of analytical talent."
That 61 percent of respondents said "no good data was available on which to make decisions" is striking, given the terabytes of internal and customer-related data available at most organizations today. It's also, of course, indicative of the sad state of data management inside organizations. In the Accenture survey, 39 percent of respondents said that IT capabilities restrictions were a major challenge, and 27 percent said there was an inability to share information across organizations within their company.
In a previous post, "The Ugly Truth About "One Version of the Truth," I described the disconnected and expanding back-office mess residing inside IT's walls these days—siloed ERP applications, standalone SaaS CRM apps, a couple of marketing department data warehouses, maybe even a legacy supply chain app, all working out-of-synch with each other.
Now, business intelligence, analytic and forecasting/predictive software are being invited to the party. Surprise, IT!!
A recent report from Aberdeen Group, by research director David Hatch, examines why companies struggle with "one version of the truth" and how BI reporting and analytic tools fit into the picture. "Many organizations spend months and endure significant costs to obtain the reporting and analysis capabilities that BI promises," Hatch writes, "only to find that different 'versions of the truth' still exist without any definite way of determining which one is real or accurate."
The top reason behind the "one version of truth" quests for those surveyed by Aberdeen was wholly unsurprising: 36 percent wanted to replace "gut-feel" decisions with "fact-based" ones.
Nevertheless, nearly three-quarters (72 percent) of the Accenture survey respondents say they are striving to increase their organization's business analytics and BI use. Two-thirds surveyed recognize their decision-making failings and want to fix them.
A real-world example of this situation can be seen at global coffee purveyor Starbucks. In a recent CIO.com profile, new CIO Stephen Gillett says that Starbucks is making progress but is nowhere near mastering BI. "[The business users] haven't indoctrinated it into everyday business decision-making yet," he says. "We still have a lot of decisions based on real-time data, intuition, or historical trends. I think in today's economic climate, having strong analytic and BI-based decision making can help give a new dimension to that."
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Good post, Tom. I'm finding much of the same thing - a lot of frustration out there with the aged, proprietary BI tools and architectures that are too costly and complex relative to the value they deliver in the enterprise. But business managers want to treat what ails them. The enterprises I speak with want new tools that are simpler, far easier to implement, and come at a much lower cost. As an open source BI vendor (we create the world's most widely used BI software), Jaspersoft is among a select few that are more able than others to
adapt quickly to the rapidly changing needs of the enterprise. What's really telling is the point about a "lack of quantitative skills by employees." This can be addressed with Web 2.0 tools that don't require every user to go to a training class. Give folks tools they can use and that actually make them more capable. I look forward keeping up with your blog. Check in on mine at www.openbookonbi.blogspot.com.
Brian Gentile
Chief Executive Officer
Jaspersoft
i can't believe it! this article critiques the way in which the BI industry as a whole has been ineffective at serving the needs of decision makers, yet one more BI vendor speaks up to say how his "open-source web 2.0" version of BI is better than everyone else's! whatever!
what the world needs, is not yet another piece of BI software -- open source, on-demand, on-premise -- who cares. business people want analytics just seamlessly part of their business process. like driving and having your car prompt you to take another route because of a traffic jam.
The reason BI is not delivering is the same reason ERP didn't deliver, CRM failed, and salesforce automation delivers no ROI. Managers think that getting x technology in place will solve their business problems - in the case of BI it's typically a lack of/poor information leading to low-quality management decisions.
The problem with any of these systems is that they're tough to implement correctly. To achieve a successful BI delivery requires significant guts on the part of the project sponsor (someone from the business, not IT) - the guts to keep the scope small, to focus only on what's essential, and to insist the project be delivered in a short timeframe - say 3-6 months from start to finish. It also requires an experienced and seasoned senior project manager. After the first 'instance' of the BI platform has been delivered it will probably require several weeks of adjustments until you've got the data/reports right and change management has ensured they are being used (correctly). Then you build additional cubes and more reports in successive mini-implementations or iterations. Too many people get caught up in trying to deliver a perfect product the first time - with several cubes and numerous reports. BI platforms require the development of new skills in organizations - not just for IT but on the management side as well. Managers are advised to be aware that IT never offers silver bullets and that getting real business value from an initiative requires discipline and patience. BI does work!
I am not surprised that the gut is still used so much since many decisions are made for subjective and emotional reasons, which BI findings don't address. They do provide good statistics and the facts are hard to argue with, so if a cross-functional team can be involved in decision-making this is the best of all worlds since there is a lot to be said for intuition and having that feeling about things that also should not be discounted.
I work in the area of competitive business intelligence and I notice that emotions often rule in decision-making there too. It's just human nature. We might provide all the evidence as to why entering a specific market is going to fail, but the customer will often choose to enter that market anyway and won't be successful. In other cases, I wonder why a customer stays in a certain market when they are losing money and have other choices. In one of these instances I found out why: the CEO's dad had bought the business and he just didn't want to let go. I heard it in his voice during a quarterly earnings teleconference.
Great post you have here. Still, fact-based decisions are better than gut-based decisions. Through business intelligence, IT is more effective and measurable.