Wednesday, June 16, 2010

Know Where You Are, Know Where You Are Going

“If we could first know where we are, and whither we are tending, we could then better judge what to do and how to do it.”  –Abraham Lincoln
Every day we are getting better at managing the mounds of data that our businesses produce. The size of databases tend to double every 12 to 18 months according to an InformationWeek article. Not only are the data sets getting bigger, they're becoming more real-time, where Wal-Mart is adding a billion records daily. With this explosion of data, how do we bring order to guide the business?
A Single Version of the Truth
Business Intelligence strives to deliver a single version of the truth based on trusted information to help business leaders make better decisions. To give our leaders clarity of action, we need to simplify the masses of data into manageable metrics that let us do the following:
  • Know Where We Are: Understand the competitive landscape
  • Know Whither We Are Tending: Identify opportunities and trends
  • Know What To Do: Set targets and monitor results so we can see what works
  • Know How To Do It: Create a common context and objectives for decision making across the organization

Business Intelligence for Driving Innovation
In the case of Wal-Mart, the focus is on managing a gigantic supply chain and identifying tactical moves to improve sales and minimize costs. "Supply Chain Management" is not the only area of business that can benefit from improved business intelligence. R&D and Product Managers can use sales data to obtain a single version of the truth using Voice of the Customer Exploration tools that monitor customers' willingness-to-pay for products (what I call product value) in a portfolio. A generic representation of what this would look like is shown in the figure below.
If your product is A and your competitor's is B, don't you think it's important to know when the consumers in your market become willing to pay more for your competitor's product? Total Product Value Analysis is about "Knowing Where You Are". One of the major benefits of this form of analysis is the ability to compare how you are doing against the competition (an outward looking metric). 
Product Cost is traditionally the metric that can be measured, so this is the metric that gets managed. Unfortunately, this isn't the way to make your products more valuable to your customers. However, if your Business Intelligence Systems gain the ability to measure and monitor Product Value, value driven product management becomes possible because you "Know What To Do". Ultimately, the product manager evaluating new innovative ideas by understanding how to balance the increased value to the customer with the possible increases in product cost. The only way to do this without a product value metric is to use intuition or "gut feel", which is no way to be competitive in todays ultra-competitive global economy as I discussed in a previous blog.
How It Would Work
The Business Intelligence System will be able to drill down and role up to identify trends within markets, within regions, and as a whole. Performance bands can be placed at each level so that product managers can be alerted to major changes in value that could be attributed to successful advertising campaigns or new product introductions introduced by competitors. With these alerts it becomes possible to react both tactically and strategically to drive product value back into your products via additional promotion or making tweaks to products and services.
Guidelines for a Value Driven BI System

Transforming processes into a system begins by integrating the right information and being able to summarize the data so that it is useful in supporting decisions making. Here are some guidelines:

  • The system should aggregate product value and customer satisfaction data
  • Managers should be able to drill down and roll up the data by product, market, segment
  • The database should be able to show trends

This data should be made available to executives, general & product managers, brand managers, sales, quality, product development, R&D and customer service.

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