As smaller firms face competition and grow, it’s imperative they make good decisions based on even better information When asked what business intelligence (BI) tools are used to measure their organizational performance, the common response by entrepreneurs might include Excel spreadsheets, report writers and canned reports. BI can be defined as the ability to extract actionable insight from data available to the organization, both internal and external, for the purposes of supporting decision-making and improving corporate performance.
Small and medium-sized enterprises (SMEs) are mostly owner-managed, entrepreneurial companies. And for many entrepreneurs, decision support tools tend to be a combination of static historical reports, analysis spreadsheets and gut feel, which is fine while an organization is small and easily managed on this basis.
However, as smaller companies grow or face stiffer competition, the need to make good decisions based on meaningful information quickly becomes an imperative. Succession planning adds to the importance of being a well-managed company, and being able to prove it. This is where detailed reports, summaries that are not drillable and spreadsheets can fall short. Spreadsheets in particular are potentially dangerous tools.
Reports often contain information relating to a particular transaction type, such as sales revenue and related costs. These reports typically ignore other factors that might affect the interpretation of the reported data, such as number of customers acquired and lost during the period under analysis.
Typically the barriers to adoption of BI are cost and complexity. Costs include software tools and services, as well as people and time costs. The SME faces additional hurdles, such as tighter budgets, less sophistication and organizational knowledge, technology hurdles and fewer people, meaning less time to spend on planning and analysis.
The potential benefits include insight from data, improved decision-making and risk mitigation. The factors involved in the implementation of a BI solution can be broken into four areas: * Information (the data available to the organization),
* Intelligence and
The SME faces many of the same BI challenges as larger organizations, and some additional ones to boot. The smaller you are, the less data you are likely to have access to. In terms of internal data, a basic entry-level accounting program stores substantially less information than a higher-end enterprise resource planning (ERP) system. And externally, in the context of industry-specific or competitor data, there’s not much out there on small businesses.
Most SMEs do manage supplementary key business data, frequently in the form of spreadsheets, contact manager databases, payroll systems and other home-grown databases. These can potentially be harnessed to provide the BI backbone, provided the data is reliable and accurate. In many cases, data outside the accounting or ERP system is not subject to the same controls and may provide more red herrings than pearls of wisdom. Technology
BI software tools include scorecards, dashboards, analytics, data mining and reports with drill downs. The available software solutions delivering these toolsets used to be beyond the financial reach of the typical SME.
In recent years, however, there have been a number of alternatives priced more aggressively, bringing the technology for a comprehensive BI implementation into the reach of the SME. Some of these tools are available online, using the software as a service model. Others use the traditional licensing model.
And then, of course, there is the ubiquitous spreadsheet. Packages such as Excel are undoubtedly valuable and powerful tools, and many companies have mined their ERP and other data by live-linking spreadsheets to data sources, using pivot tables, conditional...