Business Intelligence Strategy: Capability-Focused or Customer-Centric?
In the course of our business intelligence strategy work with major companies across a range of industries, we've seen two general types of BI strategies. One strategy centers on marshaling resources and deploying organizational capabilities. Once the capabilities are deployed, then work on development of actual BI applications can begin. We call this approach a "capability-focused" BI strategy. Another approach focuses on identifying BI-enabled improvements to the business processes that drive business results, and then on rapidly building and deploying BI applications to capitalize on those opportunities. We call this approach a "customer-centric BI strategy." The two approaches have different implications for the timing and level of BI investment, and for the magnitude and timing of a return on investment. Accordingly, companies need to consider which approach works best for their particular business circumstances. In this blog post, we will describe these two strategies and then offer some factors for companies to consider when choosing their BI course.
Capability-Focused BI Strategy
A capability-focused BI strategy is based on the philosophy that the best way to succeed with BI is to first establish BI-related building blocks within the company and then leverage those building blocks to deploy BI within the business. Companies that adopt this approach tend to:
- 1. Think in terms of "standing up" a BI organization (a.k.a. BI Competency Center or BI Center of Excellence);
- 2. Identify a high-level view of key data subjects - generally Customer, Product and/or Service, Channel, Organization, Financial Performance, and Operational Performance;
- 3. Build an enterprise data warehouse based on consolidating - but not necessarily integrating - data about those key data subjects;
- 4. Invest up front in comprehensive, enterprise data governance disciplines and tools to improve data quality;
- 5. Invest up front in master data management technology;
- 6. Architect and procure data warehousing and BI technology up front that is suitable for an end state vision that may be three to five years off;
- 7. Create directories and metadata that enables business people to find data of interest and create the analyses they want to create; and
- 8. Deploy canned and/or lightly customized reports that come with the BI tool or tools they've chosen.
The basic argument for this approach is that successful enterprise BI requires addressing these building blocks, and once they are in place smart creative people within the organization will figure out cool ways to leverage the data warehouse for various business purposes. An analogous business strategy would be to build a manufacturing plant, buy flexible tooling that can make various products, hire people to work in the plant – and only then do the marketing work needed to figure out what products to make and who to sell them to.
Customer-Centric BI Strategy
A Customer-Centric BI Strategy is business-driven, whereby specific business opportunities for leveraging BI are identified up front, and these BI opportunities (BIOs) are the central focus of an enterprise BI strategy. While the various BI-related capabilities described earlier need to be considered, the BI program is optimized around rapid-fire delivery of BI applications and integrating them into targeted business processes to create an ROI based on a very specific pre-defined investment hypothesis. Companies that adopt this approach tend to:
- 1. Identify ways that BI can be used in business processes that increase revenues, reduce costs, or both;
- 2. Prioritize their BI opportunities for execution;
- 3. Organize their people around BI development projects;
- 4. Incrementally develop an enterprise data warehouse based around data integration for specific BI applications, as opposed to trying to consolidate all data about all subjects a priori;
- 5. Invest in enablers such as data governance and master data management on a scale that is needed to support the roadmap for rolling out BI applications, with the investment growing over time; and
- 6. Focus on architected BI applications to serve known business purposes within specific business processes, versus just deploying data without having in mind well-specified BI applications for that data.
The basic argument for this approach is that:
- · creating business value from raw data depends almost entirely on deployment of BI applications within core processes that make a different in economic and operational results; and
- · creating and deploying BI applications does not depend on having full-scale versions of all the basic building blocks - those can be deployed in measured increments as BI applications are rolled out over time.
Customer-Centric BI Strategy embraces the perspective: "why spend heavily up front and hope for good results when one can spend less up front and grow the BI program over time?" By focusing on getting the business people what they need quickly, BI can become a self-funding investment as results are proven. This approach substantially reduces the risk associated with large-scale "build it and they will come" approaches – which have in many cases been associated with failure and huge consulting bills.
Three Factors to Consider when Choosing
1. Competitive Urgency. Are your competitors gaining BI-based competitive advantages and/or is there an economically-relevant motivation for your company to invest heavily ahead of your competition? If so, a Capability-Focused BI Strategy can be argued for. On the other hand, a Customer-Centric BI Strategy may be more focused and less risky. It can be seen as a shotgun versus a rifle approach.
2. Business Process Change. Investments in BI only pay off when BI is used within the core business processes that drive economic and operational results. Accordingly, a key question is how good is your company at business process improvement and how much change can it undertake at any point in time. A large up-front investment under a Capability-Focused BI Strategy could result in an enterprise data warehouse that cannot be fully leveraged for years due to competing process improvement initiatives that fully absorb business unit bandwidth for change.
3. IT Unit Priorities. Like other business units, IT units are generally managing a portfolio of programs and projects, so launching and executing a major Capability-Focused BI Strategy may create bandwidth issues. BI success requires different methods and skills than traditional IT projects, and many IT policies are rightly focused on optimizing cost and service level, and on minimizing operational risk for transactional systems. BI has different critical success factors which drive the need for organizational change within IT, change which may be better realized more gradually via a Customer-Centric BI Strategy.
A Capabilities-Focused BI Strategy tends to require a materially larger up-front investment for business returns that are less defined, less certain, and further in the future than with a Customer-Centric BI Strategy. This creates a slower payback and a lower ROI within any given investment horizon. In contrast, a Customer-Centric BI Strategy tends to achieve a more optimal balance in the timing of investment cash flows and economic returns. All this being said, the choices between strategies are not as cut-and-dried as I've depicted. Sharp companies will look at each BI-related building block in relation to competitive factors, business capacity for change, and IT capacity for change and then combine the best of both strategies to create their own unique BI roadmap.