View from the bridge

At last a new generation of IT systems has delivered what has been promised for years.

by Ron Condon
Last Updated: 09 Oct 2013

Lord Weinstock had the right idea. As chairman of GEC, he would telephone each department head at the end of the working day and ask: 'How much money did we make today?' It allowed him to keep his finger on the pulse of the company and identify any under-performance immediately.

At the time, his approach to running a large business was roundly derided, as was the huge pile of cash he accumulated on behalf of the company.

Given what has happened to GEC since, it sounds like good sense. For most senior directors, however, running a large corporation can be like steering a huge liner through fog. Occasionally the mist clears, you adjust your direction, then the fog rolls in again and you hope you have chosen the right course.

Those of us without Weinstock's skills need tools to improve our navigational powers, and many have found the answer in a new generation of IT systems, which - according to the IT industry, at least - really can provide senior management with an instant and accurate picture of what is happening below them.

If this sounds familiar, that's because it is. The IT industry has been promising this for years, churning out new systems with fancy titles such as Executive Information Systems, Decision Support Systems, Data Warehouses and Online Analysis and Reporting. But this time it's different and, after many a false dawn, the technology really is in a state to deliver.

'We have 15 years of history and the technology has been coming together,' says Richard Neil, a consultant with Business Objects. 'Executive information systems failed because they were limited to a few key people and there was no data warehouse underneath them. There was no infrastructure and they were isolated from the systems driving the business. And there were inconsistencies in the data.'

What he and others in the business intelligence (BI) market promise now, however, is a computer-based dashboard that links right into the live data of the company, measuring it and presenting it in a simple way. This would allow chief executives - and anyone else in the company with a legitimate interest - to see immediately how the organisation is meeting key performance indicators (KPIs).

Two factors make the promise more believable this time. The first is the widespread use of enterprise resource planning (ERP) systems from the likes of SAP, Oracle, PeopleSoft and JDEdwards. These all-in-one systems combine the major business functions under one umbrella, with a common set of data to be shared between the various departments that use them.

Now, having gone through the pain of installing their ERP systems and pulling all their data into one format, companies have the opportunity to mine a rich vein of operational information. The other key element is web-browser technology and company intranets, which make the delivery of that information to users a simple task.

Says Graham Walter, managing director of business intelligence company Cognos: 'The technology available today allows the dashboards to be driven directly from the underlying data held in the ERP systems or a data warehouse.' This avoids one of the major problems afflicting older reporting systems: the fact that the information on which reports are based is held separately from the operational data that runs the business.

The dashboard needs to be closely aligned to planning budgets and KPIs within the organisation, points out Walter. These have usually been held on individuals' spreadsheets, isolated from the reporting systems in the business.

So the strategy was not linked to the reporting systems. Now it is possible to create what he calls 'a single version of the truth', rather than multiple versions sitting on a variety of Excel spreadsheets. 'The technology improvement provides integrated dashboards with reporting systems, but, more importantly, integrated planning, forecasting, budgeting and reporting,' he adds. 'If you change a plan or a budget, it is also automatically reflected in your scorecard and your reporting systems.'

In other words, it can be instantly reflected on the KPI dashboard. The dream of fully integrating business strategy and its implementation - known as corporate performance management - is now closer than ever before.

It sounds irresistible, but on deeper probing most suppliers concede that few organisations have yet arrived at this level of control. So what is holding them back? Says Nigel Youell, head of applications marketing at Hyperion, a supplier of business intelligence software: 'Most companies now have fairly robust transactional systems to manage day-to-day operations.

But they usually end up with multiple instances of different versions of their ERP systems.'

And not all data is held in the ERP system. Companies also have customer relationship management, human resources and custom-built applications, all holding data that needs to be analysed. And the sheer volume of data is exploding. According to IBM, the size of a typical enterprise database has grown 100 times over the past five years, from gigabytes to terabytes of information. Explains Youell: 'Data warehouses are supposed to pull that information together, but it is very complex and expensive, and these projects have a high failure rate.'

Indeed, research company Gartner predicts that more than half of all data warehousing projects will have limited acceptance, or will be outright failures, as a result of a lack of attention to data quality. Says Ted Friedman, principal analyst at Gartner: 'Many enterprises fail to recognise that they have an issue with data quality. Consistency and accuracy of data is critical to success with BI, and data quality must be viewed as a business issue and responsibility, not just an IT problem.'

This is a key point. The successful dashboard depends entirely on the quality of the data underlying it and the creation of meaningful KPIs.

Explains Mandy Winder, a consultant at Nottingham-based Zeda Systems: 'To create an effective dashboard, senior management need to be aware of what KPIs are important to their company. A good dashboard should limit its reporting to the top five performance indicators that are essential to the company.

'The process of choosing KPIs should be the most important factor in the creation of a dashboard,' she adds. 'Many companies develop their dashboards around the information they have available, rather than changing their business processes and data storage to match those KPIs that can really benefit their business.

'This is particularly important in service industries, where one of the most important KPIs should relate to information such as skill sets, business knowledge and turnover of staff. The information underpinning these KPIs is often not stored at all, or it is stored in systems outside standard business systems.'

Despite appearances, then, this is not something to be left to the IT department. All agree that buy-in and commitment from senior management, including the chief executive, is essential from the start to ensure any chance of success. Richard Brown, head of business intelligence for SAP, has seen these projects from close up and agrees. 'Projects that are IT-led are not as well accepted. They lack credibility.'

But senior management should welcome getting involved at the early stages, because if the process is done well, it can reveal all sorts of poor practice.

'In the early stages of any project where the senior management get involved, there's a lot of soul-searching and gnashing of teeth as they come to terms with the KPIs, and businesses change them as they realise the ones they put up in the first place weren't right. But that is a healthy process,' adds Brown. 'It sorts out what you really are measuring; you have to get a single version of the truth that everyone agrees with, and you may have to change some of the business processes.'

Once the work is done, the dashboard can become a catalyst for change, believes Youell at Hyperion. 'Your strategy and objectives can be cascaded down, so the person at the front line understands what their role is in the overall goal. Instead of just telling them to increase profits by 10%, you can tell the services guy to sell two extra days of consultancy a month. You can make the front line responsible for their own operational plans and budgets. They get a better understanding of how things work, and they own the budget.'

Observes Nick Groves, senior consultant at Deloittes: 'The process you go through is probably more important than the end result. You can take a strategy, model it in one of these tools, and break it down into business plans and budgets, work out the KPI targets, cascade them down into a scorecard, all on one integrated planning tool.'

He adds: 'It has been done in some organisations, although not many have joined up the dots yet. Many will have a corporate dashboard that executives will look at in board meetings. But most dashboards so far are used at department level - for instance, in a call centre to analyse calling patterns and service levels.'

DAILY DRILL-DOWN SPEEDS UP WEST BROM

Installation of a business dashboard has helped improve decision-making at West Bromwich Building Society, providing senior management with a range of up-to-date performance indicators. According to David Eggleston, the society's system development manager (above), the organisation has gone from relying on reports that took weeks to produce to the daily delivery of key performance metrics to 40 of its most senior managers.

Behind the pretty graphics is an Oracle data warehouse that feeds into the Business Objects Dashboard Manager, which presents a handful of key measures - such as cash inflow and outflow - for the managers to check if they are within expected limits.

The system has been designed to allow any manager to click on any item on the dashboard and drill down to the next level for more detail. 'In practice, they tend to pick up the phone and ask if they see anything wrong, but they have the ability to get down to the detail themselves,' says Eggleston. 'We wanted to make the system as simple to use as possible, by just pointing and clicking. They don't have to type anything.'

The data warehouse is updated every night, pulling in live data from three major operational systems, including financials and customer relationship management. More systems, such as personnel, will be added later, says Eggleston, increasing the amount of data that can be analysed at dashboard level.

The main benefit of the project, he believes, is that they have created in the data warehouse a single version of the truth. 'Before, a lot of people were running their own information on private spreadsheets, which we have strongly tried to discourage. The other challenge was tying people down on their key performance indicators. At first, we came up with 200 to 300 KPIs because people were confusing them with shopfloor measure.

Now we have it down to five.'

BI SYSTEM TAMES BOURNE'S DATA DELUGE

The crunch came for Bourne Leisure three years ago when it took over Rank Holidays. The £750 million company, which runs holiday camps, hotels and resorts in the UK and France, had previously relied for its financial reporting on people e-mailing in their spreadsheets, which were then aggregated manually by an outside contractor.

'With the acquisition of Rank, the company also acquired a mass of new data that needed to be brought together and reported on,' says Mark Humble, Bourne's chief systems accountant. 'The problem was trying to identify a standard tool to deploy across the group. At the time, each brand had its own process for reporting, and we needed to create a more consistent approach.'

To cope with the different data formats coming in from the company's divisions, Bourne implemented the WebFocus business intelligence system from Information Builders. This takes data from disparate financial, sales and reservations information held on Microsoft SQL server databases and provides real-time information to 200 managers in 60 locations. Using the company intranet, they can get an instant picture of sales, stock, sales margin and debtors.

Bourne has cut the time it takes to produce reports, and has reduced costs by eliminating the need for outside contractors. Says Humble: 'Managers are no longer swamped with information they don't need or want, as WebFocus enables them to drill down to the particular information that is relevant to them.'

The company also plans to extend the system to handle HR data.

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