Is business more intelligent today than in the past, I wonder? Despite the advances in technology, computing power and data it still seems to me that many of today’s businesses fail to keep up and make the same mistakes they always have. While history is replete with examples of companies that have gone down this path (Sears, Kodak, Kmart, Circuit City, etc.), today’s business environment has brought a new dynamic, a dynamic characterized by hyper-competition and one where even the strongest of market leaders is not immune to being disrupted by garage jockeys.
To illustrate my point, once upon a time, not that long ago, the average life expectancy of a Fortune 500 company was 75 years. That’s a nice run for any business. Today, however, the average is 15 years, and in the next 10 years this average is expected to drop to seven. It makes you question whether there is stability in large organizations as we continue to careen through the so-called “Fourth Industrial Revolution.”
It is becoming ever more apparent that regardless of your business and regardless of your market position, you had better be thinking about ways to innovate and reinvent yourself or someone else will do it for you. When’s the last time you went to the bookstore or to Blockbuster? I think you get the picture.
So why is it that so many strong, market-leading businesses find themselves in situations where they have woken to declining markets, disruptive competitors and late-night hand-wringing about what can ultimately be done to survive?
On the one hand, we can certainly point to leadership at these organizations, as it is always the leadership that bears the responsibility for managing the business in a manner that avoids such situations. Did the leadership suddenly become dumb? I hardly think so. However, like most large successful organizations, leaders can easily become insulated from what is happening around them and content to manage the business in a manner that is comfortable for them, even when doing so makes the business susceptible to competitive risk. It’s not easy for traditional leaders to thrive in a chaotic environment where they are continually challenging their existing businesses and models in the same manner a small startup would. These are typically individuals who have had great success in their careers, have a wealth of experience and have a formula that has delivered success. They have good gut instincts and often have used these instincts to drive decisions that have led to long-term success. Is such an instinct of value in today’s business environment? Certainly yes; however, not in the same manner as it was in the past.
Today’s innovative companies and leaders recognize that past practices and gut instinct aren’t enough. Making all facets of the business operate more smoothly and providing personnel at every level in the organization with the information needed to make more effective decisions is critical. It is exactly for this reason that we have seen the rise of business intelligence (BI).
For years, business leaders have understood the value in measuring performance — and not just financial performance. As Peter Drucker once said, “If you can’t measure it, you can’t improve it.” This approach was undoubtedly the forerunner of business intelligence, as businesses of all sizes measure their performance in a manner that at least permits them to look backward and determine what happened. No doubt this is valuable and is still the primary way in which businesses manage their activities today. Conduct activities, measure results, adjust activities, measure results … and so the merry-go-round turns.
Things, however, are changing. Given today’s pace of business, is it enough to look back following the close of a month, quarter or year and then make adjustments? What if business direction could be adjusted in real time, as business activities were occurring and as business processes were active? This is the promise of business intelligence.
Before considering some examples, let’s first discuss what is possible today in terms of BI and how this capability is poised to change the traditional gut-feel approach to business decisions.
We are drowning in data — more than at any time in our history. According to a recent article in Forbes Magazine, 90 percent of the data in the world was generated in the last two years alone. To give this even more context, every minute more than 4.1 million YouTube videos are watched, and over 500,000 photos are shared on Snapchat. With the pace of the Internet of Things continuing to expand, data will only continue its exponential growth. Given this explosion in data, businesses are hard-pressed to determine what data is meaningful and should be harvested and converted to information, and what data is just noise and of little value to the business. It’s easy to recognize that we can measure most things, but the question is, why? Just because we can measure something doesn’t mean that particular something is of value to the business. It’s important to know what to measure so we can ultimately avoid receiving information that is of no value.
When we have identified what is important enough to measure, we then need to dig a bit deeper, asking ourselves the questions, “If I measure this, how will I use the information that I glean? What types of decisions will I ultimately make given the information presented?”
The value of business intelligence is that today’s technologies such as artificial intelligence, machine learning and big data analytics can all be harnessed to not only provide the information needed to make more informed decisions, but if utilized properly, to present the potential decision options available. Using BI systems to deliver such information and decision options in real time, we can ultimately create an environment where options are presented given specific business circumstances, and simulations can be driven to provide insight into the potential outcome of a given decision path. Does this remove experience and gut-feel from the process? Not at all. However, it does provide a structure for making more informed decisions and doing so at the right time. By building such systems using AI and machine learning, outcomes can also be driven back into such systems, thereby ensuring the systems are continually learning and capable of serving up better recommendations in connection with future scenarios.
Have many businesses reached the scenario outlined above? Not many. Unfortunately, most businesses don’t have a good handle on the organization of the data that is needed to build such systems. Of course, this is changing, but until businesses more effectively manage their data and content, building systems similar to what is described above will remain a significant challenge. That said, the beauty of BI is that it doesn’t necessarily need to be applied to the entire business to be effective. As such, many organizations today are applying BI to discrete business processes and applications where they can expect to generate a significant return on their investment.
For example, let’s look at today’s modern marketing organizations. One of their primary roles is to capture qualified leads that will ultimately move through the pipeline and close. There are a number of tools that have emerged in recent years to aid marketers in automating the process of driving campaigns, reaching targeted prospects and measuring results. These systems provide significant reporting and business insight in helping marketers understand the type of campaigns that are most effective in reaching their desired targets and in analyzing the actions that lead to the greatest level of sales success. With the introduction of artificial intelligence, machine learning and big data, these systems are also helping marketers to recognize two important aspects of their marketing outreach — timing and making an emotional connection with the buyer. As capturing qualified leads that convert to sales is often dependent upon both of these factors, intelligent systems that guide marketers in terms of the timing for outreach and the messages or offers that will most resonate with a prospect are reflective of business intelligence systems that can make the difference between closing a sale or missing an opportunity.
How about accounts payable (AP)? What might we learn by applying BI to this business process? At first glance, we might not think that paying bills is all that complex or even important as long as we pay on time. But when we dig deeper within this business process, we recognize that the accounts payable process is critical to operational efficiency, cash flow and business risk. Applying business intelligence to an AP process permits organizations to ultimately track their process efficiency, making process adjustments that can lead to better outcomes. Why is process efficiency important? When organizations can make payments on time they can often benefit from discounted terms, thereby lessening cost. Tracking processes also enables finance and accounting organizations to more effectively manage cash flow — an important metric for any business. Maybe of greatest importance is risk mitigation. By applying AI to this process, businesses are capable of tracking payment history and anomalies, lessening their risk associated with fraud and, in essence, capturing potential fraudulent or duplicate invoices. With nearly 5 percent of corporate revenues lost to fraud each year according to a 2018 study conducted by the Association of Certified Fraud Examiners (ACFE), applying BI to AP seems to be a smart decision.
No matter where we look, innovative businesses are looking at ways in which they can apply data analytics and business intelligence across their major processes and line of business applications. While this may not be the magic elixir for long-term survival, as traditional business success is no longer a given, it is becoming quite clear that organizations and leaders failing to utilize business intelligence may be left wondering when they became so “dumb.”