In a recent tutorial we looked at the benefits of big
data for small businesses. But even if your firm doesn’t handle that volume
of data, you can still benefit from an analytical approach.
Like big data, business intelligence systems were once the
preserve of large companies with lavish IT budgets. But thanks to extra
competition and the advance of technologies like cloud computing and software
as a service, more and more small firms are taking advantage of the affordable options on offer today.
An Oxford Economics study in 2013 found that more
than half of firms with sales under $100,000 were planning to use business
intelligence within three years—a jump of 43%.
But be careful before taking the plunge. Between 70% and 80%
of corporate business intelligence projects fail, according to Gartner research
cited in this Computer
World article.
So in this tutorial we’ll help you position yourself to make
smart use of business intelligence. You’ll get a solid understanding of what
business intelligence means, what benefits it can bring to your business, and
how you can implement it successfully. We’ll also look at some examples of how
companies are using business intelligence systems right now to help them get
information about their operations and make better decisions.
1. What Is Business Intelligence?
First things first. What do we mean by business
intelligence?
According to technology research firm Gartner:
Business intelligence (BI) is an
umbrella term that includes the applications, infrastructure and tools, and
best practices that enable access to and analysis of information to improve and
optimize decisions and performance.
In simpler terms, it’s about making better decisions in your
business by analysing information. Usually that takes the form of a database or
other software that pulls together facts and figures from various parts of your
business and produces charts, reports and other insights.
You can use business intelligence solutions to analyse any
aspect of your company. You could monitor the effectiveness of your sales
efforts, for example, or the efficiency of your factory operations, the
performance of different staff members, and much more.
2. Benefits of Business Intelligence for Small Businesses
Business intelligence systems can be costly and
time-consuming to put in place. So what’s the benefit of doing it?
A 2014 report by
Dresner Advisory Services found that the main reason small companies use
business intelligence is for “better decision-making”. Other important reasons
included:
growth in revenues
increased competitive advantage
improved operational efficiency
enhanced customer service
We’ll look at some specific examples of how companies get
those benefits in the next section, but that’s a pretty impressive list
already. It touches on most of the key factors that determine a company’s
success.
Most companies already analyse data anyway, but it’s often in
the form of pulling together a few spreadsheets in Microsoft Excel. That can be
very time-consuming, and the results aren’t always what you’re looking for.
Excel’s great for a lot of things, but sometimes you need a different tool to
solve a different problem.
“When done properly, the analytics can provide insights into
trend analysis that otherwise can't be seen,” said Dan Linstedt, president of
Empowered Holdings in Saint Albans, Vermont, in an Inc
Magazine article. “BI can also provide insights into the cost of acquiring
new customers over time, and how those costs are related to ‘customer gain or
loss.’”
3. Examples
So how are companies using business intelligence right now?
Here are a few examples.
To Boost Sales
Customers are the lifeblood of any business, of course, and
a business intelligence system can help you understand them better.
Online luxury women’s goods retailer Gilt Groupe is a prime
example. Every day it sends out an email to its customers at 11:45am, previewing the daily
sale, and customers then click through to buy (or not) from its website.
Clearly, with a business model like this, the conversion rate from each email is
absolutely critical.
The company was already collecting data on its customers’
browsing and shopping history and more, but was looking for a better way of
analysing all that data and producing actionable results.
Gilt implemented
a business intelligence system from SAS, enabling the firm to combine
information from different sources and produce reports that helped it target
its emails more successfully. The data produced allowed Gilt to predict much
more accurately which customers would be attracted by which offers, and
customise its emails to maximise sales.
The results:
More customers were attracted to new merchandise
categories where they had not purchased before.
A 100% lift in conversion for women who were identified
as being likely to shop on the men's site, but had not yet done so.
A significant increase in the conversion rate of
new members (i.e. the number of members making a purchase rather than just
browsing).
To Control Inventory
As we’ve seen in previous
tutorials, controlling inventory is an important way to make your business
more efficient, improving cash flows and profits. Business intelligence systems
can help you achieve that.
“Cutting excessive inventory—and thereby the cost to
maintain it—is one of the easiest changes a company can make to immediately
affect its bottom line," Dwight deVera, senior vice president at BI
provider Arcplan, told
CIO.com. And a BI solution with a good dashboard, “that provides retailers
better visibility into inventory, enables them to make better decisions about
what to order and when so goods don't sit idly on warehouse shelves.”
Wine retailer The Wine House put this into
practice, freeing up $400,000 in capital by using its new SAS analytics
software to identify inventory items that hadn’t moved in more than a year.
Good wine doesn’t go bad, of course, but it does take up
space and cost money to store. The Wine House held a sale to clear the excess,
and has been using the software since then to pinpoint slow-moving bottles and
promote them to move them out.
The company also uses that information to inform its future
buying decisions. For example, the data showed that customers were buying
plenty of $20 bottles of wine, but not so many $100 bottles. So The Wine House
shifted to offer more of the lower-priced merchandise its customers wanted.
Other companies have followed a similar approach, such as
telecoms company Asurion Asia Pacific, which used QlikView
software to analyse and improve its inventory management, delivering a
return on investment in just six months.
To Analyze Web Traffic
Some business intelligence systems are simple and
well-known, and you’re probably using them already.
Google offers lots of analysis of your website visitors
through free services like Google Analytics and Webmaster Tools, and taking the
time to use them effectively can help you attract more customers and optimise
your website to encourage them to buy.
Bob Shirilla started a small business after spending two decades at a large IT company
that regularly used data analysis software. He told Inc Magazine that his sites, Keepsakes-etc.com and Simply-bags.com, “are doing very well in a very competitive product space. I
attribute their success to the business decisions made by using the Google
Analytical tools."
To Provide Better Customer Service
British startup company SureFlap already had a strong idea:
a cat flap that uses microchip technology to let in your beloved pet and keep
out other cats. But as founder Dr
Nick Hill says, “Having an amazing product isn’t enough; you need to wrap
it up with amazing customer service too.”
So the firm uses a tool called Service Cloud from
Salesforce.com to send out hundreds of customer satisfaction surveys every week
and constantly analyse the results. This allows SureFlap to identify and
address problems, resulting in satisfaction scores of over 90%.
The system also notifies the customer service team of any
individual survey responses with low scores, so that they can follow up with
the customer and try to resolve any outstanding issues.
4. Implementing Business Intelligence
So now you’ve seen the benefits of business intelligence,
and some examples of how small businesses can use it. If you’re convinced of
its value, it’s time to look at implementing it in your company. In this
section we’ll look at a simple process you can follow, and some examples of
popular vendors you could investigate.
What’s Your Objective?
The first question to ask yourself is what you’re hoping to
achieve.
As we’ve seen, business intelligence is an umbrella term for
a wide range of solutions, in any area from customer relationship management to
operational efficiency. So what’s your priority?
Do you want to boost sales, for example, or improve
satisfaction among existing customers? Do you want to squeeze out more
efficiency from your operations or your workforce? Be clear about the overall
priorities and long-term plan for your business, and then consider how business
intelligence systems can help you reach your objectives.
What Do You Have?
Once you’ve got an idea of what area you want to address,
consider what data you already have. What information are you collecting right
now, and what could you easily collect with the right systems in place? One of
the main functions of business intelligence is to pull together data from
different parts of your business and analyse it. So consider what kind of data
you have available to feed in, as that will likely drive the results.
Also consider existing solutions you’re using, such as
simple spreadsheets or databases. In some cases, these may be enough.
“There has to be
enough data available so it can't be readily understood without assistance,” says
Paul Massie, senior director of operations and IT for YouSendIt. “There's
no point in implementing a BI if the data volumes are so small a person can
look at the data and reach accurate conclusions.”
What Do You Need?
Once you’ve decided on an area of focus and identified what
you have, it’s time to make a more specific decision on what you need.
If you’ve decided to focus on workforce efficiency, for
example, and you already have data on employees’ attendance records, work
hours, performance appraisals and computer usage, consider what the system you
want to implement would ideally do.
Do you want something that integrates all your existing data
and produces charts and reports showing you who’s performing best? Or do you
want to identify new data sources and better ways of measuring employees’
performance?
Do you want to buy a simple software program, or have
something customised for you? Do you prefer a cloud-based system, software as a
service, or a software package that you install and run yourself? Do you want
something that’s compatible with your existing systems, or something that
replaces what you already have?
Once you’ve got clear answers to all these questions, you
can start shopping around.
Sample Solutions
There are many providers out there, but here are a few to
check out. The names and categories are taken from a recent report by Dresner
Advisory Services.
Titans
IBM
Microsoft
SAP
Large Established
Pure-Play Vendors
Actuate
Information Builders
Qlik
High-Growth Vendors
Logi Analytics
Pentaho
Tableau
Tibco
Specialized Vendors
Dimensional Insight
Dundas
Jinfonet
Klipfolio
Phocas
Targit
Emerging Vendors
Adaptive Insights
Birst
GoodData
Jaspersoft
Jedox
This is not an exhaustive list, of course, and there are
plenty of other providers out there. But browsing through the offerings of
these companies will give you a great idea of the various business intelligence
systems available to choose from.
Next Steps
In this tutorial, we’ve arrived at a simple definition of
business intelligence, discussed its benefits, and seen some examples of how
other companies are using it to improve their performance.
The next step for you is to decide whether it’s right for
your company, and start researching solutions. Follow the steps outlined in the
final section of the tutorial to get clear on exactly what you’re looking for,
and then start doing your research on different offerings from different
vendors.
There are lots of options to choose from, so it can be
confusing at first, but you’re also more likely to be able to find something
that’s right for you and can help you take your business to the next level.
Resources
Graphic Credit: Data icon designed by Christopher Holm-Hansen from the Noun Project.