session 3 bi requirements & roadmap

BI Requirements & Roadmaps

Setting the Stage for BI Success

IMA Carolina Council Winter ConferenceColumbia, South CarolinaFebruary 17, 2012

Copyright DecisionPath Consulting 2011 2

Your Instructor

Steve Williams works with leading companies in the food/CPG, financial services, manufacturing, and energy industries to develop business intelligence, analytics, and performance management strategies, program plans, and designs. These engagements have focused on deploying performance management and analytics applications for enterprise management, financial management, supply chain & operations, sales & marketing, and customer service.

Steve is president of DecisionPath Consulting and is the co-author of The Profit Impact of Business Intelligence. He holds an MBA from the University of Virginia and has published numerous articles, including “Power Combination: Business Intelligence and the Balanced Scorecard” - the cover article in the May 2008 issue of Strategic Finance magazine. Steve can be reached at [email protected].

“We have used the strategies in The Profit Impact of Business Intelligence to align our BI program with our critical success factors and to drive our BI development efforts." --Terry Lillis, CFO - The Principal Financial Group

"This book is a must for business leaders who require that their BI programs drive real business value." --Barbara Wixom, Ph.D., Associate Professor and Director of MS-MIT, University of Virginia McIntire School of Business


Seminar Agenda

• Overview - business intelligence, business analytics, and business performance management

• BI opportunities and BI requirements• Pitfalls in gathering BI requirements• Business engagement - the key to BI success

Overview

Business Analytics, Business Intelligence, and Business Performance Management


Overview: DefinitionsBusiness Performance Management(BPM) is a systematic management process for planning and budgeting enterprise performance, measuring performance against financial and operational targets, and taking corrective actions

Business Intelligence (BI) is a systematic approach to delivering and leveraging business information and analytical tools to improve performance

Business Analytics (Analytics) is a term used to describe the use of long-established statistical and operations research methods to understand what happened, why it happened, what’s likely to happen in the future, and what the impact of that could be.

Why Did It Happen?

What Happened?

What Might Happen Next?What’s the Impact?


Overview: BI Definition


Overview: Key BI Design Questions

• What business information do we need?• For what business analyses?• In support of which key business decisions?• That impact which core business processes?• To deliver how much business value?• Via what changes to people, processes, and

technology?

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Overview: BI Value Propositions


Overview: BI, BPM, and Analytics

Key Concept: BI, BPM, and Analytics are mutually reinforcing with same goal - improved performance and profitability.


Overview: BI, BPM, & Analytics


Examples For Top Executives:

• Enhanced control over strategic performanceKPI trends over timeBusiness unit performance

• Enhanced short interval controlScorecards and dashboards“Flash Reports”Alerts

Overview: BI Impact


Examples For CFOs & Financial Managers:

• Precise, granular understanding of links between operational performance and financial results

• Better tools for performance management - readily available scorecards and dashboards

• Better data for planning, forecasting, and budgeting• Better tools for performance assessment, variance

analysis, and root cause analysis• Better tools for optimizing working capital

Overview: BI Impact


Examples For COOs & Operations Managers:

• Precise, granular understanding of links between operational performance and financial results

• Better tools for cost analysis/control• Better tools for operations management - readily

available scorecards and dashboards• Better tools for monitoring and improving key

performance drivers, e.g. customer service, product quality, supplier performance, etc.

• Better data for demand planning/forecasting, inventory optimization, and capacity planning

Overview: BI Impact


Examples For CMOs, Sales Managers & Marketers:

• Complete information about customers for improved segmentation, more precise campaign targeting, and enhanced customer retention techniques

• Better tools for campaign lift/ROI analysis• Improved ability to determine customer lifetime

value and use differentiated customer service treatments and channels

• Improved tools for determining price elasticity of demand to support pricing strategies

• Improved tools for category management• Enhanced revenue capture management via more

timely and granular performance scorecards

Overview: BI Impact


Examples of leveraging BI

• $7.4 billion discount retailer leveraged analytics to improve/optimize replenishment, assortment planning, and pricing

• $15.6 billion electronics distributor leveraged analytics to optimize inventory levels and improve customer service

• $8.9 billion financial services company leveraged analytics for financial performance management and optimizing business unit expenses

• $3.5 billion semiconductor manufacturer leveraged analytics for improving yields, customer service, and pricing

• $1.7 billion financial services company leveraged analytics to improve order management and operations performance

• Electric utility serving 675,000 customers leveraged analytics to improve its enterprise performance management process

Overview: BI Impact


Overview: BI Impact

Key Concept: BI impacts financial performance


Overview: BI Impact

Key Concept: BI impacts operational performance

BI Opportunities & Requirements

The Key to a Strong Tactical BI Foundation and Effective Information Model


BI Opportunity Analysis


BI Opportunity Portfolio


BI Requirements

2. Revenue Management Analytics. Company professionals reported that timely, granular information about revenues, shipments, volume, prices, consumption, share, margin, inventory, and net sales is essential for enterprise demand planning, brand planning, customer service, category analysis, pricing, budgeting, financial analysis, managing revenue attainment, variance analysis, customer marketing, business development, and field sales purposes. This BIO would integrate and deliver the required business information to support all these uses and users, with an emphasis on enabling Pinnacle to drive revenue growth and effectively manage revenue attainment on a customer-by-customer basis across all channels of distribution.


BI Requirements

BQ ID Business Question81 What are gross sales and net sales in units, dollars, and declared weight by item by customer by sales organization by time? Compare actual sales to budget,

forecast, and actuals for the previous X years82 List the top N customers based on gross revenue, net revenue, gross margin dollars, and gross margin % by time. Provide a Pareto analysis of customers based on

these same four metrics. How do the “top N customers” lists for this year compare to those of previous years?83 How does salesperson and broker performance (measured by revenue, gross margin, or however the company chooses) compare to plan/quota, by time?84 How does customer performance (measured by revenue, gross margin, or however the company chooses) compare to the account plan, by time?85 List the top N items based on gross unit sales, net unit sales, gross revenue, net revenue, gross margin dollars, and gross margin % by time. Provide a Pareto

analysis of items based on these same four metrics. How do the “top N items” lists for this year compare to those of previous years?86 How many of the “top N items” are “new” items, and how much (and what % of total) gross unit sales, net unit sales, gross revenue, net revenue, and gross

margin dollars did they contribute, by time?87 What are returns/unsaleables by item by customer by reason/cause by time?88 What are the top N most returned/unsaleable items, based on units, dollars, % of units sold, and % of dollars, by customer by time? Provide a Pareto analysis on

returns by item for these same metrics.89 (Who are our most rapidly growing customers?) What is the year-over-year sales change, expressed in gross revenue, net revenue, and gross margin, by customer

(sorted in descending order)?90 What distribution (number of customers who carry the item) do we have for each item, and how has it changed over time?91 Who (which customers) is the distribution we have for each item, and how has that changed over time?92 What is the penetration rate for “new” items, by item by sales organization by time? (Penetration rate = number of customer who agreed to carry the item /

number of customers to whom we presented the item)93 What is the penetration rate for “new” items, by item by sales organization by time? (Penetration rate = number of customer who agreed to carry the item /

number of customers to whom we presented the item)


BI Requirements

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Cost of Goods Sold (COGS) 2 20 10Customer Profitability 1 5 1 2Customer Returns $ 2 2 4 4 2 4 2 2Customer Returns Quantity 3 3 6 6 3 6 4 3Customer Store Population 4 8 4 8 16 4 8Distribution at Retail 3 8 16 24 8 16 3 8 3Distribution Cost 3 30 15EBITDA 2 20 10Gross Margin 7 4 19 40 65 19 38 10 3 7 4 2Gross Revenue 1 1 1 1 1 1Gross Sales 18 2 25 51 64 25 50 5 2 21 17Inventory Turns 1 10 5Inventory Value 1 10 5Net Sales 18 2 25 52 74 25 50 10 2 21 17Price per Unit 6 6 12 24 6 12 6Product Profitability 1 2 1


BI Requirements

• Reports - identify and analyze what happened in financial and/or operational terms

• Scorecards and dashboards - identify and analyze what happened by comparing to a target, acceptable range, benchmark, or other suitable performance expectation

• Multi-dimensional analysis (drill-down, drill across, slice & dice) - analyze why something happened by looking at contributions of specific subsets of the who, e.g. products, customers, channels, or business units

• Variance and root cause analysis - identify favorable and unfavorable variances and use multi-dimensional analysis to determine where to begin root cause analysis

• Predictive analytics - project what will happen by using past performance information in conjunction with other management information and business judgment (examples: forecasting, customer lifetime value, credit scoring)

• Advanced analytics - e.g. use collaborative filtering and conjoint analysis to group customers and/or potential customers for marketing, sales, and product development purposes (example: Amazon and I-tunes recommendations)

Key Concept: BI come in a variety of shapes and sizes.


Overview: BI Design Challenge

Pitfalls in Gathering BI Requirements


Business Requirements for BI are NOT

• Functional Requirements• System Requirements• Interface Requirements• Integration Requirements• Software Requirements• Database Requirements


• BI or ETL Tool Requirements• Report Layouts• Lists of Data Elements • Requests for Ad Hoc Access to Business

Information

It’s not about “Paving the Cowpath” (i.e. accessing the same old information using BI tools)

Business Requirements for BI are NOT

Business Engagement

The Key to BI Success


Five Strategic Barriers