By Anuar Yaakub, Senior Consultant, Sageconsulting Sdn Bhd, September 2017
Have we ever wondered what do great culinary chefs have in common? Probably they have attended prestigious culinary schools, inherited family secret recipes, had access to quality ingredients or cooking equipment or even more importantly, possess extraordinary grit and determination to satisfy the taste bud of the rich and famous.
Similarly, a great business strategist would need an access to quality information in the forms of business intelligence (BI). Otherwise, in the absence of quality BI, the strategic plan tends to be “malnourished or half baked.” Good BI does not necessarily translate into good strategies but good strategies are derived from good BI.
BI could be aggregated into internal and external information. Internal information is more about the company’s i.e. resources and capabilities such as production and sales figures. The information can normally be obtained from the company’s internal systems or resources. Whereas external BI is about the competition, market, customer and other forces impacting the industry. This external information which is the focus of BI is not normally readily available in ICT systems and needs to be researched and compiled. ICT systems can help to compile and aggregate the information but it lacks the human wisdom in making sense of the information.
Prior to the proliferation of ICT in business organisations, BI was a “manual” affair. When I wrote a research paper on BI for my strategic management class in 1992, the role of ICT in BI was almost non-existence. BI information requirements were identified and manually compiled from various publicly available sources of information such as print media, trade shows, advertisement, etc. BI culture tends to be acculturated throughout the organization to allow wider participation of employees in collecting, disseminating and using BI information. Even support employees such as dispatch personnel or customer service officers could contribute towards the compilation and dissemination of BI information based on their day-to-day interactions with the customers.
The transition from “manual” BI to ICT has effectively decreased the active involvement of employees in BI information gathering and dissemination. BI has gradually been overtaken by ICT and is now synonymous with ICT systems without which there will be no BI. The new generation of employees grow with the notion that BI is part of the ICT systems i.e. implementing BI means implementing ICT system.
Most are under the impression that everything one needs to know about BI could now be sourced from ICT systems. While it might be true for internal BI information, external BI information would still need to be researched and compiled as they are not normally automatically captured by the systems. For example, one can analyse and predict the strategic direction of a company by looking at the patterns of its advertisements or job vacancy advertisement. This piece of information has to be manually compiled and analysed and not readily available from standard ICT system. No ICT system could replace the human wisdom and intelligence in interpreting data gathered through ICT systems.
How Business Intelligence Shapes Strategy
“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” ― Sun Tzu, The Art of War
The above quote from Sun Tzu emphasizes the importance of BI in strategy formulation. Knowing the enemy is a form of external BI. In this case, the enemy refers to the external environment such as industry forces, government policies, customer preference and the competition. A good BI enables a company to formulate and implement superior strategies in facing the competition.
Among the key benefits of BI in strategy formulation and implementation are as follows:
- Accurately define the competitive environment. These include industry dynamics, the manoeuvring of competitors and customers change of appetite. This will help to prevent decisions that are based on hearsay and “ gut” of the management
- Forecasting future competitive scenarios. The forecasting of future scenarios is normally based on the various forces shaping the future such as the convergence of technologies, innovation and potential constraint on resource supplies. BI would validate the forces thus providing more reliable inputs for the forecasting of competitive scenarios
- Challenging underlying assumptions. Strategic planning is shaped based on certain assumptions and available information. For example, “the least expected” competitors could shake the industry landscape and pose new competition. As access to the internet is getting easier and friendlier, the “brick and mortar” businesses will either have to join the bandwagon or go bust.
- Adjust and validate strategies. The revision of strategies is a normal process but must be based on solid BI. For example, the forecast of certain targets such as sales target will need to consider all forces affecting the sales such as the availability of information for the customers to compare products or services. In a fast-moving industry, the strategies will need to be constantly reviewed and adjusted.
- Identify incoming threat or surprise moves. A sudden cut in prices or the introduction of new product package should have been predicted based on a good BI. The hint about the competitors’ move could have come from promotional brochures, websites, industry talks and news channels. Otherwise, the company might be constantly on costly reactive or “fire-fighting” mode.
Useful BI information needs to be characterised by the following:
- Old or outdated BI would be useless in strategy formulation or implementation. For example, when Maxis recently introduced MaxisONE Prime for the entire needs of the family, Celcom or DIGI should have found out about the plan earlier and come out with mitigation strategies to defend their market share. Once the MaxisONE plan was out, any counter measure strategies would be considered reactive
- BI could not be based on hearsay. The sources must be reliable and trustworthy. For example, information obtained from social media will need to be thoroughly verified before being disseminated for strategy consumption
- Consistency is an indication that the information is reliable and can be trusted. One test of consistency is the information from different sources carry the same message
How to Leverage on BI in Strategy Formulation and Implementation
Having understood the above, the key question is how to apply BI in strategy formulation and implementation. Below are some of the possible steps that can be taken to leverage on BI on strategy formulation and implementation:
- Include BI as part of the formal process of strategy formulation and implementation. Challenge the assumptions adopted during the strategy formulation and implementation. The information should only be adopted once validated by the BI efforts
- Assess the impact of the new strategies on firm’s capability to implement the strategy e. its capabilities and weaknesses. A good strategy is only as good as its implementation. It is imperative that the capacity and capability to deliver is assessed prior to the strategy implementation
- Develop possible scenarios how the strategies will affect competitors or industry and assess their likely responses to the new strategies. Before an attack, one must assess the likely response of the enemy. Without sufficient preparation, the strategy might be retaliated by stronger competitors leading to crushing defeat
- Put in place a mechanism to monitor the effectiveness of the implementation of the new strategies and potential competitor’s responses. The BI needs to gather data with the aim to of measuring the effectiveness of the strategy implementation. The worst scenario is that the strategy may inflict more harm than good
- Assign responsibility to monitor the effectiveness of strategy implementation. The monitoring should result in the realignment or scrapping of the new strategies before it is too late
The often neglected BI needs to be part and parcel of strategy formulation and implementation. The external BI information might not be readily available in ICT systems and extra efforts are thus required for compiling and analysing the information. Human wisdom, experience and judgement which are essential prerequisites to be a “sage” person can never be replaced by ICT systems.
The notion that BI is about ICT system is a myth. ICT system suppliers who are not normally business strategists have the tendency to push the product ahead of the strategic needs of the organization. Strategic planning and BI require hard work and wisdom. It is not just a few clicks on the dashboard screen of the so-called BI ICT systems.