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Making the case for Business Intelligence in Small Business

While many IT professionals equate business intelligence (BI)  with large organisations, the reality is that there are many small and medium sized businesses who are quietly implementing BI because they see the benefit of it.  I think there are three reasons for this:

  1. On the human side many talented managers leave big businesses that are resistant to change and setup by  themselves.  They may well relocate and get into a completely different market in the process, but they wont forget to keep a keen eye on the bottom line and will have imaginative marketing plans which they will want to measure.
  2. Falls in the cost of hardware mean that the Christmas card I sent my mum with a silly tune it has more power than my dads first mainframe (which in 1963 had 2K of main store using ferrite cores).
  3. Massive increases in the capabilities and ease of use of the tools available.  There is a mature tools market from a variety of vendors Microsoft, SAP, IBM and a large body of niche providers.  Interestingly all of these hook up in some way to Excel as the primary front end.

The perceived barriers to wider adoption of business intelligence are also worth noting:

  1. Confusion.  The IT vendors have done a great job of confusing business with all sorts of terminology and made the whole area more complex than it needs to be. 
  2. High cost of acquisition.  Although the infrastructure is cheap., there is quite a lot of work to be done to get meaningful insight out of raw business data.  This is both technical work which is usually done by a specialist consultancy or contractor, and business effort needed to articulate what is required, training to use the system and possible cultural change needed to use BI as part of the decision making process.

I use the term perceived here because I believe these are views that are not necessarily correct when put in context and are often based on outdated information. 

Yes Business Intelligence can be complicated depending on the complexity of the business and the measures used to measure success.  At it’s simplest level it should be a one page report summarising where you are with subsidiary or sub-report with a more detailed analysis of each quadrant of performance. 

As for costs IT should be treated like any other investment and the challenge here is to measure the effectiveness of that investment.  Measuring the costs of an IT investment are relatively easy, the hard part is assessing the benefits particularly of BI projects.  I think this can only be done if by assessing the contribution BI makes to the decision being made and he ensuing benefits of those decisions. 

For example you browse your Profit and Loss and realise you are paying a lot interest and bank charges.  Analysis leads you to notice that your corporate clients are paying right at the end of their payment terms (their savvy finance guys have BI as well of course), however your suppliers have tighter payments terms with you because you are small so essentially you are giving interest free loans to your corporate clients.  BI has identified the problem, it’s up to about what you do to fix it, but whatever you decide to do you need to set up monitoring to watch this while keeping an eye on your sales so that your tactics for fixing this don’t seriously affect your other strategies.  The possible benefits arising from BI in this scenario might be:

  • The problem being picked up earlier than you would have done otherwise, and with less effort.
  • The analysis you can do to help you decide, what to do about it
  • The improvements to your bottom line that arise form making the change.

To conclude BI is like any business investment, and while the benefits may be hard to quantify there is no doubt that the reduced costs of ownership, make it more and more attractive to small businesses.