"IT groups face a barrage of demands from CEOs, CFOs, auditors, and boards to ward off new information-security risks such as subtler viruses, evolutionary hacking algorithms, and strategies that exploit wireless connectivity," write David Apgard, author of the new book Risk Intelligence: Learning to Manage What We Don't Know. "With resources already stretched thin, IT security executives will have to do ruthless triage. They must discern which security risks pose the most substantial threats, which are small enough to postpone taking immediate action, and—perhaps most important—which are threats for which IT lacks sufficient risk-evaluation abilities."

He urges us to take a disciplined approach to risk -- one that helps us evaluate all the discernable information security risks that we now face. Current approachs to risk assessment revolve around measuring the loss associated with worst case scenarios and the costs associated with mitigating them.

The problem with this approach is that aggregated risks that may be severe at an enterprise level may be different from those that show up at a business unit level. We also are biased -- or predisposed -- to focus on certain kinds of risks. These risks may or may not represent a prioritized threat to our organizations.

What are the biggest information security risks to organizations now?According to the Computer Security Institute, the ones that represent the greatest loss are:

=>VIrus Attacks.
=>Unauthorized Access.
=>Stolen Laptops or Mobile Hardware.
=>Intellectual Property Theft.

Phishing scams, in which a hacker misrepresents an email message in order to collect consumer data and passwords, also are costly to companies from a brand standpoint. Deloitte Consulting reports that the number of brands hijacked through such scams was up 18% from June (over May). In July, 157 online brands were attacked by such campaigns, according to its report.

Given the circumstances and the stakes, information security professionals are challenged to introduce disciplined ways of identifying and managing such threats.

Apgard urges such security leaders to "ask which risks your organization is skilled at determining. Then, separate high-risk intelligence projects from those for which the organization has low risk intelligence before deciding which to pursue first."

While Apgard's method is discussed in greater detail here, the critical factor to understand is that enterprises need methods not only to identify and measure their immediate risks but ways to evaluate the emerging threats that they don't yet understand as well. Risk intelligence helps us prioritize the threats that can truly hurt us.

Davenport, who has been named one of the most influential consultants by Consulting Magazine, is a recognized thought leader for his work in knowledge management, business process reengineering and the economics of attention (to mention a few of his works). Now, he has turned his attention to the power of analytics as a force for competitive differentiation. In fact, Tom tells me that his recent piece on the subject in Harvard Business Review has generated more reader comments and feedback than any other article he has ever written.

One wonders whether the interest in this sphere might fade a little bit, though, now that the economy has revived. Seems like companies get most interested in number crunching during downturns, and mostly because they are weighing an M&A deal. Hopefully, such campaigns can help fuel investment in the analytical realm.

Aggregate the data from those searches and, pretty quicklly, you are able to see what trends are emerging (or fading out). Marketers, whose mouths begin to water, see it as a way to forecast what consumers will buy. The Internet, in other words, can see the future. As a recent article in the New York Times put it:

When people went to the home page of Google or Yahoo and entered a few words into a search engine, what they were really doing, he realized, was announcing their intentions. They typed in "Alaskan cruise" because they were thinking about taking one or "baby names" because they were planning on needing one. If somebody were to add up all this information, it would produce a pretty good notion of where the world was headed, of what was about to get hot and what was going out of style.

Or, as Battelle has put it, Web searches are "a place holder for the intentions of humankind — a massive database of desires, needs, wants, and likes that can be discovered, subpoenaed, archived, tracked, and exploited to all sorts of ends...Such a beast has never before existed in the history of culture, but is almost guaranteed to grow exponentially from this day forward."

The NYT piece noted that the database of intentions has become ever more real with Google's recent announcement of a new offering called Google Trends. You can check the popularity of any term using this tool. And you can match the popularity to geography. Now, one town mayor -- in Elmhurst, Ill. -- is stuck explaining why more people in his town type the word "sex" into their search engines than in any other place. But forget about sex for a minute. As the piece points out:

It's the connection to marketing that turns the database of intentions from a curiosity into a real economic phenomenon. For now, Google Trends is still a blunt tool. It shows only graphs, not actual numbers, and its data is always about a month out of date. The company will never fully pull back the curtain, I'm sure, because the data is a valuable competitive tool that helps Google decide which online ads should appear at the top of your computer screen, among other things. .

But Google does plan to keep adding to Trends, and other companies will probably come up with their own versions as well. Already, more than a million analyses are being done some days on Google Trends, said Marissa Mayer, the vice president for search at Google.

When these tools get good enough, you can see how the business of marketing may start to change. As soon as a company begins an advertising campaign, it will be able to get feedback from an enormous online focus group and then tweak its message accordingly.

Clearly, the database of intentions offers some promise to marketers. Expect to see Yahoo and Google begin to show linkages between searches and the searchers (demographics and psychographics). The challenge, however, is that searches are supposed to be anonymous. I imagine they will be less so in the future -- as the search engine folks offer enticements to encourage searchers to share data about themselves. That will help the search engine companies close the loop. Perhaps they will transform marketing. Perhaps they will merely predict the future.

Microsoft is fighting a war on all fronts. On the desktop, it is under assault by Google, which just announced plans to launch a new spreadsheet. In the enterprise, it is threatened by Linux and the whole open source movement. And, on the consumer gaming front, I personally experienced the disarray surrounding the X-Box 360 when we tried to download a patch so my 10 year old son could play a prior version of Star Wars Battlefront II. (The X-Box 360 version is still not out and the process of trying to download a fix to a gameplayer from my modem was a 4-hour tour through virtual hell. Long story short: we discovered -- along with Microsoft tech support -- that you cannot sign up with an AOL email address.)

Intel, meantime, is completely bereft of vision, according to one senior technologist I know who works there. They have to put 50 people in a room to make a single (minor) decision. The business people -- who live in a world of PowerPoint projections -- can no longer communicate with the technologists because they no longer have an interest in or a technical grasp of the issues associated with the actual silicon. The company also is bogged down in India, hiring cheap labor to do stuff that doesn't really need to be done. HR, which is stretched thin all over the globe bringing the company's newest laborers up to speed, is an absolute no show in an organization that needs cultural resusitation. And did you hear? Dell just announced it would be collaborating with AMD, ending Intel's chip monopoly on this critical channel.

And speaking of Dell. It just missed its numbers just in time to see HP blow theirs out. The famed Dell model is under extraordinary pressure as IT buyers look for "trusted advisors" that can guide them through complex IT decisions. That isn't Dell. It is all about selling boxes cheap. But what happens when a big company stops fixating on cheap boxes because it has decided to virtualize the corporate data center and wants a strategic partner that can provide critical assistance throughout the whole delicate process? (Ugh, is this Bangalore I am speaking with?) Nor can the hip new Apple ads lampooning the weaknesses (and squareness) of the PC be good for business. Remember the good old days when Dell was considered the Wal-Mart of the PC industry?

Which brings us to Wal-Mart. It is taking blows from Target and Costco and Amazon, of course. But now we hear about a new threat. UK-based Tesco threatens to do to Wal-Mart what it has done to all its other competitors in Great Britain: kill them. In fact, it has blown away Wal-Mart-owned Asda. Tesco's UK market share in groceries has climbed to 31%, nearly double the 16% held by the Asda chain, according to market-research firm Taylor Nelson Sofres. Unfortunately for Wal-Mart, Asda accounts for about 10% of its overall business and 45% of its international sales.

Andy Bond, Asda's chief executive, stated last December that the unit is "operationally failing." As Mike Duke, the chief executive of Wal-Mart's international division, put it: "We took our eye off the customer." Wal-Mart says Asda sales were "slightly negative" and profits were "below plan" in 2005.

Tesco, on the other hand, is leveraging customer data and its Clubcard loyalty program to present its customers with extremely targeted offers and keep them coming back. While Wal-Mart relies on aggregated data about customer purchases, Tesco knows exactly what its individual customers purchase and prefer. "Its big weapon is information about its customers," as the Wall Street Journal puts it. "Tesco has signed up 12 million Britons for its Clubcard program, giving cardholders discounts in exchange for their name, address and other personal information." Here's one telling vignette in this week's Journal story:

Tesco statements mailed to Karen Masek, an actor and mother of two in London, reflect her preference for fresh produce, environment-friendly cleaning products and organic meat. "They definitely know your shopping habits," she says. "They've never sent me anything totally off the mark."

Recent mailings to Ms. Masek, 43, have included coupons for new vegetables, cooking sauces, and nuts or seeds. Ms. Masek, who made sure her nanny had a Tesco loyalty card as well, says she often redeems the coupons and uses Clubcard points to pay for video rentals.

Through its work with Dunnhumby, a research firm in which it has a majority stake, Tesco analyzes individual customer buying patterns and presents targeted offers. In fact, 80% of its customers are ClubCard members. The data, quite clearly, is an enormous competitive advantage.

So there you have it. The new models -- Google, AMD, Apple, Tesco -- are now strolling down the runways, showing off the newest fashions. By contrast, yesterday's models -- Microsoft, Intel, Dell, Wal-Mart -- are looking rather haggard and worn.

"Bad data remains a major cause of botched marketing campaigns, failed CRM and data warehouse projects, angry customers, and lunkhead decisions," according to InformationWeek. "Despite all we know about the importance of data scrubbing and quality management, many companies are still using data that's redundant, incomplete, conflicting, outdated, and just plain wrong."

Recognizing the risks they run and the costs they bear, many companies are now investing big money in efforts to get a better view of their data, integrate it and ensure it is scrubbed for quality. They recognize the interconnectedness of data quality and corporate performance. "Our marketing effectiveness leads to our sales effectiveness, which leads to our service effectiveness. Data quality is key to the success of that," says Chuck Scoggins, VP of customer solutions at Hilton Hotels. "If you don't have quality data, that whole chain breaks down."

As corporate managers become ever more dependent on performance management scorecards and dashboards, they start to see the critical importance of the data underneath. As the article suggests, the greatest hurdle associated with addressing the problem is the tendency to point fingers of blame. Business managers see data quality as an IT problem -- even though IT doesn't control the business processes that generate bad data in the first place. "Business has to accept the fact that it has primary responsibility for data quality. Data is a business asset," says Nigel Turner, a manager for data quality programs at BT Group (formerly British Telecom) in the late '90s.

How big is the problem? Stamford, CT-based Gartner contends that more than 25% of important data within large enterprises is inaccurate or incomplete in some way. Business result? One survey of 750 IT managers and business executives by the Data Warehousing Institute in 2005 found that 53% had experienced losses or increased costs due to data quality problems.

But there's no reason to throw up one's hands. BT found a way to address the challenge:

Rather than create a top-down, companywide program, Turner targeted line-of-business operations and identified a data quality "champion" in each to lead an information management forum. The groups targeted specific projects with demonstrable returns on investment, such as improving names and addresses in marketing data to reduce the number of letters sent to the wrong people and improving private-line inventory record keeping to increase the number of disconnected circuits returned to stock for reuse.

"We had to prove to BT that these things were worth doing," Turner says. "Data quality isn't very sexy." The original budget for the data quality efforts was a measly $30,000. As the project expanded, Turner's group developed a data quality methodology incorporating best practices gleaned from inside the company and from outside experts, and centralized data quality management. Recognizing that errors will creep into databases despite its best efforts, BT uses data profiling and cleansing tools from Trillium to identify and remove errant data.

The efforts have paid off: BT has realized as much as $800 million in aggregate savings by improving inventory management, boosting productivity through improved automated interactions with suppliers and customers, and reducing revenue leakage through more accurate billing. BT has parlayed its data quality know-how into a consulting business headed by Turner.

Other companies are putting data quality under broad "data governance" programs. The objective is to establish best practices managing, securing and using data. "It requires establishing a formal set of business processes and policies to ensure that data is handled in a prescribed fashion," according to the magazine. "Data governance includes standard definitions for data elements to be used throughout a company--just what a 'lost customer' is, for example--and metrics for measuring data quality, says Terry Haas, director of the enterprise data management practice at PricewaterhouseCoopers. Data governance also defines the data management roles and responsibilities of managers and employees and limits the ability to change data to designated 'data stewards.'"

"This conceptual schism merely creates barriers and conflicts where none need exist," states the book. "It provokes needless arguments and wastes precious time. We need to get beyond this long-running, yet pointless, debate."

As the book puts it, "consistent, measurable results will always be impossible to achieve without compelling, creative endeavors and initiatives that build value in the marketplace. There is, in fact, much evidence that the emotional power of 'charismatic' brands and 'engaging' experiences becomes even more important as customer choices proliferate and the pace of life quickens."

Naras further points out that we should be "looking ahead to an era of marketing in which discipline drives dynamism and dynamism delivers impressive results. Dynamism...is an essential force in the rise and continuing success of great companies. It is the energy, excitement and compelling value we bring to the market – the gravitational pull that draws our customers close and deepens our connection to them."

Now, the argument is being bolstered by marketing pioneers Don Peppers and Martha Rogers. Here's how they put it in their newsletter Inside1to1:

Companies are awash in customer data these days. Web tracking technology, data capture and warehousing, and various other tools make it easy to delude yourself into thinking that you now have a psychic-like knowledge of almost everything a customer buys, communicates, and says to friends about your company.

The problem is that the actual customer insights you have will almost never match up to the expectations created by the deluge of data. And evidence is starting to suggest many companies are developing an unhealthy reliance on this customer data, sometimes using it as a crutch to support a lack of creativity or imagination when dealing with their customers.

Peppers and Rogers go on to point out that data, measurement and analysis can help companies spend their marketing dollars more efficiently, but it won't necessarily help one imagine, design and craft the products that will take companies to new levels. There's a reason that Spock wasn't the captain of the starship.

They urge us to seek and develop the "engines of creativity" that will differentiate us in the market and create exceptional new forms of customer value. Customer analysis and feedback should be treated as part of a guidance system, but not an end in themselves. They quote Peter Guber, chairman and CEO of Mandalay Entertainment: "Encourage uncertainty, because it's a fertile ground for new ideas... You have to build possibility, not just probability, into the equation."

In a survey conducted with Boston Consulting Group, the magazine ranked the 25 most innovative companies. The top 3 in America are Apple, Google and Procter & Gamble. In Asia, 3M breaks the top 3. In Europe, Nokia does.

One of the key elements in innovation is coordination, according to the survey. It's about more than transcending silos. In fact, the top innovators "reroute reporting lines and create physical spaces for collaboration," the magazine contends. They reward innovation and build innovative cultures. "You have to be willing to get down into the plumbing of the organization and align the nervous system of the company," says James P. Andrew, who leads the innovation practice at BCG.

One company that is profiled is Procter & Gamble Co. It has introduced an open-source innovation strategy it calls "connect and develop." The idea is to leverage the best thinking from all over the globe. In fact, the company has an objective of generating 50% of its new products from outside its own R&D labs. How? "Tap networks of inventors, scientists, and suppliers for new products that can be developed in-house," the pub states.

The company was forced to reinvent and redesign its R&D operation to meet these goals. "It created new job classifications, such as 70 worldwide 'technology entrepreneurs,' or TEs, who act as scouts, looking for the latest breakthroughs from places such as university labs," according to the article. "TEs also develop 'technology game boards' that map out where technology opportunities lie and help P&Gers get inside the minds of its competitors."

Larry Huston, vice-president for innovation and knowledge, is leading the connect-and-develop initiative. Managers in every business unit are now responsible for driving culture change. They communicate with Huston who is leading the company's innovation networks. "You want to have a coherent strategy across the organization," says Huston. "The ideas tend to be bigger when you have someone sitting at the center looking at the company's growth goals."

Indeed, geographic intelligence is becoming easier to use and vendors are starting to incorporate it into their enterprise software solutions, explains Joe Francica in Intelligent Enterprise. "As a result, C-level executives are asking about ways in which they can integrate their corporate data with location technology and get a bird's-eye view that may provide a better understanding of customer locations, as well as proximity to other geographically important features — such as competitors."

Expect greater corporate investment as the benefits become more clear. "Corporations that need to leverage location-based information can now more efficiently expose geographic relationships to a broader group of business process managers and executives, who never knew they were missing key information," the author writes. "From customer relationship management to enterprise resource planning, maps complete the dashboards so familiar to many decision support tools."

One company now focused on "geographic enablement" in business intelligence is Oracle. Indeed, it now "delivers its database with the ability to manage, store and query geospatial data. The company offers enterprise database users a way to manipulate data with a location attribution and take advantage of the product's inherent security and indexing features. Oracle Locator provides support for simple feature management, map projections and visualization, while Oracle Spatial delivers geocoding, routing and spatial analysis."

BI providers such as Hyperion Solutions, Information Builders Inc., MicroStrategy and SAS Institute are working with geo-intelligence software specialists like ESRI, MapInfo and others to "integrate location technology with their platforms." Atlanta-based Cox Communications has deployed a solution jointly developed by MapInfo and MicroStrategy solution to analyze markets and support field sales activities.

This may change the way we think about geography. As companies and consumers increasingly identify the value of being location-aware, our demand for geo-intelligence can only be expected to grow.

If we are to bring about greater analytical competitiveness, we probably should start with financial literacy. There's a clear correlation between such literacy and the performance of organizations, contends Dr. Karen Berman, Founder, President and Co-owner of The Business Literacy Institute and co-author of the book Financial Intelligence. When employees understand how success is measured financially, they are more able to contribute to those results, according to her research.

But that's not the only benefit of higher financial literacy. "Motivation also increased, commitment increased, and turnover decreased and people felt better about where they worked," she says. "They realized that they were an important part of the organization and its success; that the leadership team trusted them, considered them important and included them by sharing the information on the business."

Berman focuses on teaching non-financial managers about key financial matters such as understanding an income statement, a balance sheet and a cash flow statement. As she explains, "it is not complicated, although maybe the finance people in your organization present it in a complicated way."

It's a bigger challenge than one would expect. "I think one of the problems is that as you are moving up the ranks in the organization, at some point you are expected to know this stuff," Berman says. "In many cases there is no formal training and it is very hard for people in a management meeting to raise their hands and say, 'Wait a minute! I don’t understand what you are talking about.'”

What's the payoff of a financial literacy program? The same payoffs we can expect by promulgating operational analytics programs that help people understand and act on the numbers from their front line positions. "By understanding the numbers, people at all levels can make better decisions," concludes Berman. "They can understand how their actions and decisions impact the bottom line."

As Prusak puts it, information is that "one dimensional and bounded" stuff -- like an x-ray, a recipe or a powerpoint presentation -- that we are sending every day via email all over the globe. Knowledge, by contrast, "results from the assimilation of and connecting of information through experience, most often through apprenticeship or mentoring. As a result, it becomes embedded in organizations in ways that, so far, have largely evaded codification...And while the cost of obtaining, storing and moving information has plummeted, the cost of doing so with knowledge hasn't dropped much at all..."

Why? Because it still takes virtually the same amount of time to acquire knowledge or learn a skill that it did before the arrival of the Internet. People can't produce a drug, design a new product or provide strategic advice just because they have access to information. As Prusak concludes, "Most of the people in the world remain out of the knowledge loop and off the information grid...But simply giving everyone access to email and Google will never in itself flatten the earth. Until our governments, NGOs, schools, corporations, and other institutions embrace the idea that knowledge -- not information -- is the key to prosperity, most of the world's people will remain a world apart."

The outlines of this transformative trend are sharply sketched out by Jeremy Hope in the most recent issue of Optimize Magazine. Hope is the research director for the Beyond Budgeting Roundtable, a group dedicated to elevating the modern CFO by liberating the role from stultifying, budgetary bureaucracy and placing emphasis on advice, analysis and agile leadership. As he explains:

Finance faces a host of problems. For one thing, transaction processing and month-end routines take up more than two-thirds of its time—there are simply too many journals, too many spreadsheets, too many errors, and too many disconnected systems. Budgeting takes too long, is too expensive, and adds too little value. In addition, there are too many irrelevant measures and reports, and information flow is way too slow. Clearly, forecasting and risk management aren't core competencies, and finance is seen as an accounting specialist, not a business partner. The results of all these failings are increasing levels of detail and complexity, and less time available for value-adding work.

If analytics are to be widely distributed and operationalized, the CFO must be liberated -- and liberate the rest of the enterprise -- to concentrate on the performance management and measurement issues that truly matter. As Hope points out, "few CFOs have realized the ultimate goal of transferring resources from transaction processing to decision support."
He offers a powerful model to guide us as we consider the implications of this situation. Citing compelling examples such as American Express, which has an "investment-optimization process that lets senior managers prioritize new investments on a monthly basis," he points to links between performance management and measurement. As he explains the model:

It isn't about quick-fix solutions, but about applying a number of clear, simple principles that liberate the finance team and its management colleagues. It means simplifying everything and providing effective decision support and performance insights that really help managers improve their results.Instead of using crude targets to drive performance results, the CFO...believes that a better and more sustainable approach is to relentlessly focus managers on improving processes so the company can boost customer value and rival competitors in profitability. This approach encourages managers to eliminate costs that add no value, use measures to improve their work, and make sensible risk-adjusted decisions. Words such as clarity, simplicity, transparency, and accountability best describe this vision, through which finance becomes a valued and trusted business partner.

Ultimately, Jeremy Hope argues that CFOs must free themselves and the organization from the top-down, centralized controls now being proferred by executives, consultants and vendors that preach the gospel of "managing by the numbers." Hope offers hope, but it will take initiative. As he puts it: "It's up to the finance team to take the initiative and not only build more adaptive systems with fewer targets and performance contracts, but also to rescue managers from excessive detail, complexity, and micromanagement so they can focus on improving performance—and the business."