Intelligent Economy

Tom Davenport's doing a free webinar titled: Competing On Analytics: Move Faster, Accomplish More, and Avoid Mistakes by Learning From The Best on October 31.

The agenda:

- What data-driven marketing is (and isn't)
- How marketing visionaries are using analytics for competitive advantage
- What specific tactics these early adopters believe are essential to their success (and what they'd do differently next time)
- How you can personally succeed as a marketer during these tumultuous times

What are you waiting for? Go sign up!

Posted by Christian Sarkar at 07:52 PM | Permalink | Comments (0) | TrackBacks (0)

The Economist Intelligence Unit and Accenture researched the key factors behind high performance in finance and accounting functions.

While the survey results make sense, what does not is Accenture's take on what the survey means.

Their findings:

Over half of the respondents felt that the high-performance finance function was defined by an ethos of service and strategy. Fifty-nine percent included the creation of a service-oriented culture; 55 percent included the development of a strong capacity for strategic analysis; and 53 percent expressed a belief that there should be a clear linkage between the work of the finance department and the overall company strategy.

Significantly, these attributes are primarily outward facing. Inward-looking attributes—to do with the composition of the finance function itself—were not seen as contributing explicitly to high performance. No fewer than 69 percent of respondents felt that enabling senior management to make the best business decisions was the most important role of the finance function. But the traditional, tactical role of finance comes through strongly as well—68 percent felt that managing cash flow efficiently was of high importance in the success of the business.

Perhaps the most notable characteristic is the gap between the ideal and performance:

- Only 14 percent rated finance’s contribution to the attainment of organizational strategy highly, with just under half (45 percent) giving a “good” rating.

- While 69 percent saw enabling better decision-making by senior management as a key finance goal, only 37 percent saw actual performance as good.

- Only 19 percent rate their finance function’s management of risk as good.

Cash flow management, while ranked as important by 68 percent, is rated as good by only 45 percent.

One reason for this lack of performance is the reliance on traditional measurements—if measurements are used at all. Measurements oriented towards strategic goals remain the exception—for example, only 22 percent conduct user surveys to measure internal satisfaction with the finance department.

Barriers to progress include cultural resistance to change and the lack of clearly defined metrics for directing improvement. While it is agreed that CFOs must take the lead in overcoming the barriers, there is no consensus on what their ideal skill set should be.

The conclusion?

According to Accenture:
For CFOs, the message is clear: outsourcing finance is one route to high performance.

This is NOT what the survey said.

Rather, this is Accenture's view of how companies can become better at strategy- outsource the day-to-day work and focus on strategic finance.

But what if the next strategic advantage comes from analysing the day-to-day intelligence, looking for early trends, customer preferences, and spending patterns?

What if you had to "compete on analytics" ?

What Accenture should do next is hire the EIU and survey companies that have already outsourced their operational finance functions to see if there is a correlation between outsourcing and getting more strategic.

I'm willing to bet there won't be a significant positive correlation...

And what qualities do you want in your new CFO? You want them to think strategically and critically. You want them to question reports like this one.

Read the full "report" here>>

Posted by Christian Sarkar at 10:56 AM | Permalink | Comments (1) | TrackBacks (0)

Interesting stuff uncovered by the research folks at CFO magazine.

They sought to explore finance executives' views on their ability to report and analyze financial information. What do their companies do well? Which stakeholders are well- or ill-served with information and analysis tools? And what barriers do companies face when trying to improve their financial reporting and analysis capabilities?

CFO Research executed an electronic survey to readers of CFO magazine in November 2005. They gathered a total of 164 responses from senior finance executives — more than half from companies with $1 billion or more in annual revenue.

The respondents' titles breakdown:

- chief financial officer (30 percent),
- vice president or director of finance (33 percent)
- controller (16 percent)

Here are two snapshots of what they uncovered:

and

Looks like the intelligent economy still has a ways to go. A majority of survey respondents say their processes and systems to allow what-if scenario analysis and to give end users flexible desktop access to additional information needed improvement.

Read the report here >>

Posted by Christian Sarkar at 01:54 AM | Permalink | Comments (0) | TrackBacks (0)

Performance scorecards and dashboards have the potential to make actionable intelligence available throughout the enterprise -- at both executive and operational levels. Rather than lining up for reports produced by IT analysts, performanace management solutions of this kind make the insights and analysis available on-demand, according to Wayne Eckerson, director of Research and Services for the Data Warehousing Institute and the author of Performance Dashboards: Measuring, Monitoring, and Managing Your Business.

"Dashboards and scorecards can help transform underperforming organizations into high fliers," he writes in Intelligent Enterprise. "They help you focus on the key objectives and provide timely alerts so you can fix problems or exploit opportunities before it's too late. As the name suggests, dashboards provide controls that executives can use to change the direction of an organization and get everyone headed in the same direction. "

Eckerson sees multiple layers in a performance management system:

Monitoring layer -- uses dashboards, scorecards or alerts to notify users of material changes in the performance of processes and activities.
Analysis layer -- lets users drill down into exception conditions and explore a problem's root cause using multidimensional analysis.
Reporting layer -- provides users with detailed operational data (such as a list of defective parts and the customers who received them) so they can take prompt action.
Planning layer -- lets managers employ the output of their analyses to create plans, models and scenarios, which are then fed back into the monitoring layer and encoded as targets and thresholds.

Eckerson warns us that there are "pseudo performance dashboards" on the market today. The key weaknesses to watch out for: too flat (inadequate data or analytic capabilities); too manual (requiring too much manual data collection and massaging); and too isolated (misaligned with the strategic objectives of the enterprise).

As he concludes, "Performance dashboards and scorecards are part of a layered set of analytical applications running on a common set of BI services; they let users measure, monitor and manage the processes and activities for which they are accountable. Don't forget that the system is dependent on a robust data management architecture that delivers actionable information to users on demand. Dashboards and scorecards should translate the organization's strategy into objectives, metrics, initiatives and tasks customized to each group and individual in the organization."

Read the whole piece here.

Posted by Britton Manasco at 10:40 PM | Permalink | Comments (0) | TrackBacks (0)

From time to time, we're going to take a look at what various vendors are up to in the Intelligent Economy.

In this case we'll take a look at HP's vision for Business Intelligence.

Yale Tankus spells it out for us in his blog. It's all about "synchronizing strategy & execution."

But how?

If you look beyond the sales-talk, you'll see there is flesh on the bones. HP has built an enterprise management framework around "process aware" business intelligence. Admittedly it's still somewhat IT-centric, but they're headed in the right direction, with partnerships with SAS, Cognos, and Hyperion among others.

What's going to tie all of this together in a manageable way? SOA. And according to HP, their SOA Manager product.

Let's watch the fun. The first step will be getting HP consulting up to speed on SOA. The challenge is not in the vision, but in the execution. The first integrator to get their talent base up to snuff is going to win this game.

Are you listening, IBM Global Services?

Posted by Christian Sarkar at 12:17 PM | Permalink | Comments (0) | TrackBacks (0)

Tom Davenport gives us 10 characteristics of businesses that compete on analytics. Can you think of more?

Tell us about it, or better, post them on his blog!

Posted by Christian Sarkar at 12:10 PM | Permalink | Comments (0) | TrackBacks (0)

Here's some "intelligent economy" thinking from the folks at MercerMC.

The article is called "Uncovering the Hidden Drivers of Demand" and presents a good example of how a data-driven business model works to maximize profit.

Here's how they describe it:

"It's not enough to know what makes demand happen. Executives also need to know the variable costs of acting on that information so that they can determine whether a given move will make or lose money. Linking the information about each demand driver directly to the variable costs of the business answers questions such as: If the brand matters most, where should we invest to improve brand equity and what will it cost? If external influencers matter, should we shift the marketing mix away from golf tournaments and toward better relations with trade journalists? If customer acquisition cost determines most of the lifetime value of that customer, how do we adjust our channel mix to ensure a profitable relationship? If customer service matters, what exactly merits investment--a shorter wait on the phone, the knowledge of call center representatives, or the speed of technician response? If the customer is asking for 24-hour delivery of a turbine, what are the economic implications?"

Decisions are based on data and "profound knowledge" (hat tip to the late, great Deming) to embed the key value drivers and business economics data into a graphical representation of a company's business model, an Interactive Strategy Model, they call it.

Here's a "dashboard" of how this might look:

Doesn't that make you want to read the whole article?

Posted by Christian Sarkar at 11:27 PM | Permalink | Comments (0) | TrackBacks (0)

Is "competing on analytics" a management innovation worthy of Gary Hamel's "standards"?

Let's see... in his article "The Why, What, and How of Management Innovation," Hamel says:

"A management innovation creates long-lasting advantage when it meets at least one of three conditions:

1. It is based on a novel principle that challenges the orthodoxy
2. it is systemic, involving a range of processes and methods
3. it is part of a program of invention, where progress compounds over time"

Check, check, check.

Looks like "competing on analytics" meets all three conditions.

Hamel lists a dozen of the most noteworthy management innovations from 1900 to 2000:

1. Scientific management (time and motion studies)
2. Cost accounting and variance analysis
3. The commercial research laboratory (the industrialization of science)
4. ROI analysis and capital budgeting
5. Brand management
6. Large-scale project management
7. Divisionalization
8. Leadership development
9. Industry consortia (multicompany collaborative structures)
10. Radical decentralization (self-organization)
11. Formalized strategic analysis
12. Employee-driven problem solving

Losing out are the following:

- Skunk Works
- account management
- business process reengineering
- employee stock ownership plans.

Says Hamel: "There are more recent innovations that appear quite promising, such as knowledge management, open source development, and internal markets, but it’s too early to assess their lasting impact on the practice of management."

Let's add "competing on analytics" to the list.

The Intelligent Economy is, of course, not just about management innovation. Rather, it's about the process of continuous innovation - sometimes incremental, sometimes radical - with a fundamental focus on results. Not simply measurement, but the right measurements, often in real time... Decisions made not just on data, but on data models (David Maister has one we'll ask him to share with us one of these days).

Now let's apply this notion (competing on analytics) to every field, from branding to business activity management, from communities of practice to talent development, from physical (geographic) clusters to online global ecosystems.

Tom Davenport, you have a winner.

Posted by Christian Sarkar at 10:03 PM | Permalink | Comments (0) | TrackBacks (0)