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1. Kramer Management Consulting Box 14195 Scottsdale, AZ 85267(480) 824-8194 or tkramer@k-advise.com www.k-advise.com Terence Kramer - CMC, President Kramer Management Consulting (c) 2012 tkramer@k-advise.com Increasing Profits Through Business Intelligence Presentation By:
2. Unique Background: Rags to Nicer Rags Middle child of 15 siblings; egalitarian & military multi-racial environment Started working at 8 years of age; worked & paid my way through college Meditating for 40 years; high IQ and intense intellectual curiosity Multiple industry experience Business Successes that involved BI: Grew client from $15M to $300M at 4-5% NPBT over 15 years Grew client from $5M to $60M at +15% EBITDA over 12 years, then assisted in sale of company to Private Equity firm in 2008 Served on Board of $500M company, revised Board Agenda, their Board/Executive meeting interactions, and created dashboard
3. Interest in Business Intelligence 1985-86: Multi-faceted role with advertising agency Part of billion-dollar company: Liaison to branches, 16 branch offices (2 were foreign), 6 companies, 16 support staff 10 calls a day per branch, communication was a disaster, multiple software was being utilized (10), only IT understood & could translate data, companies were losing money, financial & business reports were 2-3 months behind Opening new Information Services Division How could this situation be changed ? How do you fix this ?
4. Converting Bad BI Into Good Discovered Report Writer, as part of mainframe, which formatted data in proper, readable manner Started eliminating extraneous software to chagrin of VP-IT, diverted data flow into correct buckets, and turned data interpretation over to Accounting Created “text language” for branch reports so Managers immediately knew information Listened to branches, corrected problems, and then added requested information Prevented profitable branch from closure Convened meetings among staff to exchange intercompany transactions, which cut report production to 2-3 weeks versus 2-3 months Spoke to new Division Leaders to inquire about their needs & then established report output formats for them
5. Defining Business Intelligence (BI) Mainly refers to computer-based techniques used in identifying, extracting, and analyzing business data. Some basic examples are sales revenue by products, by departments, or by associated costs. Technologies provide historical, current and predictive views of business operations. Common functions of business intelligence technologies are reporting, analytics, data mining, business performance management, benchmarking, text mining and predictive analytics. Business intelligence aims to support better business decision-making. Bottom line: BI = Communication !
6. Why is BI Important ? In this difficult economy, profits are not rolling in through top-line growth. There are significant opportunities to streamline businesses. The streamlining occurs through improved data collection, formatting, analysis, and decision-making. The dollars lost in poor productivity & potential cost savings are measurable. The cost savings from BI improvements consistently outpace the cost savings through any personnel productivity improvements achieved . BI improvements will save $ 15.8 B. Source: Reed Business Information Average worker spends 40 % their time searching for information. * Each employee takes 70 % of their knowledge when they leave a company .* 60 % of companies have not successfully integrated hard-copy documents into their digital workflow .* * Source: Digital Asset Storage
7. Specific Case Study Savings Initial cost savings from new BI: $200K Company estimated that they saved a minimum of 10,000 hours per year, or roughly 5 employees’ worth of time, within the 1st year. At $ 20 per hour per employee, the cost savings would be $ 200 K annually. This was accomplished through streamlining, summarizing, and linking their information sources to produce new internal report formats, which improved strategic management decisions. New approach was described as horizontal integration, which differs substantially in how most companies capture data, which is traditionally within a vertical, silo framework. (chart distribution)
8. Typical Employee Productivity Example Company: $ 25 M in revenues with 100 employees
9. Productivity Change Comparisons 100 employees = 208K work hours 20 % productivity increase saves over 40 K hours 40 K hours pay = $ 800 K $ 25 M Company generated $ 6 M in Labor Costs 10% productivity increase = $ 600 K
10. Profit Correlation to BI Improvements
11. Information Technology Overview The Best Are Not That Good There are top-ranked companies that have key Managers participating & leading Computer User Groups, but often have poorly designed & labeled report formats, They also have limited usage of software modules. These companies are considered the most sophisticated within their industry when it comes to technology and data outputs. Fragmented Technology Approaches The leading computer hardware and software companies have very limited customer databases, reflecting the lack of common frameworks in which to process information. Each top-flight technology company may have a customer base of only hundreds, yet claim to be the leader. Bottoms-Up Approach Is Not The Only Approach The technology orientation is on transaction processing, which is a bottoms-up approach. Few are seeking to design information outputs, which is a top-down approach.
12. Current Situation With Information Outputs Software Usage & Variety Companies barely use 50 % of the available report capacity. Companies also use un-linked multiple software applications that produce redundant & over-lapping reports. Transaction Focus & Limited Summary Use Companies are focused solely on transaction data and data entry when it comes to information The standard reports generated by software regurgitate transaction summaries Errors & Omissions Companies do not always do a good job when it comes to capturing & entering transaction data in the first place Poor Report Designs The summary report formats that companies produce are poorly designed and labeled, which impede communications, discussions, and decisions Mis-Aligned Target Audiences Reports do not always flow to the decision-makers and will flow to interested employees who are not authorized to view proprietary data. Information & reports often surprise meeting attendees.
13. Improved Decision-Making Yields Profit Profit Quality Information flow from multiple sources improve data quality. Meeting attendees are informed & prepared ahead of time. Expansion of report format utilization beyond transactions. User-friendly reports. Employees buy into information value to contribute to BI. Profit Multiplier Information output is designed for optimal decision-making and for automated decision outputs. Companies that begin to utilize this linked information system to yield the best business decisions produce above average profits. Horizontally integrated work acquisition systems drive profits. Less time is spent on information searches. Companies can focus on making idle time productive.
14. Where to Start: Fixing the Basics Know Technology Capabilities First Become familiar with current software module capabilities. Most companies are not aware of their current BI capabilities. Identify active components of software & report descriptions Properly label & design format output Select the timeframe parameters of reports & the output timing Create secure controls over report distribution lists Improve Your Business Intelligence Determine new report outputs from unused modules to fully utilize existing capabilities. Also add new software where data generation is entirely missing. Getting to Square One At this stage, these improvements in BI, while exciting and extremely helpful to companies, only represent the early stages of producing the best transactional information outputs.
15. Integrating Outputs Correct Basic Transaction Summary Reports Create New Reports from Existing Report Writer Modules Improve Analytical Reports of Transaction Data Create Business Activity Reports for Non-Transactions Establish In-House Benchmarks Compare to Industry Standards Link to External Economic & Market Data Convert & Integrate Vertical Information Flows into Horizontal Data Report Flows
16. Specific Business Activity Reports Success Ratios Employee Activity Production Opportunity Share of Market Leads + Market Share % Probability Revenue & Gross Margin Report (sales pipeline) Backlog Factor Analysis Number of CO’s and CO Dollars per Completed Project Manpower Projections
17. Early Transformative Stages More Complex Summary Data is Needed Optimal business decision-making data cannot be generated by existing transaction summary reports. Companies then seek interpretative data of transaction reports for better management decision-making when basic information will not suffice. Companies begin to explore linkage of information from internal business functions as well as importing external market & economic data. Light Bulb Goes On It dawns on companies that the profits increase through better decision-making when the best data output is available. BI Drivers Experience: Executive Committee participation, hands-on task responsibilities in staff roles, managerial delegation, collaboration with multiple Branch Managers, Board participation, cumulative business experience and through transaction analysis. Values & Beliefs: Streamlining communication flows, increasing the ability to communicate successfully with larger numbers of people, improving productivity in every position, intellectual curiosity, and the desire to maximize profitability.
18. Surpassing Best-in-Class BI Automate Strategic Decision-Making Eliminate re-inventing the wheel Don’t act like repeat occurrences are 1st time events Limit company time spent on decisions Reduce meeting time Prepare personnel for effective meetings through BI Use meetings to verify information, not understand it for the 1st time Make decisions & reduce debate Provide Succinct Summary Reports At Every Level Create mid-level decision-making environment & culture
19. Typical Stacked Information
20. THE AUTOMATED DECISION PROCESS Better Decisions = Higher Profits Time Savings = Cost Savings
21. Incredible Benefits from BI Increased Data Capture: Improved capturing of critical data because companies know what they want Dollars & Time Saved: Time savings from improved report formats because they are readable Improved Analysis: Interpretive, analytical reports become part of mainstream information which saves time Linked Information Yields Data-Based Insights: Horizontal, linked integration of multi-functional & market data yields better assessments and business decisions Market Data Inclusion Adds Perspective: External data portals put companies in direct touch with market forces so they can quickly adapt Automated Decision-Making Provides Consistency: Automation of decision-making saves enormous amounts of meeting time plus minimizes Management’s bad judgment calls Time Savings Promotes Focus on Critical Business Areas: Time savings through data capture within a single information database versus re-entering data separately into multiple software packages Enhanced Profits: Better business decisions, enhanced communications, and significant time savings lead to higher profits.