The ability to exploit data in a myriad of different
ways is key for successful organisations in the information age.
According to areportby consultancy McKinsey, "One
of the trends that will help shape businesses and the economy over
the coming years is leveraging information in new ways.
Organisations can do this by using information to make smarter
decisions and to develop insights that create competitive advantage
and new business models."
But while few would disagree with this as a vision statement, it
fails to reflect reality.
Data morass
Neil Macehiter, partner at analyst company Macehiter
Ward-Dutton, believes that, ultimately, all businesses are
concerned with exploiting information and using it more
effectively. "The challenge is that they have vast amounts of it
and so often don't know what they've got," he says. "They may not
always be collecting the most relevant stuff or be able to access
it, and the quality and consistency is variable."
So while most enterprises find themselves swamped with data,
many fail to make the most of it, despite having introduced rafts
of
business intelligence (BI) tools from different vendors.
One of the problems here, says Andreas Bitterer, a
vice-president of research at Gartner, is that organisations are
often simply unaware of the possibilities offered by such
technology and so tend to focus on historical reporting and
analysis activities.
"The trick with BI is not finding out what happened yesterday,
but predicting the best next action," says Bitterer. "The value
comes from forecasting and looking into the future, but many
companies are missing a beat here. They're so focused on the
reporting and analysis bit that they're not using what they've
learned and applying it effectively."
Organisational culture
Another issue is that enterprises tend merely to implement
business intelligence. But they also need to introduce a sound
enterprise-wide approach to information management and governance
and revisit organisational culture to promote
collaboration and information-sharing.
"It's no accident that the I in information technology stands
for information because it's about exploiting data in different
ways," Macehiter says. "It's partly about making smarter decisions,
but it's also about combining information with other assets such as
people to harness innovation."
While companies have tried to grapple with this issue for years
under the banner of knowledge management, traditionally it has been
a top-down approach with a tendency to be prescriptive. But the
arrival of
new management techniques could change this.
As the McKinsey report points out: "Google fosters innovation
through an internal market: employees submit ideas and other
employees decide if an idea is worth pursuing or if they would be
willing to work on it full time."
Prediction markets
Another idea starting to gain some credence in the US is that of
the
prediction market, a strategy already
adopted by Intel in conjunction with more standard short-term
forecasting techniques in an attempt to estimate product demand
more accurately.
Vuk Trifkovic, an analyst at Datamonitor, says prediction
markets are "a sort of
freakonomics" that work on the same principle as fantasy
football leagues. "People set up exchanges of ideas, put pretend
money on a given notion and track it as it gains or declines in
value," he explains.
Although prediction markets are no less subjective or vunerable
to hype than real ones, Trifkovic believes the concept has value,
particularly if combined with more scientific ways of predicting
performance. This is because "they can be a really fun way to
engage people more and foster a sense of community".
The problem lies in how to balance the use of automated,
standardised processes with a more creative approach that relies on
human intelligence and flair.
"An organisation's ultimate differentiator is its people,"
Trifkovic says. "So you have to ensure that everyone's working in a
standard way so that things happen and there isn't redundancy in
business processes. But you also have to provide people with the
right tools to promote creativity and I don't think anyone's put
their finger on how to do that yet."
Another consideration is organisational culture, which in many
instances is typified by the "information is power" mindset. At a
personal level, let alone a departmental one, people are often
reluctant to share information with colleagues and need to be
persuaded with carrot and stick methods.
Tim Jennings, a research director at Butler Group, says, "It's
about setting down guidelines in an information charter and
rewarding people for sharing or contributing to corporate knowledge
bases. Quite often you see organisations setting out information
policies so that staff know what is expected, but it's generally
just an advisory thing and isn't built into appraisals or
contracts."
One technology trend that will help in breaking down information
silos is the increasing integration of business intelligence tools
into enterprise application suites such as those from
SAP and Oracle.
This is because analysing and exploiting information will become
progressively embedded in the way staff work rather than simply
being a separate activity undertaken by subject specialists.
Feedback loops
A further important step forward in optimising internal data
usage will be the incorporation of performance data of all types
into business processes to create a feedback loop. Although the
biggest barrier to this at the moment is poor data quality and a
lack of faith that information is accurate, it is a logical outcome
of the raft of performance management initiatives taking place at
the moment.
"If you start taking all this information and distilling it down
into key performance indicators such as customer enquiries need to
be resolved in two days, it's perfectly possible to feed that
information back into your
CRM or ERP
system," Jennings explains. "So if a process fails, staff or
systems receive an alert and are instructed to take action to deal
with the situation."
While such a scenario is currently the exception rather than the
rule, it is more widespread in customer information than elsewhere
even though there is still much work to be done in the field of
master data management, which is crucial in creating a
single view of the customer.
Collaborative filtering
Another area likely to grow in importance is the move to
near-real-time modes of working and pull- rather than push-based
modes of selling. McKinsey cites online retailer Amazon as at "the
forefront of advanced customer segmentation" in that its
recommendation
engine correlates the purchase histories of individual
customers with others who have bought similar goods in order to
suggest items of potential interest.
Beyond the online world, the idea is to provide call centre
agents with insight into customer behaviour so they can up-sell
products and services at the most appropriate time, for example, or
to alert check-out staff that a given client might respond to a
special offer.
While a move to real-time can require major upgrades to IT
infrastructure, some organisations are already embracing the
concept in a limited way.
Differential pricing models are starting to emerge although
relatively basic, they are likely to become more sophisticated over
time.
In future, customers can expect to be charged according to their
spending power, purchasing history and the time they visit a site,
or a combination of these and other factors.
McKinsey points out that some US toll road operators "are
beginning to segment drivers and charge them differential prices
based on static conditions (such as time of day) and dynamic ones
(traffic)."
Another manifestation of the pull concept is enabling
individuals and communities of customers to design their own
products.
BMW, for
example, allows customers to customise their own production
vehicles, while Threadless.com encourages people to design their
own T-shirts and vote for a winner, before selling them to
participants.
"We're starting to move to more of a pull model, which is where
technologies such as
Web 2.0 come in by building communities of interest," says
Macehiter. "These communities enable you to tap into useful
information, aggregate it and target an active customer base for
mutual benefit. So it's about the customer telling you what's
appropriate and adding value rather than just being a passive
purchaser."
Mash-ups
offer further interesting possibilities. "If you know where your
customers are and you use this data in combination with mapping
technology such as
Google Maps, you can determine the ideal location for a store
based on what products to sell where, for example," says
Bitterer.
New business models
The exploitation of information in this way may also lead to the
emergence of new business models. The ability to aggregate more
data as a result of digitising more processes and activities may
create "by-products or exhaust data that companies can exploit for
profit", says McKinsey.
For example, retailers with digital cameras installed to prevent
shoplifting "could also analyse the shopping patterns and traffic
flows of customers through its stores and use these insights to
improve its layout or the placement of promotional displays". They
could likewise sell such consumer behaviour data on to their
suppliers to help them improve their merchandising activities.
A second scenario is the growing importance of
information-as-a-service. Hosted information services already exist
in the shape of credit bureaux that check customers' financial risk
ratings on behalf of third parties such as banks. Bitterer believes
"we ain't seen nothing yet" and that the market is set to explode
in the next few years.
Walk before you run
But before they can take giant leaps, most companies have much
work to do just to get the basics right. There are coherent
enterprise-wide information strategies to devise and rafts of data
to cleanse.
Before they can even begin, says Macehiter, organisations need
to change their attitude from one of "what can we do with our
data?" to "what are we trying to do with the business? what
information do we need to do it? and how can we capture that?"
"Look at the information assets that you have and require, and
keep very focused," Macehiter recommends. "There's too much of a
temptation to boil the ocean and come up with answers to
everything, but that's not going to happen. And in some cases, it
may simply be a matter of harnessing more effectively what you have
already."