In a challenging economy, it’s essential to have easy access to critical business information. “If it takes until the end of February to analyze what happened in January, it will be too late to react,” says Bill Harris, executive vice president at MIS Group. “The quicker you can get vital business intelligence, the quicker you can respond and make good decisions.”
Smart Business recently spoke with Bill about how a company can gather and utilize business intelligence.
Why is business intelligence (BI) so important right now?
Many executives have become successful because they have intuitive business skills. They make decisions based on what ‘feels’ right. This approach may serve them well when sales are plentiful, but it’s not nearly as effective when business is scarce. In good times, mistakes can be covered up with more business, but in tough times, there’s little margin for error. A leader must make decisions that are both accurate and timely.
The upside of all this is that if you put the right key performance indicators(KPIs) in place, you’ll be ready to make a very healthy profit when things improve. These disciplines, if you stick to them, will serve you well when the economy rebounds. Your profitability has the potential to go through the roof.
How does the executive put business indicators in place?
It starts by asking, ‘What do I need to measure if I want to keep my finger on the pulse of my business?’ In other words, how do you know if your business is or isn’t working? The answer to that question gives you an idea of what KPIs to capture. You will also want to ask, ‘How do I facilitate these measurements?’ Once you know what data to measure, you’ll want to make sure you have the skills, personnel and tools in place to obtain those measurements.
What does it mean to move from a reactive to a proactive stance?
Are your business decisions reactive, based solely on past performance (aging, inventories, etc.) or are they proactive, based on predictive business intelligence? For instance, if you are a distributor, are you able to track buying trends and cash flow in order to forecast how customers will respond to certain influences (seasonal, economic, etc.)?
The economy is unpredictable right now, but prebuilt models can be put in place that will facilitate more rapid decision-making given a certain set of circumstances. A distributor might have a model that says, ‘When the price of gas goes up to $___ per gallon, I will do ___.’ Escalating fuel prices may change the way that company delivers inventory, approaches scheduling or handles other business details.
That’s what I mean by flipping the business strategy from one that’s reactive to one that’s proactive. A proactive approach is always more profitable.
What type of business intelligence tools should executives consider purchasing?
You don’t have to spend a lot of money to get good tools. You may already have some in place. Business intelligence tools such as reporting and dashboarding applications should give you a big picture view. They should also let you drill down to get the details you need. Let’s say your phone bill increases 50 percent one month. You will want to know that it happened (with a timely alert). You will also want to know how it happened (who made the calls and to whom). Maybe you have an employee with a new girlfriend in Singapore! With good tools in place, you can quickly put that phone fire out.
Even so, the goal isn’t to simply put out fires, but to move toward fire prevention. Why? Preventive maintenance always costs less than crisis management. We either make things happen or we watch them happen. We only get the results we want when we take control.
If you want to know how healthy your business is, consider how much time is spent on urgent business as opposed to important (but not urgent) business. Seldom do people go into business because they want to spend all day dealing with unhappy customers or settling staff disputes. People go into business because they want the freedom to make their own choices.
Business intelligence gives you the information you need to make good choices. Decisions no longer have to be made from ‘gut feel.’ Instead, they can be made on the basis of actual validated information. If you know where your business is right now, and you know where you want to go tomorrow, then you will be in charge, empowered, moving forward and much more satisfied with the result.
BILL HARRIS is executive vice president of the Business Management Division at MIS Group. Reach him at (866) 467-4181 or[email protected].
