Business Analytics

for

Managers
Taking Business Intelligence Beyond Reporting
GERT H.N. LAURSEN JESPER THORLUND

Business Analytics for Managers

Wiley & SAS Business Series

The Wiley & SAS Business Series presents books that help senior-level managers with their critical management decisions. Titles in the Wiley and SAS Business Series include: Activity-Based Management for Financial Institutions: Driving Bottom-Line Results by Brent Bahnub Business Intelligence Competency Centers: A Team Approach to Maximizing Competitive Advantage by Gloria J. Miller, Dagmar Brautigam, and Stefanie Gerlach Business Intelligence Success Factors: Tools for Aligning Your Business in the Global Economy by Olivia Parr Rud Case Studies in Performance Management: A Guide from the Experts by Tony C. Adkins CIO Best Practices: Enabling Strategic Value with Information Technology by Joe Stenzel Credit Risk Assessment: The New Lending System for Borrowers, Lenders, and Investors by Clark Abrahams and Mingyuan Zhang Credit Risk Scorecards: Developing and Implementing Intelligent Credit Scoring by Naeem Siddiqi Customer Data Integration: Reaching a Single Version of the Truth by Jill Dyche and Evan Levy Demand-Driven Forecasting: A Structured Approach to Forecasting by Charles Chase Enterprise Risk Management: A Methodology for Achieving Strategic Objectives by Gregory Monahan Fair Lending Compliance: Intelligence and Implications for Credit Risk Management by Clark R. Abrahams and Mingyuan Zhang Information Revolution: Using the Information Evolution Model to Grow Your Business by Jim Davis, Gloria J. Miller, and Allan Russell Marketing Automation: Practical Steps to More Effective Direct Marketing by Jeff LeSueur Mastering Organizational Knowledge Flow: How to Make Knowledge Sharing Work by Frank Leistner Performance Management: Finding the Missing Pieces (to Close the Intelligence Gap) by Gary Cokins Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics by Gary Cokins The Business Forecasting Deal: Exposing Bad Practices and Providing Practical Solutions by Michael Gilliland The Data Asset: How Smart Companies Govern Their Data for Business Success by Tony Fisher The New Know: Innovation Powered by Analytics by Thornton May Visual Six Sigma: Making Data Analysis Lean by Ian Cox, Marie A. Gaudard, Philip J. Ramsey, Mia L. Stephens, and Leo Wright
For more information on any of the above titles, please visit www.wiley.com.

Business Analytics for Managers

Taking Business Intelligence beyond Reporting

Gert H.N. Laursen Jesper Thorlund

John Wiley & Sons, Inc.

Copyright # 2010 by SAS Institute, Inc. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at www.wiley.com/go/ permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specically disclaim any implied warranties of merchantability or tness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of prot or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data Laursen, Gert H. N. Business analytics for managers: taking business intelligence beyond reporting/ Gert H.N. Laursen, Jesper Thorlund. p. cm. (Wiley and SAS business series) Includes index. ISBN 978-0-470-89061-5 (hardback) 1. Business intelligence. I. Thorlund, Jesper. II. Title. HD38.7.L39 2010 658.40 09033dc22 2010016217 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1

Contents
Foreword ix

Introduction
What Does BA Mean? Information SystemsNot Technical Solutions Purpose and Audience Organization of Chapters xvi xix xx xiv

xi

Why the Term Business Analytics?

Chapter 1 The Business Analytics Model . . . . . . . . . . . . . . . . . 1

Overview of the Business Analytics Model Deployment of the BA Model Conclusions 12 6 2

Chapter 2 Business Analytics at the Strategic Level. . . . . . . 17

Link Between Strategy and the Deployment of BA 18 Strategy and BA: Four Scenarios Summary 40 19 31 Which Information Do We Prioritize?

Chapter 3 Development and Deployment of Information at the Functional Level . . . . . . . . . . . . . . . . . . . . . . 43

Case Study: A Trip to the Summerhouse 46 Establishing Business Processes with the Rockart Model 55 Example: Establishing New Business Processes with the Rockart Model 57 Optimizing Existing Business Processes 65

vi

CONTENTS

Example: Deploying Performance Management to Optimize Existing Processes 67 Which Process Should You Start with? 72 A Catalogue of Ideas with KPIs for the Companys Different Functions 90 Summary 91

Chapter 4 Business Analytics at the Analytical Level . . . . . . 93

Data, Information, and Knowledge Analysts Role in the BA Model 95 98 101 94

Three Requirements the Analyst Must Meet Required Competencies for the Analyst Hypothesis-Driven Methods Explorative Methods Summary 134 127 130 117 120 Data Mining with Target Variables Business Requirements

Chapter 5 Business Analytics at the Data Warehouse Level. . . . . . . . . . . . . . . . . . . . . . . . . . 137

Why a Data Warehouse? 137 140 160 Architecture and Processes in a Data Warehouse Tips and Techniques in Data Warehousing Summary 168

Chapter 6 The Companys Collection of Source Data. . . . . 169

What Are Source Systems, and What Can They Be Used for? 170 Which Information Is Best to Use for Which Task? When There is More Than One Way to Get the Job Done 177 When the Quality of Source Data Fails Summary 180 179 174

CONTENTS

vii

Chapter 7 Structuring of a Business Intelligence Competency Center . . . . . . . . . . . . . . . . . . . . . . . 183

What Is a Business Intelligence Competency Center? 183 Why Set Up a Business Intelligence Competency Center? 184 Tasks and Competencies 185 191 197 Centralized or Decentralized Organization When Should a BICC Be Established? Summary 200

Chapter 8 Assessment and Prioritization of BA Projects . . 201

Is it a Strategic Project or Not? 201 203 209 214 Uncovering the Value Creation of the Project When Projects Run Over Several Years When the Uncertainty Is Too Big Summary 222 211 Projects as Part of the Bigger Picture

Chapter 9 Business Analytics in the Future . . . . . . . . . . . . . 223

Index 231

Foreword
This book is more fuel for this era of strategic and unied views of business analytics for value creation. In the same vein as Competing on Analytics and Analytics at Work, Business Analytics for Managers: Business Intelligence beyond Reporting adds another interesting and worthwhile perspective on the topic. In times of rapid change and growing complexity, rapid learning becomes more valuable. This book provides the strategic view on whats required to enable rapid learning and ultimately value creation. How we make decisions using huge, noisy, messy data requires business analytics. True appreciation and advocacy for the analytical perspective on the whole of business analytics is importantan analytical perspective on data (as a strategic asset), on methods and processes (to be rened and optimized), on people (the diverse skills it takes to formulate and execute on a well-thought-through strategy). It starts with an analytical view of datawhat are you measuring and are you measuring what matters? Measurement (data generation and collection) is itself a processthe process of manufacturing an asset. When data is viewed this way, the analytical concepts of quality improvement and process optimization can be applied. The authors essentially ask What are you doing with your data? How are people in your organization armed to make better decisions using the data, processes, and analytical methods available? Business analytics as portrayed by these analytical thinkers is about value creation. Value creation can take different forms through greater efciency or greater effectiveness. Better decisions to reduce costs, reveal opportunity, and better allocate resources can all create value. The authors provide valuable business analytics foundational concepts to help organizations create value in a sustainable and scalable way. ix

FOREWORD

Why business analytics? Even though some have tried to expand the denition of the relatively aged term, business intelligence, there is no real consistency, so a new term reecting a new focus is warranted. Further, through promotion of a process view, we break out of some of the silothink and see the importance of closing the loopon data (data quality and measuring what matters), on process (to continuously learn and improve), and on performance (to make the best decisions, enable the best actions, and measure impact). How many organizations continue producing text-heavy, tabular reports reporting on old and perhaps out-of-date metrics that few take the time to consume? How old are some of the processes driving key decisions in organizations? What opportunity costs are you incurring and how could you be creating more value? This book provides a synthesized view of analysis, traditional business intelligence, and performance management, all of which are connected and need to be orchestrated in a strategic way for maximum impact. The chapter advocating a shared strategic resourcea competency center or center of excellenceis an excellent way to drive best practices and create more value, making the case for treating data as a strategic asset and investing in the appropriate analytic infrastructure to maximize value. Wherever you may be on your business analytics journey, you will nd worthwhile thinking, shared expertise, and solid practical advice in this book to help you create more value in a sustainable and scalable way. It is not just analytics as a step in any given business process, but the analytical perspective on any process that is key to understanding what it takes to drive continuous learning and improvement. Anne Milley Senior Director of Analytic Strategy SAS Institute