Business Intelligence for the Strategy-Focused Organization

A study of 275 portfolio managers reported that the ability to execute strategy was more important than the quality of the strategy itself. Therefore, corporate success comes from making the strategy everyone’s everyday job. It is critical to:

1. Being able to capture value-creating intangible assets.
2. Involve all business units and employees into value-creation process and focus all key management processes – planning, resource allocation, budgeting, periodic reporting, and the management meeting – on the strategy.

1. Measuring intangible assets

Organizations now recognize that competitive advantage comes more from the intangible knowledge, capabilities, and relationships created by employees than from investments in physical assets and access to capital. So the management priorities for creating value are shifting from managing tangible assets to managing knowledge-based strategies that deploy an organization’s intangible assets:

• Customer relationships,
• Innovative products and services,
• High-quality and responsive operating processes,
• Information technology and databases,
• Employee capabilities, skills, and motivation.

These “intangible” values are indirect; they seldom have an effect on financial outcomes of revenue and profit. But improvements in intangibles affect finan­cial outcomes through chains of cause-and-effect relationships:

1. Investments in employee training lead to improvements in ser­vice quality
2. Better service quality leads to higher customer satisfaction
3. Higher customer satisfaction leads to increased customer loyalty
4. Increased customer loyalty generates increased revenues and margins

The complex linkages make it difficult to place a financial value on an asset such as “workforce capabilities.” And without tools that describe knowledge-based assets, companies have difficulties managing these assets.

Business Intelligence creates such a new framework for continuous measuring organization perfor­mance. It allows not only to report financial measures on outcomes, lagging indicators, but also to communicate the drivers of future perfor­mance, the indicators of how to create new value through investments in customers, suppliers, employees, technology, and innovation. It opens up opportunities for measuring intangible assets and links them to value creation.

2. Making strategy everyone’s everyday job

Many business units and teams are much closer to the customer than large corporate staffs. Therefore, they have to understand who the customers are so that they can find innovative, new ways to create value for them. It is important to en­gage and align all of the employees to the strategy. Ultimately, the employees are the ones who will be implementing the strategy. Besides, companies now look to their frontline em­ployees for new ideas, as well as for information on market opportunities, competitive threats, and technological possibilities.

Business Intelligence provides organizations with a powerful tool for communication and alignment. It allows to create open information environment. It allows to report on progress against the strategy and corrective actions.

Translating a Mission into Desired Outcomes, from "The Strategy-Focused Organization" by Robert S.Kaplan and David P.Norton

Finally, Business Intelligence allows to make a transition from an old organization to new, customer-focused organization and realize the following improvements:

• Functional -> Process-oriented
• Decision-making at top -> Decentralized decision-making
• Bureaucratic -> Flexible
• Measure tasks and activities -> Measure outputs and outcomes
• Little variable pay -> Pay for results