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Business Analytics for Managers Taking Business Intelligence beyond Reporting Gert H.N. Laursen Jesper Thorlund

Copyright#2010 by SAS Institute, Inc. All rights reserved. Published by JohnWiley & 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 Requests to the Publisher for permission should be addressed to the Permissions Department, JohnWiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at permissions. Limit of Liability/Disclaimer ofWarranty: 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 specifically disclaim any implied warranties of merchantability or fitness 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 profit 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 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 658.4 009033–dc22 2010016217 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1

Contents Foreword ix

Introduction xi What Does BA Mean? Information Systems—Not Technical Solutions xiv Purpose and Audience xvi Organization of Chapters xix Why the Term Business Analytics? xx

Chapter 1 The Business Analytics Model. . . . . . . . . . . . . . . . . 1 Overview of the Business Analytics Model 2 Deployment of the BA Model 6 Conclusions 12

Chapter 2 Business Analytics at the Strategic Level. . . . . . .17 Link Between Strategy and the Deployment of BA 18 Strategy and BA: Four Scenarios 19 Which Information Do We Prioritize? 31 Summary 40

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

Chapter 4 Business Analytics at the Analytical Level . . . . . . 93 Data, Information, and Knowledge 94 Analyst’s Role in the BA Model 95 Three Requirements the Analyst Must Meet 98 Required Competencies for the Analyst 101 Hypothesis-Driven Methods 117 Data Mining with Target Variables 120

Explorative Methods 127 Business Requirements 130 Summary 134

Chapter 5 Business Analytics at the Data Warehouse Level. . . . . . . . . . . . . . . . . . . . . . . . . .137 Why a Data Warehouse? 137 Architecture and Processes in a Data Warehouse 140 Tips and Techniques in Data Warehousing 160 Summary 168

Chapter 6 The Company’s 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? 174 When There is More Than One Way to Get the Job Done 177 When the Quality of Source Data Fails 179 Summary 180

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 Centralized or Decentralized Organization 191 When Should a BICC Be Established? 197 Summary 200

Chapter 8 Assessment and Prioritization of BA Projects . . 201 Is it a Strategic Project or Not? 201 Uncovering the Value Creation of the Project 203 When Projects Run Over Several Years 209 When the Uncertainty Is Too Big 211 Projects as Part of the Bigger Picture 214 Summary 222

Chapter 9 Business Analytics in the Future. . . . . . . . . . . . .223 Index 231

Foreword This book is more fuel for this era of strategic and unified 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 what’s 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 important—an analytical perspective on data (as a strategic asset), on methods and processes (to be refined 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 data—what are you measuring and are you measuring what matters? Measurement (data generation and collection) is itself a process—the 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 efficiency 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. definition of the relatively aged term, business intelligence, there is no real consistency, so a new term reflecting 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 loop—on 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 resource—a competency center or center of excellence—is 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 find 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

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