How Business Intelligence Can Affect Bottom Line.Mark Borkowski
To many business owners, business intelligence should be more than just spy vs. spy. The electronics industry has been a great target.
Loss of that information – temporary or permanent – will cause any business to grind to a halt. IT professionals need only point to examples of organizations such as The Bank of America, LexisNexis and ChoicePoint who have all experienced loss of customer data to hackers.
However, business intelligence (BI) is more than just delivering reports from a data warehouse or datamart. It’s also about providing large numbers of people – executives, analysts, customers, partners; you name them – with secure and simple access to the right information.
In June 2003, Wendy’s decided to accept credit cards in its restaurants based on information it got from its BI systems. Because of that decision, Wendy’s restaurants have boosted sales.
Originally, executives decided to test the impact of credit cards in select stores. The company used its BI system to determine how a credit card purchase would affect sales and speed of service as well as to measure the amount of cannibalization from credit cards – in other words, how many cash sales would simply be transferred to credit cards because it’s an available option.
To their surprise, executives learned that people who use credit cards spend more and buy more than they would if they were using cash. People who pay cash tend to buy value meals which, while good for consumers’ pockets, are less profitable for Wendy’s. By contrast, customers who pay with plastic tend to order a la carte, which tallies up to a larger tab.
Indeed, the average bill paid for by credit card was 35 percent higher than bills paid for in cash, according to Wendy’s executive vice president and CIO John Deane.
Carlson Restaurants Worldwide (CRW), the Dallas-based operator of T.G.I. Friday’s and Pick Up Stix restaurants, uses business intelligence software to identify discrepancies between prices they’ve negotiated for food supplies from their vendors and what their vendors are actually charging them on invoices.
Here’s how it works: the software parses all of the company’s invoices from suppliers and contracts with food vendors in CRW’s data warehouse to verify if any of the vendors are actually charging restaurants for food at a higher rate than the chain had negotiated. Since CRW contracts with a variety of different suppliers for meats, dairy products and produce, it also uses the software to pinpoint the suppliers that offer the best deals – and support these vendors.
The company saved $US200, 000 in 2003 by correcting these discrepancies and by giving more business to suppliers with the most competitive prices.
What is the most important thing to remember to avoid failure in business intelligence application development? The answer might surprise you.
Today’s BI projects face unprecedented challenges in coping with data volume, workload, compliance, cost, availability and the time in which working applications are delivered, says Richard Winter, president of Winter Corp. He says many never surmount these difficulties and fail.
The most common problems? According to Mr. Winter, solutions that don’t scale, cost too much or don’t meet the minimum performance standards to be successful. But what can companies do to avoid these problems?
Mr. Winter outlines four tips for addressing factors that often make or break BI projects:
Get buy-in from those who will build or use the system.
Build in the flexibility to handle new or changed requirements.
Don’t underestimate the difficulties that size and complexity can bring, and make purchases accordingly.
Remember the value of services in a BI project.
Businesses that follow these best practices –or that hire consultants who do — stand the best chances of success in BI projects, says Mr. Winter, and the payoffs can be enormous.
Already, telecommunications companies are leveraging BI systems to catch fraudsters and to boost renewal rates. Affinity programs often live or die by how effectively they keep loyal customers, cross-sell, and up-sell their products and services. And every such success raises the bar in a competitive environment.
“Some businesses will leverage their data for competitive business advantage, and that forces others to do so, as well,” says Mr. Winter.
By: Mark Borkowski is president of Mercantile Mergers & Acquisitions Corporation. Mercantile is a mid market M&A brokerage firm the specializes in the sale of mid market companies sold to large strategic or private equity buyers. Mercantile can be contacted at firstname.lastname@example.org or (416) 368-8466 ext. 232 or www.mercantilemergersacquisitions.com
Posted: September 14th, 2012 under General.