Lecture at MIT Sloan School

Earlier this week, I had the privilege of delivering a guest lecture on Business Intelligence for Professor Malone’s graduate “IT Essentials” class at MIT Sloan. The experience brought back fond memories from when I taught back in the early 1980s.

Most in the class already had some real-world business experience. As a result, there were a number of excellent and insightful questions.

Here are a few of the questions (paraphrased), with my responses:

Q: How do you create and sustain an “information democracy” in a startup venture?

A: First, you need to plan as though your “startup” will someday become a large enterprise. Decisions made today will either help or haunt you well into the future. So, with that in mind, at the top of the list are transparency and the open sharing of knowledge and insight. By nature humans are hoarders and prefer to withhold information for their own benefit. That’s why it’s nearly impossible to change the culture of a large organization where “in-transparency” has been the norm. Of course, it’s easy to put transparency in the mission statement and ignore it. However, to be truly successful, one must “live” transparency. This means encouraging and incenting the sharing of information – especially if it exposes problems!

It’s also useful to look at the dysfunction surrounding BI implementations in large organizations today: disparate applications and data, conflicting business semantics, multiple master files, and a multitude of user tools (including spreadsheets!) – have created pockets of BI automation and what I call information “myopia”. These problems can be minimized if you start out with the notion of an enterprise data model and build (or implement) enterprise applications that are fully integrated and which are equally well designed to analyze the data which they process and store. Although data warehousing will still be necessary, its creation and maintenance will be substantially easier.

Q; How do you balance data quality shortcomings and urgent user demands for access to information?

A: Data quality and integration are areas where getting it “right” is critical. It’s expensive, takes lots of time and energy (and skill) - but is hard to readily demonstrate value to business management. In contrast, users are easily excited by fancy BI tools with cool visualizations. And, with innumerable tools available for purchase and download over the internet – users are buying them and loading them with report extracts, spreadsheet data, etc. and making decisions based on incomplete or erroneous information.

The solution is to balance urgent end user requests with needed data quality programs. This means doing some things that are expedient: delivering user applications quickly without perfect data quality. As a part of this, users must understand the limitations and that the reliability and utility of these applications will eventually improve as a result of strategic data quality programs. One of the best ways to achieve this is through the creation of a BI competency center –whose charter it is to document and implement best practices for BI.

Q: Can organizations use the tools they have or do they have to buy new ones to succeed with BI?

A: It turns that that success with BI has much less to do with the tools than the people using them. I’ve seen some BI successes that employed very modest technology and some colossal failures that had all the technological bells and whistles. That’s why much of my book focuses upon the human and organizational issues that determine the success of BI initiatives. These include management vision and commitment, organizational alignment, culture, and skills. Although buying “yet-another-tool” is easier than solving these problems, it ultimately makes things worse.

-Howard

Check out my website for details on where I'll be speaking, presentation abstracts, articles, my book and more!

Some good sources

Last week, at the Gartner conference, I was asked several times for good books and other sources of information on Business Intelligence and Performance Management.

Here are some books from authors on the subject that I respect:

- "Successful Business Intelligence: Secrets to Making BI a Killer App" by Cindi Howson

- "Scorecard Best Practices: Design, Implementation, and Evaluation" by Raef Lawson, Denis Desroches, Toby Hatch

- "Smart Enough Systems: How to Deliver Competitive Advantage by Automating Hidden Decisions" by James Taylor, Neil Raden

- "Performance Dashboards: Measuring, Monitoring, and Managing Your Business" by Wayne W. Eckerson

- Freakonomics : A Rogue Economist Explores the Hidden Side of Everything by Steven D. Levitt , Stephen J. Dubner

- Super Crunchers: Why Thinking-by-Numbers Is the New Way to Be Smart by Ian Ayres

and, of course my own book:

- "The Performance Management Revolution: Business Results Through Insight and Action" by Howard Dresner

And, here are a few of good blogs:

- Frank Buytendijk's Blog

- The Business Foundation Blog

- Neil Raden's Blog

- Smart Enough Systems Blog

And, some good on-line mags:

- B-Eye Network

- BIReview

- Intelligent Enterprise

- SearchDataManagement

Check out my website for details on where I'll be speaking, presentation abstracts, articles, my book and more!

-Howard

Gartner's Business Intelligence Conference

I’m just back from Gartner’s BI conference in Chicago and I feel energized. First of all, let me mention that I founded this very conference in 2003 and chaired it until I left Gartner in 2005. So, I was honored and delighted to be invited back to deliver a keynote on Thursday with “Mr. Balanced Scorecard” himself, Dr. David P. Norton, in addition to presenting at a “power breakfast” and a doing a book signing.

I was impressed with how the conference has grown since 2005. With over 1,200 attendees and more than 50 vendors on the show floor – it is the biggest vendor-neutral BI/EPM show in the world. When we started the conference in 2003, it was at the Sheraton in Chicago. After three years – and growing from 400 attendees to 800, it moved to the Hyatt. Now at 1,200 attendees, Gartner will be moving it to the Gaylord National Resort & Convention Center, in Maryland, for 2009.

Unlike when I was chairing the conference, I had plenty of time to talk to people and even attend some sessions. Here are some of the things that I observed:

Even though many of the sessions were designated “advanced sessions”, most attendees were first timers and were there to begin learning about business intelligence, data warehousing and performance management. This confirms my belief that, while vendors consolidate and make for a more mature supplier market, user adoption and penetration is still in its infancy. Absent a real BI strategy, these organizations are rife with the misuse of spreadsheets and other personal productivity tools. To cater to them, Gartner offered tutorials and even some workshops this year.

Eighty percent (or more) of the attendees came from IT departments. The rest (presumably) were business users. Gartner has been trying to encourage its traditional following to bring a user “buddy” with them by offering discounts. Having said this, much of the content was oriented towards IT, not business. Among the most popular sessions: data warehousing and master data management – i.e., the “plumbing of BI”.

Some of the attendees that I spoke with felt frustrated by their inability to take what they learned and change the status quo of their organizations. This is nothing new and underscores the fact that success with BI and EPM requires much more than architecture and technology. In fact, while it might be easier to buy yet-another-tool, it is often the wrong approach. Change requires vision and leadership at the highest levels of the organization. Those who have read my book, The Performance Management Revolution (John Wiley & Sons), know that I have focused predominately upon organization, culture, politics and method as the obstacles or enablers of “information democracy”.

Others attendees were sent with a real mandate to supply better information to management. Here I see the potential to change management’s perception of BI and EPM. However, shifting from a tactical request for better information to a performance-driven culture is fraught with risks and challenges. Working with Finance and establishing a competency center outside of IT can help. Gartner had at least two sessions on competency centers. The one I went to was extremely well attended. However, at my “power breakfast” I surveyed the audience and found that only a small minority of them had a competency center in place.

With some of the changing market dynamics, I was pleased to see sessions on “open source” BI and DW and software-as-a-service (SaaS). However, to my great surprise, when polled during the MQ Power Session, none of the attendees indicated that they were using any open source products for DW, DI or BI. A few seemed to be exploring SaaS. Perhaps those were the few business users, as most IT folk view SaaS as a problem. And, while the “mega vendors” (e.g., IBM, Microsoft, Oracle, SAP) were often mentioned, I found no in-depth or critical discussion of their offerings, strategies or relative merits.

All-in-all, it was a great conference which was very well received by attendees and vendors alike. And, given the imperative by management to improve decision making and access to information, I suspect that 2009 will see continued strong demand – with the indoctrination of the next crop of “newbies” to DW, DI, BI and EPM.

And, don't forget to check out my website for details on articles, speaking engagements, presentation abstracts, my book and more!

Buffets says it, and I believe it

I am a devout Buffet fan, and I don't mean Jimmy. Instead, I refer to his "Uncle Warren".

Today Warren Buffet declared that the US economy is now in recession. Here's the quote from this mornings Reuters article:

"Buffett said that 'from a common-sense standpoint right now, we're in a recession,' though the U.S. economy has not yet recorded two straight quarters of declining gross domestic product, a traditional indicator of recession.

He said the environment is 'nothing like '73 or '74 yet,' referring to a deep economic downturn also marked by rising oil prices, higher inflation and falling stocks."

Here's the link:

http://www.reuters.com/article/ousiv/idUSWEN425620080303

Here's what I think:

With all of the mounting evidence that the US (and other western economies) are cooling off, the effect is already starting to show up in business spending. Even if businesses are healthy, management sees it as prudent to prepare for the worst. This means renewed spending scrutiny, budget cuts and precautionary RIFs. Of course, it should be noted that this has the effect of a self-fulfilling prophecy. And, the tools that government has at its disposal - putting money into the economy through interest rates and tax rebates - will not work if everyone believes the worst is yet to come. So, my belief is that conditions will continue to worsen and that we'll be dealing with the effects for the rest of 2008.

From a software industry perspective, this means that companies that can't demonstrate real value - i.e., an ability to save money - will suffer mightily. Having said that, Business Intelligence and Enterprise Performance Management solutions, positioned accordingly and to the "right" person (senior levels of business management), ought to fair better than other initiatives.

Software companies focused upon selling tools to IT will have a hard time in this economy and will need to retool (no pun intended) to address the requisite business priorities. Many will fail trying.

Ironically, many domain-specific application software companies that have been successful in niche markets, are seemingly intent on expanding into the more general tools market. In this case the "grass" is NOT greener on the other side of the fence. My advice to those companies is to sit tight and appreciate the successful (albeit smaller) market that you're in.

Here's another cheery thought: those software companies that survive the recession will emerge stronger and more viable and will reap substantial rewards when the economy starts to improve.

-Howard

Brave New World?

It’s February and winter is nearly over here in New Hampshire. Well, maybe not. But it’s nice to have an extra hour of daylight since the start of winter and the snow is starting to recede a bit. But, this is New Hampshire and it’s always wise to temper one’s optimism for an early spring. After all, the groundhog has said six more weeks of winter (ten in New Hampshire).

Recently I’ve been spending some time in “the valley” where the weather hasn’t been much better (cold and rainy). However, some software companies that I’ve visited have a pretty sunny outlook on the future, and with good cause. Here’s why:

1. Acquisition mania, which has led to the near total demise of “pure-plays” has created significant complexity and confusion with “mega vendors”. This has led to a slowdown in sales, a decline in employee morale, and opportunity for smaller, more agile vendors, with a simple message and little or no baggage.
2. Entrepreneurial/innovator types rarely stick around long at mega vendors. This has freed up the main ingredient of innovation (really smart and talented people). I’ve met many of them in recent weeks. Joining ranks with smaller concerns, they bring energy, enthusiasm, experience and a pent up desire to “get it right this time”.
3. Almost all of the emerging software vendors that I’ve spoken to recently are focused on selling to the business and not the IT department. Often they solve tough business problems, faster and cheaper than many internal IT functions can (e.g., this fiscal year not next). This obviously creates some internal tension and these vendors have taken to checking under their cars before leaving the customer site.

I try to resist new buzzwords like “BI 2.0”, but there’s definitely something different going on. This market is changing dramatically. It’s exciting and invigorating and I’m enjoying being a part of it. But, for now, I’ll hold off trying to name it.

See you out there,

Howard

Retailers had weak sales in December - AP Newswire Jan. 10, 2008

Today AP Newswire released an article which supports my 1/2/08 post about the economy and holiday retail sales.

"Many merchants who reported sales figures Thursday failed to meet already lowered sales projections, making this the weakest holiday season since 2002. Their performance led a string of stores to reduce earnings outlooks for the fourth quarter."

Here's a link to the article:

http://news.yahoo.com/s/ap/20080110/ap_on_bi_ge/retail_sales;_ylt=AuL7PSbZ9fVMg5apxkBGdPqb.HQA

Goldman Sachs Expects Recession

Looks like Goldman Sachs agrees with the prediction that I posted on January 2nd.

Today they released a statement saying that they expect the U.S. economy to drop into recession this year, prompting the Federal Reserve to slash benchmark lending rates to 2.5 percent by the third quarter.

You can read the release here:

http://news.yahoo.com/s/nm/20080109/bs_nm/usa_economy_goldman_dc_2