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Driving by looking in the rearview mirror – a hidden trap in BI and Analytics.

by Mark P. McDonald  |  October 12, 2009  |  4 Comments

Business intelligence (BI) provides managers with a wide range of management and operational information stored in data cubes or warehouses.  The availability of all of this information is driving new levels of analytics and fact-based decision-making.

Analytics is a welcome addition to the executive toolkit.  Leading organizations are using analytics to make critical decisions across the enterprise.  Tom Davenport and Jeannie Harris’s book Competing on Analytics provides a good resource for describing how companies are using information to raise performance.

Executives apply information to raise performance-using techniques such as Six Sigma and business pattern recognition.  These techniques are effective at raising the performance of individual processes through using information to identify, manage and reduce variances across processes.  This form of continuous improvement raises margins of the enterprises current operating model.

Analytics applies information to evolving the business model by identifying customer behavior, preferences and other market opportunities.  Analytics extends beyond corporate information to incorporate demographic, geographic and other insight into business model decisions.  For example, Will Smith the actor used analytics to determine the sequence of movie roles he should place, starting with summer blockbuster action films (Independence Day) and then moving to romantic comedies (Hitch) and serious drama (the Pursuit of Happiness).

The hidden trap with business intelligence occurs when you apply continuous improvement techniques to analytics issues.  When this happens, executives based their business model evolution on resolving operational issues in the past.  They look for current patterns of business activity and strengthen those patterns.  They create the future out of strengthening the past.

This is the essence of driving forward by looking in the rearview mirror.

Your future business model cannot be a corrected version of your current approach.  That leads to stagnation and creating core rigidities that will eventually bring the company down.  Donald Sully in his bookThe Upside of Turbulencepoints out that the idea of a company lifecycle is all-wrong.  Opportunities have a lifecycle and companies can avoid having a lifecycle by moving from opportunity to opportunity rather than refining the current opportunity they are in.

Refining your current opportunity comes from using BI to find patterns, refine current operations and make operational improvements in the belief that doing things better will be the path to growth and future success.  This belief is supported in the short term by BI based data that proves improvement but blinds organizations to missed opportunities.  Look at IBM in the 1990’s and you can see the devastating potential from this approach.  IBM’s near death experience came because it was optimizing its hardware model until that model, although very efficiency came crashing down when market opportunities changed.

Don’t drive your organization’s future by looking in the rear view mirror.  Basing your future models on patterns of past success are a certain way to lock into today’s opportunities and put your company on a lifecycle path that always ends with death.

Recognize the role of BI in improving current performance and driving operational improvement.  Keep that role distinctive from analytics aimed at creating your future business model and bringing the next set of opportunities online.

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Category: cio  strategy  tools  

Tags: business-leadership  business-strategy  it-and-business  it-strategy  strategy-and-planning  

Mark McDonald, Ph.D., is a Vice President and Fellow Emeritus in Gartner for General Managers Program.

Thoughts on Driving by looking in the rearview mirror – a hidden trap in BI and Analytics.

  1. […] This post was mentioned on Twitter by Candace . Candace said: Driving by looking in the rearview mirror – a hidden trap in BI …: Analytics applies information to evolving .. […]

  2. it is truely the fact based decision making strategy that makes a organization perform at its best as being said in the text and that part truely inspired me to comment on the topic

    kind regards

    Thank You

  3. Richard Preece says:

    As with investments…past performance is not a perfect indicator of future returns…
    Business intelligence is a great tool for analyzing the past, but is it that good a predicter of the future? Only if nothing changes (status quo, working in a vacuum, linear world). BI is like continuous improvement in that it will move towards perfection in the current system, but it is only one factor to be considered when deciding on the future.
    Like looking in your rear view is a good thing…but only to make sure that past is not coming up fast to bite you…and history does repeat itself!

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