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September 17, 2003

What Are You Measuring?

Before you can create a useful analytic application, you must first analyze the business effectively. A method of business assessment developed two decades ago can form the foundation for the most cutting edge of today's strategic IT applications

by Creighton Lang

Continued from Page 2

Cross-Chain Opportunities

More recently, companies have begun to use the data warehouse as an opportunity to deliver information to suppliers, buyers, and other business partners. The third and final example of using the framework involves an advertising and media client. By understanding its own customers' value chain, the company can identify an opportunity to aggregate and syndicate information about commercial advertising reach and effectiveness.

The company realized that when making advertising and positioning decisions, its clients would feel more comfortable and make better decisions with data points indicating the targeting reach and effectiveness by dimensions such as competitor, product, channel, and customer demographic.

By serving as an aggregator and then sharing this information with its customers, the company increases its value proposition, locks in more customers, and raises a new barrier to entry for potential competitors that would have to build their own media analytics capability to woo the firm's customers.

Additional Payback Methods

Raising customer lock-in and barriers to entry represents one payback method for B2B or B2C analytics projects. Organizations may also sell unique market, customer, or other analytic data. In these cases, the underlying warehouse can be turned into a profit center, and usually employs charge-back reporting for its internal use as well.

In some cases, organizations may seek to deliver their own customer and market intelligence upstream in their value chain. Although these applications can be sold, more often they're distributed as part of an effort to influence greater pricing discounts or quid pro quo information flow. Such end-user demand information is extremely valuable to upstream organizations, and an efficient supply chain benefits all participants in a transaction.

Of course the threat of disintermediation is highest when sharing information with upstream partners, as the information supplied may reduce the risks of the upstream company entering downstream markets.

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The Analysis Before the Analytics

The promise of increased margin, faster decision-making, and better overall confidence in a firm's financial statements is very achievable through the development of analytic applications. While corporate strategists and managers will demand enterprise performance management solutions, recognize that a single application or software suite can't simply be dropped into place by the IT organization. Instead, a comprehensive study of your own value chain will enable the iterative release of meaningful analytic solutions.

Creighton Lang [www.reveregroup.com/123.shtm] is a principal and group leader of the Business Intelligence Practice with The Revere Group, a Chicago-based business and technology consultancy. He has nearly a decade of experience developing data warehousing and business analytics solutions for a variety of industries. He specializes in CRM analytics for financial services and insurance industry clients.