Scenario 1: No Formal Link between Strategy and Business Analytics The first type of link between the deployment of BA and strategy is the absence of any link

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Scenario 1: No Formal Link between Strategy and Business Analytics

The first type of link between the deployment of BA and strategy is the absence of any link. This may be a surprising notion, but the most common explanation is that, when developing their strategy, companies often focus on the most visible aspects, such as sales targets, production targets, or cost targets in connection with procurement. In relation with the achievement of these targets, the sales department, production, and procurement will be faced with targets from the business strategy. However, a company also consists of many other functions, such as human resources (HR), finance, product development, strategy, competitive analysis, administration, and BA. These functions are called support functions because they are not adding value in connection with the daily production. However, if they did not exist, the company would soon encounter problems.

From a strategic perspective, the supporting functions are of course expected to support the primary and value creating processes. This may happen when the support functions themselves interpret the business strategy in their daily activities, but more often, the owners of the primary processes place demands on services from the support functions. When we describe a scenario with no link between strategy and BA, it is not a question of completely uncoordinated entities, but rather a case of a filter existing between them. A filter may exist because it is primarily the individual processes' owners, on an ad hoc basis, and not the strategy that defines which information is to be generated by the BA function.

The consequence of the filter is that the BA function prioritizes its tasks according to what best serves the daily target achievement of the company instead of what is best for long?term strategic projects. Moreover, the BA function tasks are performed based on the driving force of different users requesting information. In terms of reporting, this will result in the development of more or less authorized reports with inconsistent presentations of the business that they are describing. All in all, the quality of BA in this type of organization will typically be an assessment of how quickly a question is answered and how well founded the answer is.

Other reasons for the lack of a formalized link between the strategy and the BA functions may be that the right conditions simply do not exist. There are situations, such as small businesses with one or few customers, where the cost of running a data warehouse is bigger than the value of the decision support created, or companies which have no processes that need to be digitalized. And there are companies that define their strategic targets in a way that is not measurable. If, for instance, a company defines a target such as “we need to establish better relations with our suppliers,” that may be difficult to quantify. Because this definition does not tell us what to measure, we must ask: Is it the number of complaints, the average time per transaction, or the quality of deliveries that are to be improved via this new strategy?

Scenario 4: Information as a Strategic Resource

The fourth scenario is about information being regarded as a strategic resource. Such enterprises are characterized by using their analyses of market strengths and weaknesses by systematically thinking about how information, combined with their strategies, can give them a competitive advantage. As illustrated by  Exhibit 2.5 , this is less about technical solutions and more about people competencies that are required in the strategy development process. In some cases, this may mean that the enterprise needs to ensure it has staff with both strategic and information knowledge represented at the top management level. This is not an altogether surprising conclusion, considering that we live in the age of information.

Exhibit 2.5  Information as a Strategic Resource

A typical example of an enterprise that focuses on information as a strategic resource is Amazon.com, which began by selling books but has expanded to other goods via the Internet. Early in their history, Amazon.com saved information about their individual customers' purchases and requests; the information was then processed, with the result that customers were subsequently greeted with offers that are relevant and of service to them. This is a case of improving the relevance of offers to customers based on information, which differentiated Amazon.com in a positive way from some other Internet?based book shops. Now this trend is emerging among certain retail chains, too, where the segmentation of customers means that services can be customized to local conditions. Moreover, we see a growing sale of information from shops to the manufacturers of the goods sold in the shops (meaning the data also is a sellable commodity itself). This information describes which types of people buy their products, how price?sensitive the customers are towards products, which products are typically sold together, and so forth. This feedback constitutes essential information for manufacturers in terms of product development, pricing, and promotion in the right places with the right messages.

The strategies created by a company that uses information or data as a strategic asset can be distinguished by looking at certain elements of the company's strategy. If a company does not use information as a strategic asset, it will not, in the strategic implementation plans, have descriptions of how the competitive advantages should be gained via the use of information. If a company does use information as a strategic asset, then next to the objectives of the strategy it will also provide directions as to how the objectives should be reached via the use of information.

An organization that uses information as a strategic asset in its culture is also recognizable because its employees, according to our research, intuitively will think proactively in terms of how they can use information to overcome, for example, a new competitive situation. This sort of a culture will use the information as a strategic asset as a result of a top?down process as well as a bottom?up process. This means that if one region learns to improve its processes via the use of information, the news will be captured by the strategy team and spread as a best practice to the rest of the organization as a result of the next strategy creation process.

In  Chapter 3 , which focuses on business analytics at the functional level, we present a case in which the strategy at the functional level is largely managed on the basis of data warehouse information. Quality in this context is, therefore, being able to understand how the use of information can provide enterprises with an advantage in terms of key competitive parameters. Information at a strategic level must therefore be understood centrally, in connection with the strategy development process, and throughout the organization, where the implementation is carried out. As previously discussed, the use of information as a strategic resource is first about identifying central competitive parameters and second about understanding how this information can ensure that the enterprise differentiates itself from its competitors. We have chosen to introduce a tool that will help determine which information is going to support an organization's business?critical initiatives, as well as providing a number of examples of how this works in specific terms.