A value proposition is a promise of value to be delivered and a belief from the customer that value will be experienced. A value proposition can apply to an entire organization, or parts thereof, or customer accounts, or products or services.
Creating a value proposition is a part of business strategy. Kaplan and Norton say "Strategy is based on a differentiated customer value proposition. Satisfying customers is the source of sustainable value creation."
Developing a value proposition is based on a review and analysis of the benefits, costs and value that an organization can deliver to its customers, prospective customers, and other constituent groups within and outside the organization. It is also a positioning of value, where Value = Benefits - Cost (cost includes risk).
Possible BI Value Propositions
We noted earlier that “business intelligence” is a multi-dimensional tool, and different BI capabilities have different value propositions (we’ll take a closer look at the various styles of BI in a future post) :
- reporting is used to evaluate what happened after the fact, and to thereby trigger corrective actions if there is a material unfavorable variance from expectations;
- ad hoc queries, user-selected queries, and OLAP are used for such activities as deeper analysis into why something happened, creating customer segments for behavioral analysis, clustering products that often sell together for marketing purposes, and decomposing enterprise performance information by business unit, product, customer, or other relevant dimension;
- advanced analytics are sophisticated statistical and data mining techniques used to discover why something happened, particularly if simpler methods like ad hoc queries or OLAP don’t easily reveals the answers being sought;
- predictive analytics are sophisticated statistical and analytical techniques used to forecast what is likely to happen and the likely economic results;
- real-time analytics are intended for keeping a tighter rein on minute-by-minute performance of some key business process, e.g. sales or customer service, and/or to enhance such processes, such as by using BI to suggest book titles to a potential customer who has been looking at other titles; and
- performance management analytics are intended to enable strategic, tactical, and operational control over performance and to enable more cost-effective planning.
At a higher level, business intelligence and business analytics are all tools for either planning and control or enhancing the performance of an important process. That being said, many business executives, managers, and analysts we have worked with are uncertain about the value proposition for BI, and thus they hesitate to move forward with BI initiatives as aggressively as might be to their advantage. This problem can be overcome.
How to Clarify the BI Value Proposition
Essentially, leveraging business intelligence to create business value is about aligning application the BI capabilities described above with the core business processes of the firm so that business performance – and profitability – is improved. The steps for doing so include:
- conducting a BI opportunity analysis at the enterprise, functional, process, and/or program level;
- developing a concise qualitative business case for each BI opportunity that includes explicit information about which BI capabilities will be employed for what specific business purposes;
- obtain in-depth business feedback about the identified BI opportunities, including their assessments of the potential business impact of each opportunity and the relative priorities between opportunities; and
- revise the business case to reflect business feedback and finalize the value propositions for future reference.
Clarifying the BI value proposition is a straightforward process that pays dividends in the form of business sponsorship and business engagement. Further, it helps move the business intelligence initiative from being an IT-driven initiative to being a business-led initiative. This is the proper place, because while business/IT partnership is crucial to success, only business people can achieve the business process changes necessary to capture the business value of business intelligence.
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