Intelligent Business

BI projects are just a start…

How many times have you attended a meeting where the other attendants brought their own Excel-sheet showing conflicting figures? Probably way too many times… You wish for everybody to use one source, one definition, and maybe even one report or dashboard for their information needs in this meeting. Eventually a small business intelligence project is started to make some of these reports, but along the way you discover that the information quality is not okay, sources have to be integrated, uniform definitions have to be made and so on. The project scope is creeping and the budget is overrun… Familiar?

Especially when the BI project is initiated top down and organized centrally, information between different information islands (applications, business units or processes) have to and will be shared and exchanged. Both socially and technologically this can enable many consequences in the organization that are all too often not anticipated in the beginning of the project. There is more to the eye than meets the eye…

This is where information logistics come in. A couple of years ago I wrote a master thesis on the role of information in supply chain management. As you might know information is exchanged between buyers and suppliers in the supply chain in order to move goods as efficient and effective as possible to the end-consumer [1].  Besides efficiency and effectivity, exchanging information in a supply chain has many more consequences, but also needs some prerequisites… To start with the exchange of information between buyers and suppliers is only done when a certain amount of trust and collaboration is in place between the involved parties.

While on another level, it is here I see an analogy to aforementioned information islands in an organization that kick started the BI project. Just like organizations in a supply chain, information islands in the organization can be considered as business entities that exchange information in order to operate as efficient and effective as possible. The model I developed for my thesis can be put to good use here.

Namely, these islands will only share information with each other when they have a collaborational relationship and trust each other [1,3]. When they exchange information, transparency is created between them (and possibly other business units). Another side effect is that so-called white spots appear. Some information is not available, or of poor quality. To improve on this, information has to be integrated in uniform definitions or by introducing organizational or industry standards (such as XBRL) [1]. In addition, this can result in information systems that are integrated (in this case for example a datawarehouse, datamart or reporting layer) [2]. Because organizational units are gearing their activities to one another as a result business business process integration takes place which in turn will lead to increased collaboration and trust (in each other and the information) [3]. In doing so a reinforcing loop comes into existence.

So, going back to the BI project, why is it more often than not more encompassing then anticipated? Simply, because it is often not anticipated that initiating a similar project not only creates centralized reports, but as information is the lifeblood of an organization it has both technological, social and organizational effects.

Please let me know if you would like more information on the model or the thesis.

[1] Lee, H. L. and S. Whang (2000). “Information Sharing in a Supply Chain.” International Journal of Technology Management 20(3/4): 373-387.

[2] Aubert, B. A., B. Vandenbosch, et al. (2003). Towards the measurement of process integration. Scientific series. Montreal, CIRANO (Centre Interuniversitaire de Recherche en Analyse des Organisations.

[3] Premkumar, P. K. (2000). “Interorganization systems and Supply Chain management: an information processing perspective.” Information Systems Management 17(3): 56-69.

  

Add comment October 29th, 2008

Implicit Intelligence

Below you can see the presentation that I gave at a Business Information Management knowledge sharing session on Thursday October 16. The main goal was to inform people about the concept of tacit knowledge and how implementations of Business Intelligence should take this into consideration. Looking forward to your reactions!

  

Add comment October 21st, 2008

How can an organization survive in times of strategic war?

Emperor and leader of the ‘ Grande Armée’ Napoleon Bonaparte was forced to leave his throne in 1814 and banned to the Italian island of Elba. After his return to France the four great European powers conspired to strike against France. Napoleon decided to be ahead of this: he wanted to conquer Belgium in a fast way to conquer more countries after that. This campaign started at the 15th of June 1815 and ended at the 18th of June in the same year at the battlefield of Waterloo. In order to defeat him, his opponents had used his own war strategy against him: according to experts it was the main reason of his defeat.

Napoleon was already confronted with the consequences of strategy and the copying of one of his own advantages, that was used against him in 1815. Despite the fact that the battle of Waterloo happened 200 years ago, tactics that were used in that battle are daily strategy for organizations in our days. How do you keep a strategic advantage when anything can be copied nowadays?

Is there such a thing as a long lasting strategic advantage?

Obtaining a long lasting competitive advantage is, also for modern organizations, one of the focus points for strategic management (Barney, 1991; Prahalad & Hamel, 1997). Many scholars looked in to the problem of keeping a strategic advantage and many theories were developed (think for example about Porter’s Five Forces Model, 1980). But, as Grimm et al. (2006) pointed out, in our modern times a long lasting competitive advantage cannot be realized anymore, due to globalization and the speed in which information can be spread and copied worldwide. The authors talk about a period of hypercompetition that has emerged, through which obtaining a long lasting competitive advantage has no use:  “(…) today’s global business environment is becoming increasingly competitive and hostile, that every firm advantage will be quickly eroded and overcome by fast-paced competition (…).” (Grimm et al., p. 8).

So what do we do when we know that any strategic advantage that we create can and will be used against us within days or maybe hours? We have to start looking for the unique aspects from our organization, the ones that are difficult to copy. The old theories of valuable resources in an organization have to be looked at from a new background: a world where sustainable competitive advantages hardly exist anymore.

Unique resources to compete with

One group of strategic scholars focused on looking for strategic advantages inside the organisation (and not within circumstances surrounding the organisation): this was called the resource-based view (Black & Boal, 1994; Foss, 1997; Mata et al., 1995; Wernerfelt, 1984; Lippman & Rumelt, 1992; Teece, Pisano, & Shuen, 1997, Grimm et al., 2006). For their explanation of the term ‘resources’ these last authors used the paper of Barney (1986b): “all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc. controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness.”  (Grimm et al., 2006, p. 70).

Since we concluded in the previous section, that resources today are much easier to copy than they were before, we have to look for certain unique resources in the organization. These resources need to be difficult to copy and therefore intangible, so that the competition can be kept at a distance for some time. Rothberg & Erickson (2005) note that many companies forget their intangible resources when thinking about strategic advantages, because intangible resources are more difficult to connect to figures about profit or costs. “Less obvious is the analysis of the unique and rare resources that serve to support the activity, such as intangible skills and know-how of employees, (…). Although this second category might be considered soft and subjective, it can also be connected with important tangible costs and revenue (…).” (p. 76). As the authors state, it is lamentable that organizations don’t use see their intangible resources as of potential strategic value: “(…) people, their individual and collective knowledge and ability to generate actionable intelligence, are the greatest asset of the firm.” (p. 27).

Tacit knowledge as an unique resource in your organization

It can be concluded, that for example the knowledge of your employees that they have built up by experience and cannot be put into documents (so-called tacit knowledge, Polanyi 1967), can be a unique resource for your organization to compete with. Certain experience can be very rare, difficult to copy or to replace: a very valuable resource in times of strategic war! With a lot of experience in your organization, you can respond quicker to a new development and take better and faster decisions (den Hamer, 2005; Rothberg & Erickson, 2005; Davenport & Prusak, 1998).

So, in these times of hypercompetition and strategic wars, you have to focus on those resources that make your organization unique in the battle. Then why is it that during the current economic crisis, the first things that happen are the lay-off of a lot of employees? The built up experience, the tacit knowledge of your people, the knowledge that makes your organization unique: these unique resources deserve some special consideration because they can save your organizations life during the strategic battle yet to come.

Literature

• Barney, J. B. (1986b). Strategic Factor Markets: Expectations, Luck, and Business Strategy. Management Science, 32(10), 1231 - 1241.
• Barney, J. B. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management 17(1), 99 - 120.
• Davenport, T. H., & Prusak, L. (1998). Working Knowledge. How organizations manage what they know. Boston: Harvard Business School Press.
• den Hamer, P. (2005). De organisatie van business intelligence. Den Haag: Academic Service.
• Foss, N. J. (1997). Resources, Firms and Strategies. Oxford: Oxford University Press.
• Grimm, C. M., Lee, H., & Smith, K. G. (2006). Strategy as action: competitive dynamics and competitive advantage. . Oxford: Oxford University Press.
• Hislop, D. (2005). Knowledge management in organizations: a critical introduction. Oxford: Oxford University Press.
• Kogut, B., & Zander, U. (1997). Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology. In N. J. Foss (Ed.), Resources, Firms and Strategies (pp. 306 - 327). Oxford: Oxford University Press.
• Lippman, S. A., & Rumelt, R. P. (1992). Demand Uncertainty, Capital Specificity, and Industry Evolution. Industrial and Corporate Change, 1(1), 235 - 262.
• Mata, F. J., Fuerst, W. L., & Barney, J. B. (1995). Information Technology and Sustained Competitive Advantage: A Resource-Based Analysis. MIS Quarterly, 19(4), 487 - 505.
• Polanyi, M. (1967). The tacit dimension. London: Routledge & Kegan Paul.
• Porter, M. E. (1980). Competitive strategy: techniques for analyzing industries and competitors. New York: Free Press.
• Prahalad, C. K., & Hamel, G. (1997). The Core Competence of the Corporation. In N. J. Foss (Ed.), Resources, Firms and Strategies (pp. 235 - 257). Oxford: Oxford University Press.
• Rothberg, H. N., & Erickson, G. S. (2005). From Knowledge to Intelligence. Burlington, MA: Elsevier.
• Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic Capabilities and Strategic Management. In N. J. Foss (Ed.), Resources, Firms and Strategies (pp. 268 - 286).
• Wernerfelt, B. (1984). A Resource-Based View of the Firm. Strategic Management Journal, 5(2), 171 - 180.

  

Add comment September 16th, 2008

What is Intelligence?

Someone’s Intelligence Quotient, emotional intelligence, Competitive Intelligence and military intelligence. Just some terms you can find when you are looking for an explanation of the word  ‘intelligence’. Intelligence seems to be something that can be explained in many different ways. Also, in many management publications, organisational intelligence is a hot issue. But what does intelligence mean in this context, for example when we are talking about Business Intelligence? Is it the information that can be scooped out of our neighbours’ trashcan or something intangible in the back of ours heads? Well, it is both…

What is knowledge?

Intelligence is a concept that is strongly related to knowledge. Since ancient times, philosophers have thought about the concept of knowledge. Many definitions have been developed since then, for example by Weggeman (2000). He describes knowledge as the – partly unconscious – capacity that enables someone to execute a certain task by connecting data with his or her own experience, skills and values. He defines knowledge by a formula: K = I * ESV. As becomes apparent, knowledge consists of two inseparable elements, according to the author. One part that is information (explicit knowledge), and one part that is Experience, Skills and Values (implicit knowledge). New information makes no sense if it cannot be combined with existent implicit (also called tacit) knowledge. This all sounds very logical, but in the daily practice explicit and tacit knowledge are seen as two separate forms of knowledge, while they are in fact two sides to the same medal.
Tacit and explicit knowledge are thus two aspects of knowledge. Tacit knowledge can be for example the experience with which a manager can make a decision, or for example your ability to ride a bike. You cannot explain this form of knowledge, you cannot turn it into explicit knowledge. Explicit knowledge contains for example data from last year’s sales or information about the route to your work.

What is Intelligence?

If we assume that Knowledge is a combination of both explicit and tacit knowledge (I*ESV), than what is intelligence? Rothberg and Erickson stated in their publication in 2005: “Knowledge has value, but Intelligence has power.” (p. 3). According to these authors and some of their colleagues, intelligence is the application of knowledge in daily practice (Gilad & Gilad, 1999; Liebowitz, 1999; Rothberg & Erickson, 2005). Intelligence is knowledge in action. If we would want to define intelligence, based on the formula for knowledge, we could state that Intelligence is the Application of K = I*ESV. This also means that Intelligence too is built upon both explicit and tacit knowledge, the two sides of the medal called Knowledge.

Intelligence = A * K

Intelligence = A * (I*ESV)

What does this mean for Business Intelligence?

Intelligence forms an important part of the term Business Intelligence, but is traditionally seen as information, or better said: explicit knowledge. As we’ve seen in the theoretical approach to the term intelligence, it contains both tacit and explicit knowledge. Not much attention is paid to the implicit part of knowledge and intelligence, which is also very important in for example daily decision making. People working with Business Intelligence should realize that explicit knowledge, for example in the form of data coming from a datawarehouse, also needs tacit knowledge to become Intelligence. So if you want to accomplish real Business or Organizational Intelligence in your organization, combine the explicit knowledge that can be provided by your BI tools with the Experience, Skills and Values of your employees. In this way, and in this way only, you can accomplish true Intelligence!

Also read: Organizational Intelligence.

  

Add comment July 31st, 2008