Intelligent Business

The BI Business Case

As I discussed in my last article, Intelligence is not only about data and information, but also incorporates the intangible tacit knowledge from your employees. As you can see in the presentation that was uploaded recently, there is a big theoretical reasoning for why an implementation of a Business Intelligence solution should also include actions to promote the sharing and use of tacit knowledge. But how can we quantify the (potential) success of Business Intelligence, and how do we show that a BI implementation that also includes tacit knowledge is better for an organization? In other words, what is the BI Business Case?

The impossibilities for a BI Business Case

Especially in times of economical recession, each new project in an organization has to show a clear Business Case. How many benefits is this project going to create? A Business Case is, as defined by the Prince 2 Project Management method: “The information about costs and benefits of the project and with this the justification of the start-up and continuation of a Prince 2 project” (van den Akker, 2002). This Business Case is leading during a project, and will be used for evaluation of the progress and the results. In order to describe the costs and benefits data and information is needed, including forecasts.

Of course, an implementation of Business Intelligence should also be started with clear goals and potential benefits. Business Intelligence is meant to support decision making in an organization, by gathering data and information from within and outside of the organization and organizing this into management reports. But how do we measure if the decision making has indeed improved? How do we quantify decision making? We could never see the difference between the result of the decision that was actually taken and the result of the other option that was there. So how do we know which decision was the better one? How do we forecast future benefits from this ‘better decision’?

Also, when tacit knowledge is added as a point of attention to the implementation of Business Intelligence, this brings an extra factor to the table. Tacit knowledge in itself is a form of knowledge that cannot be made explicit and therefore not be measured. The use of tacit knowledge in decision making can thus not be determined, it is even so that tacit knowledge probably plays a role in every decision that we make but that the amount of influence can differ per decision. Measuring an improvement in decision making based on both data and information, delivered by BI tools, and tacit knowledge seems like an impossible goal. This leaves a possible implementation of Business Intelligence with a big problem: a quantitative Business Case can hardly be created.

The possibilities for a BI Business Case?

Brockmann & Anthony (2002) seemed to have found a solution. They investigated the influence of tacit knowledge in decision making on the performance of organizations. What better Business Case could we wish for? The authors suggest that decisions on a strategic level are often “ill-defined, unstructured and lacking in precedence”. (p. 437).

Tacit knowledge is just that, and can therefore contribute to this type of decisions. Since there is little or no attention for the use of tacit knowledge in organizations, this can be an extra advantage in strategic decisions.

The authors base their assumptions on the positive relationship of tacit knowledge to decision making on research by Wagner (1987), Wagner and Sternberg (1990). These authors investigated that the use of tacit knowledge has a positive influence on managing tasks, managing oneself and managing others. Also, there was investigation on intuition (compatible with tacit knowledge) from Parikh et al. (1994), Agor (1986a) where it was stated that “faster and higher quality decisions are made when managers rely on their intuition” (Brockmann & Anthony, 2002).

This all sounds like a perfect Business Case. But if we look into the methods that were used to determine whether a person had used his tacit knowledge, we see that we are talking about questionnaires or cases that are presented to participants. Considering my previous arguments on the impossibilities of measuring the amount of use of tacit knowledge and measuring ‘improved decision making’, these methods are not giving us any insight and certainly no reliable figures on future benefits of a BI implementation.

A different kind of Business Case

A quantitative Business Case, as described in the Prince 2 Methodology (van den Akker, 2002), is not something that we can apply onto an implementation of Business Intelligence. This implementation is complex and has many facets, as discussed in earlier articles, and can therefore not be captured by numbers about costs and benefits. So how do we show that an implementation of Business Intelligence actually has value? Well, a Business Case does not always have to contain figures that will show an increase of business results to be valid. There are examples of a Business Case based on qualitative statements and not so much quantitative ones.

During a BI implementation one could for example organize a quality audit of the decision making in an organization before the start of the implementation. At the end of the track, a similar audit has to be performed to see if the decision making has improved in the view of managers and their employees. These are very subjective criteria, but these are the only criteria that you can actually use to measure if your BI implementation has been successful.

Measuring the amount of use of tacit knowledge in decision making is, in my opinion, methodologically impossible. But a focus on the use and sharing of tacit knowledge (for example by looking over the shoulder of a colleague) could contribute to the feeling of improved decision making. So what is the answer to the question that was posed in the beginning of this article: what is the BI Business Case? There is definitely a Business Case for BI, but in the preparation of an implementation it should be proven in a different way than a traditional Business Case. With a non-traditional implementation of Business Intelligence, with extra attention to tacit knowledge, there is also a need for non-traditional Business Case!

Literature

• Agor, W. H. (1986a). The Logic of Intuition: How Top Executives Make Important Decisions. Organizational Dynamics, 14(3), 5 - 29.
• Akker, Ir. A.G. van den (2002). Prince 2 compact. Methode voor Projectmanagement. Lagant Management Consultants BV.
• Brockmann, E. N., & Anthony, W. P. (2002). Tacit Knowledge and Strategic Decision Making. Group & Organization Management, 27(4), 436 - 455.
• Parikh, J.; Neubauer, F.F. & Lank, A.G. (1994). Intuition: the new frontier of management. Cambridge, MA: Blackwell.
• Wagner, A.K. (1987). Tacit knowledge in everyday intelligent behavior. Journal of Personality and Social Psychology, 52, 1236 – 1247.
• Wagner, A.K. & Sternberg, R.J. (1990). Street Smarts. In K.E. Clark & M.B. Clark (Eds.). Measures of leadership (pp. 493 – 504). West Orange, NJ: Leadership Library of America, Inc.

Add comment November 5th, 2008