In-Depth

Why So Many BI Initiatives Fail

Balanced scorecards may help align what BI projects deliver with the strategic and operational information business users really want.

• By Peter Walzer
• 08/20/2003

A recent International Data Corporation (IDC) study, "The Financial Impact of Business Analytics," confirms what many business executives and managers already know: Business Intelligence (BI) initiatives can provide considerable value to all types of business organizations. The study, first conducted in 1996, found that "Business analytics implementations generated an average 5 year ROI [Return on Investment] of 431%." In addition, over half (63%) of the firms participating in the study "had a payback period of two years or less."

Why do so many BI projects fail? For years we've heard about the potential value of BI, so why are the results often so disappointing in the eyes of key BI project sponsors and stakeholders? A BI project can go quite smoothly -- from a technical perspective -- and still fail in the eyes of these sponsors and stakeholders.

The reason for this apparent confusion has to do with the way BI projects provide value. Specifically, the content delivered by many BI projects often does not need to be used by anyone. In fact, many BI projects have to constantly work to attract customers (or clients) who will hopefully be involved in the BI projects throughout their lifecycle. Typically, these clients must see the opportunity to leverage the information delivered by the BI project.

Contrast this to a mission-critical operational system that is inextricably tied into a key business process. As a result, what's required in a successful BI project is for key executives, managers, and other members of the organization to want to make use of what a BI project delivers. In other words, the successful BI project is aligned with the information that the organization desires.

A Strategic Approach to BI Project Alignment: Balanced Scorecard Provides the Connective Tissue

What's needed is an approach for resolving the alignment of what BI projects deliver and the strategic and operational information that the business really would like to have. Enter the Balanced Scorecard: an approach that provides a little structure and just so happens to be an ideal way to address the BI alignment problem.

In providing the rationale for utilizing the Balanced Scorecard within business organizations, Robert Kaplan and David Norton explain in "The Strategy-Focused Organization" that even organizations with "well formulated" strategies have trouble implementing them (as you might have guessed our alignment problem is often more than just a BI alignment problem). The authors explain that "strategies … are changing but the tools for measuring strategies have not kept pace."

Balanced Scorecard: Building the map

To get a sense of how the Balanced Scorecard can help us, let's start with an example of some standard strategic objectives common to many business organizations:

1. Increase Customer Value
2. Build the Franchise
3. Achieve the Best Cost Structure in the Industry

Figure 1: Click to enlarge

How can the Balanced Scorecard help us? If we take these Strategic Objectives and move them into an initial Balanced Scorecard Strategy Map (Figure 1) right away we notice two significant improvements.

First, we have incorporated different organizational perspectives for the business into the mix. There is the financial perspective, customer perspective, internal - or business process - perspective, and the learning and growth perspective. These perspectives clarify the orientation of the strategic objectives, giving them a clear frame of reference within the overall business entity.

Secondly, the Strategy Map documents the links between individual strategic objectives and also between certain strategic objectives and key business processes. This creates an opportunity for the strategy participant to ensure that strategic objectives support each other and that key business processes adequately support the right strategic objectives. The strategy participant can also evaluate the degree to which strategic objectives address key business process issues and critical success factors.

Balanced Scorecard: Adding the KPI's

Figure 2: Click to enlarge

The next step is to add the performance measures -- or KPI's in BI parlance -- to the Balanced Scorecard. In doing this, we look at specific information used to measure the effectiveness of each Strategic Objective. The links between various strategic objectives (and between certain strategic objectives and internal processes) can help support this high-value task.

A step often overlooked in collecting the metrics involves spending some time drilling into the detail of some of the key Internal Processes to establish operational metrics (Figure 2). Although strategic planning work doesn't generally call for business process analysis, certain business processes are so important to the strategic objectives of the business that this step can't be overlooked. Occasionally, business process documentation will already be available. In the event that there is no such documentation, business process experts should be asked to walk-through some of the key process flows at a high-level. This walk-through should uncover key informational metrics in the process. Since key information that supports the specified strategic objectives is all that is needed in the walkthrough, the common problem of KPI overkill can be avoided.

The result of this process analysis combined with our efforts to assign measures to Strategic Objectives will result in a Strategy Map seasoned with all the key metrics that the BI projects should be focused on implementing (Figure 3).

Benefits of a Balanced Scorecard Approach to BI Alignment

Figure 3: Click to enlarge

As Figure 3 illustrates, the Balanced Scorecard can be a unifying force in an environment where there is a real disconnect between the strategic and operational information needs of the business and the information consistently delivered by the BI project team. With an effectively implemented Balanced Scorecard, the BI project team and the rest of the business organization can begin to confidently refer to the Scorecard's elements knowing that they are talking about the same strategic objectives, key internal processes, and key performance metrics.

The Balanced Scorecard approach is now recognized internationally as an incredible transformational tool for businesses that endeavor to improve their strategic focus. For those organizations that have not yet considered this approach, an initial focus on the benefits in improved BI Alignment represents a tremendously synergistic opportunity: well-aligned BI projects can provide the performance measures that are critical to every Balanced Scorecard effort.

The Balanced Scorecard facilitates BI project alignment, prioritization, and focus and gets its performance measures as part of the package. What does the business get? It gets a focused, clearly articulated strategy and a road map for better-aligned BI projects.

References:

1. Press Release, IDC Study Finds Analytics Projects Yield 431% Average ROI, International Data Corporation, October 28, 2002.
2. Kaplan, Robert, Norton, David, The Strategy Focused Organization, Harvard Business School Publishing Corporation, 2001.