Improving decision making in organisations Unlocking business intelligence Improving decision making in organisations Unlocking business intelligence 1 Improving decision making in organisations Contents 1 Executive summary . 4 The decision making process . 6 2 2.1 Developments in the role of the management accountant . 6 2.2 Effective decision making . 7 2.3 Management information today . 8 2.4 Developments in management information . 10 2.5 Could business intelligence be the next big thing? . 12 Business intelligence . 16 3 3.1 Developments in business intelligence . 16 3.2 Recent developments in business intelligence . 18 3.3 What now? . 20 3.4 Who are the main players? . 21 3.5 What next? . 22 The role of the management accountant in business intelligence . 24 4 4.1 Management accountants and business intelligence . 24 4.1.1 BI strategy . 24 4.1.2 Business case . 26 4.1.3 Cost savings . 27 4.1.4 Increase profitability . 28 4.1.5 Intangible benefits . 28 4.2 Implementation . 29 4.3 Data quality . 34 4.4 Performance management . 37 4.5 Analytics . 39 5 Conclusion . 42 6 References and further reading . 43 7 Appendix: glossary of terms . 45 2 Figures Figure 1 Transformation of finance . 6 Figure 2 Management accountancy’s expansion . 7 Figure 3 How management information has expanded . 10 Figure 4 Service interfaces insulate business processes from IT change, and IT from business process change . 17 Figure 5 The business intelligence ‘stack’ . 19 Figure 6 An example of a dashboard . 23 Figure 7 The evolving role of BI . 25 Figure 8 Reasons for using data warehousing and BI . 26 Figure 9 Stages of a business transformation project where the risks of failure are highest . 29 Figure 10 An example of a partial benefits dependency network . 31 3 Improving decision making in organisations 1 Executive summary Business leaders and management There is a risk that competitors may have already accountants must be alert to the potential established a competitive advantage through better of current developments in the role of the decision making informed by better management information. finance function (finance transformation) and business intelligence (BI). The Management accountants have important roles combination of these developments to play in unlocking the potential in BI and finance provides an opportunity to reshape transformation. BI may threaten some traditional decision making and improve performance. accounting roles in producing management information but it presents new opportunities to stimulate stalled finance transformation projects and release management accountants’ capacity to take on decision support roles and improve decision making. • The role of the finance function is being transformed. Leading organisations have already grasped the opportunities presented by finance transformation to improve the efficiency of accounting operations. They have also developed finance personnel who can be deployed to help improve decision making across the business. The CIMA Improving Decision Making Forum (the CIMA Forum) contends that any organisation not transforming their finance function in this way could be putting their competitive position at risk. • Meanwhile, BI has matured as a technology and expanded to include the reporting and analysis or performance management tools used by accountants. Problems with data quality and the integration of systems are being addressed. Major companies in certain sectors already use BI to achieve competitive advantage. This technology is becoming cost-effective for a wider range of sectors and for smaller companies too. The term business intelligence is often used to describe the technical architecture of systems that extract, assemble, store and access data to provide reports and analysis. It can also be used to describe the reporting and analysis applications or performance management tools at the top of this ‘stack’. But business intelligence is not just about hardware and software. It is about a company wide recognition that a company’s data is an important strategic asset that can yield valuable management information and implement change so that this information is used to improve decision making. 4 Management information needs have expanded and Therefore, management accountants should work more business intelligence has evolved to meet these needs. closely with their colleagues in IT to help develop and For example, Business Objects, Cognos and Hyperion implement a BI strategy. performance management applications were often seen • They can work with IT to develop a BI strategy and as specialised reporting tools for accountants. They are the business case for the investment in BI. They now seen as business intelligence tools and have been should help determine the actions to be taken and acquired by SAP, IBM and Oracle to complete their BI risks to be managed so the expected benefits can be stacks. realised. • They can support implementation, ensuring that The CIMA Forum notes that leading companies are change management and project management seizing the opportunities presented by developments disciplines are applied. in business intelligence to provide a broader range of • They can help ensure data quality; perhaps taking management information in more accessible formats responsibility for this often unclaimed problem area. and conducting more forward-looking analysis to • They can help to articulate the business’s information improve decision making. But, while competitors are needs for decision making and support performance gaining a competitive advantage, business intelligence management with metrics that reflect value creation. strategies have stalled where senior executives either • They can support less quantitative or financially do not see the potential in BI for their organisation or articulate colleagues in the business with analysis do not ensure that the company’s data is managed and modelling of financial and non-financial data to generate management information that is used to to assess performance and enable evidence based improve decision making. decision making about the future. Likewise, finance transformation has stalled where senior executives do not have a shared vision for the new, broader, role of finance in improving decision making. If accounting is about producing management information and finance is about applying that knowledge, then too many accountants are still fully occupied by accounting roles in the reporting cycle of accounts, budgets, reports and forecasts and they do not have the capacity to challenge for these new finance roles. Management accountants should consider the potential for BI in their business and be prepared to champion BI projects where it is appropriate. It could enable them to provide a wider range of information in more accessible formats. In addition to reporting and monitoring, they could provide more forward-looking analysis based on a combination of both financial and non-financial information. It could also release many accountants from the rigour of the reporting cycle to take on decision support roles. 5 Improving decision making in organisations 2 The decision making process 2.1 Developments in the role of the management accountant The CIMA Improving Decision Making Forum (the and in finance. They describe accounts as the CIMA Forum), consisting of senior accountants production of standard reports, budgets, forecasts, from leading organisations, notes that some leading analysis and management information; whereas businesses may have a competitive advantage because finance is about the application of financial expertise they have already transformed their finance and and business understanding to provide insights and to accounts operations. They have streamlined processes support decision making. and standardised systems. They use shared service centres, whether in-house or outsourced, to achieve As the finance and accounts function is transformed, economies of scale and form centres of excellence there will always be a demand for accountants in routine processes and increasingly in higher value with technical accounting expertise, for example services too. But, in addition to increasing the efficiency as specialists in information systems and statutory of the finance function they have also improved its reporting. But the area of greatest opportunity will be effectiveness in supporting value creation. They have where accounting and management skills are combined developed finance personnel as business partners in financial roles to support decision making. CIMA’s and deployed them to help manage performance and surveys of its membership confirm that qualification improve decision making across the business. as a management.