GLOBAL EDITION Business Intelligence Analytics A Managerial Perspective on THIRD EDITION Turban • Dursun • Delen Efraim Ramesh Sharda

GLOBAL THIRD Sharda • Delen EDITION EDITION GLOBAL EDITION the approval of the Publisher or Author. of the Publisher or the approval Pearson published this exclusive edition for the benefi t the benefi edition for published this exclusive Pearson North American version. North

Chapter 3 • Business Reporting, Visual Analytics, and Business Performance Management 125

Business Functions

UOB 1.0 X UOB 2.1 X UOB 3.0

Data UOB 2.2 Transactional Records Exception Event Symbol Count Description Action Machine 1 Failure (decision)

DEPLOYMENT CHART PHASE 1PHASE 2PHASE 3PHASE 4PHASE 5 DEPT 1

DEPT 2

DEPT 3 Data DEPT 4 4 5 Repositories 1 2 3 Decision Information Maker (reporting)

FIGURE 3.1 The Role of Information Reporting in Managerial Decision Making.

The nature of the report also changes significantly based on whom the report is created for. Most of the research in effective reporting is dedicated to internal reports that inform stakeholders and decision makers within the organization. There are also external reports between businesses and the government (e.g., for tax purposes or for regular filings to the Securities and Exchange Commission). These formal reports are mostly standardized and periodically filed either nationally or internationally. Standard Business Reporting, which is a collection of international programs instigated by a num- ber of governments, aims to reduce the regulatory burden for business by simplifying and standardizing reporting requirements. The idea is to make business the epicenter when it comes to managing business-to-government reporting obligations. Businesses conduct their own financial administration; the facts they record and decisions they make should drive their reporting. The government should be able to receive and process this infor- mation without imposing undue constraints on how businesses administer their finances. Application Case 3.1 illustrates an excellent example for overcoming the challenges of financial reporting. Even though there are a wide variety of business reports, the ones that are often used for managerial purposes can be grouped into three major categories (Hill, 2013).

METRIC MANAGEMENT REPORTS In many organizations, business performance is man- aged through outcome-oriented metrics. For external groups, these are service-level agreements (SLAs). For internal management, they are key performance indicators (KPIs). Typically, there are enterprise-wide agreed targets to be tracked against over a period of time. They may be used as part of other management strategies such as Six Sigma or Total Quality Management (TQM).

DASHBOARD-TYPE REPORTS A popular idea in business reporting in recent years has been to present a range of different performance indicators on one page, like a dashboard in a car. Typically, dashboard vendors would provide a set of predefined 126 Chapter 3 • Business Reporting, Visual Analytics, and Business Performance Management

Application Case 3.1 ensures Accuracy and efficiency in Financial Reporting Delta Lloyd Group is a provider would automate some of the last-mile processes and based in the . It offers insurance, pen- reduce the risk of manual error.” sions, investing, and banking services to its private and corporate clients through its three strong brands: Solution Delta Lloyd, OHRA, and ABN AMRO Insurance. Since its founding in 1807, the company has grown The group decided to implement IBM Cognos in the Netherlands, Germany, and Belgium, and now Financial Statement Reporting (FSR). The implemen- employs around 5,400 permanent staff. Its 2011 full- tation of the software was completed in just 6 weeks year financial reports show €5.5 billion in gross writ- during the late summer. This rapid implementation ten premiums, with shareholders’ funds amounting gave the finance department enough time to prepare to €3.9 billion and investments under management a trial draft of the annual report in FSR, based on worth nearly €74 billion. figures from the third financial quarter. The successful creation of this draft gave Delta Lloyd Group enough Challenges confidence to use Cognos FSR for the final version of the annual report, which was published shortly Since Delta Lloyd Group is publicly listed on the after the end of the year. NYSE Euronext , it is obligated to pro- duce annual and half-year reports. Various sub- Results sidiaries in Delta Lloyd Group must also produce reports to fulfill local legal requirements; for exam- Employees are delighted with the IBM Cognos ple, banking and insurance reports are obligatory FSR solution. Delta Lloyd Group has divided the in the Netherlands. In addition, Delta Lloyd Group annual report into chapters, and each member of must provide reports to meet international require- the reporting team is responsible for one chapter. ments, such as the IFRS (International Financial Arnold Honig says, “Since employees can work on Reporting Standards) for accounting and the EU documents simultaneously, they can share the huge Solvency I Directive for insurance companies. The workload involved in report generation. Before the data for these reports is gathered by the group’s reporting process was inefficient, because only one finance department, which is divided into small person could work on the report at a time.” teams in several locations. The data is then con- Since the workload can be divided up, staff can verted into XML so that it can be published on the complete the report with less overtime. Arnold Honig corporate Web site. comments, “Previously, employees were putting in 2 weeks of overtime during the 8 weeks required to Importance of Accuracy generate a report. This year, the 10 members of staff involved in the report generation process worked The most challenging part of the reporting process 25 percent less overtime, even though they were still is the “last mile”—the stage at which the consoli- getting used to the new software. This is a big win for dated figures are cited, formatted, and described to Delta Lloyd Group and its staff.” The group is expect- form the final text of the report. Delta Lloyd Group ing further reductions in employee overtime in the was using Microsoft Excel for the last-mile stage of future as staff become more familiar with the software. the reporting process. To minimize the risk of errors, the finance team needed to manually check all the Accurate Reports data in its reports for accuracy. These manual checks were very time-consuming. Arnold Honig, team The IBM Cognos FSR solution automates key stages leader for reporting at Delta Lloyd Group, com- in the report-writing process by populating the ments: “Accuracy is essential in financial reporting, final report with accurate, up-to-date financial data. since errors could lead to penalties, reputational Wherever the text of the report needs to mention a damage, and even a negative impact on the com- specific financial figure, the finance team simply inserts pany’s stock price. We needed a new solution that a “variable”—a tag that is linked to an underlying Chapter 3 • Business Reporting, Visual Analytics, and Business Performance Management 127

data source. Wherever the variable appears in the management reports. It will also help Delta Lloyd document, FSR will pull the figure through from Group to meet industry regulatory standards, which the source into the report. If the value of the figure are becoming stricter. Arnold Honig comments, needs to be changed, the team can simply update it “The EU Solvency II Directive will come into effect in the source, and the new value will automatically soon, and our Solvency II reports will need to be flow through into the text, maintaining accuracy and tagged with eXtensible Business Reporting Language consistency of data throughout the report. [XBRL]. By implementing IBM Cognos FSR, which Arnold Honig comments, “The ability to update fully supports XBRL tagging, we have equipped our- figures automatically across the whole report reduces selves to meet both current and future regulatory the scope for manual error inherent in spreadsheet- requirements.” based processes and activities. Since we have full control of our reporting processes, we can produce Questions for Discussion better quality reports more efficiently and reduce our 1. How did Delta Lloyd Group improve accuracy business risk.” IBM Cognos FSR also provides a com- and efficiency in financial reporting? parison feature, which highlights any changes made 2. What were the challenges, the proposed solu- to reports. This feature makes it quicker and easier tion, and the obtained results? for users to review new versions of documents and 3. Why is it important for Delta Lloyd Group to ensure the accuracy of their reports. comply with industry regulations?

Adhering to Industry Regulations Sources: IBM Customer Stories, “Delta Lloyd Group Ensures Accuracy in Financial Reporting,” public.dhe.ibm.com/ In the future, Delta Lloyd Group is planning to common/ssi/ecm/en/ytc03561nlen/yTC03561nLEn.PDF extend its use of IBM Cognos FSR to generate internal (accessed February 2013); and www.deltalloydgroep.com.

reports with static elements and fixed structure, but also allow for customization of the dashboard widgets, views, and set targets for various metrics. It’s common to have color-coded traffic lights defined for performance (red, orange, green) to draw management attention to particular areas. More details on dashboards are given later in this chapter.

BALANCED SCORECARD–TYPE REPORTS This is a method developed by Kaplan and Norton that attempts to present an integrated view of success in an organization. In addition to financial performance, balanced scorecard–type reports also include cus- tomer, business process, and learning and growth perspectives. More details on balanced scorecards are provided later in this chapter.

Components of Business Reporting Systems Although each business reporting system has its unique characteristics, there seems to be a generic pattern common across organizations and technology architectures. Think of this generic pattern as having the business user on one end of the reporting continuum and the data sources on the other end. Based on the needs and require- ments of the business user, the data is captured, stored, consolidated, and converted to desired reports using a set of predefined business rules. To be successful, such a system needs an overarching assurance process that covers the entire value chain and moves back and forth, ensuring that reporting requirements and information delivery are properly aligned (Hill, 2008). Following are the most common components of a business reporting system. 128 Chapter 3 • Business Reporting, Visual Analytics, and Business Performance Management

• OLTP (online transaction processing): A system that measures some aspect of the real world as events (e.g., transactions) and records them into enterprise databases. Examples include ERP systems, POS systems, Web servers, RFID readers, handheld inventory readers, and card readers. • Data supply: A system that takes recorded events/transactions and delivers them reliably to the reporting system. The data access can be push or pull, depending on whether or not it is responsible for initiating the delivery process. It can also be polled (or batched) if the data are transferred periodically, or triggered (or online) if data are transferred in case of a specific event. • ETL (extract, transform, and load): The intermediate step where these recorded transactions/events are checked for quality, put into the appropriate for- mat, and inserted into the desired data format. • Data storage: The storage area for the data and metadata. It could be a flat file or a spreadsheet, but usually is a relational database management system (RDBMS) set up as a data mart, data warehouse, or operational data store (ODS). Data storage often employs online analytical processing (OLAP) functions likes cubes. • Business logic: The explicit steps for how the recorded transactions/events are to be converted into metrics, scorecards, and dashboards. • Publication: The system that builds the various reports and hosts them (for users) or disseminates them (to users). These systems may also provide notification, annotation, collaboration, and other services. • Assurance: Quality service offered to users by a good business reporting system. This includes determining if and when the right information is to be delivered to the right people in the right way/format. Application Case 3.2 is an excellent example to illustrate the power and the utility of automated report generation for a large (and, at a time of natural crisis, somewhat chaotic) organization like FEMA.

Application Case 3.2 Flood of paper ends at FeMA Staff at the Federal Emergency Management Agency project manager and computer scientist, respec- (FEMA), a U.S. federal agency that coordinates disas- tively, from Computer Sciences Corporation (CSC) ter response when the President declares a national have used WebFOCUS software from Information disaster, always got two floods at once. First, water Builders to turn back the flood of paper generated covered the land. Next, a flood of paper, required by the NFIP. The program allows the government to administer the National Flood Insurance Program to work together with national insurance compa- (NFIP), covered their desks—pallets and pallets of nies to collect flood insurance premiums and pay green-striped reports poured off a mainframe printer claims for flooding in communities that adopt flood and into their offices. Individual reports were some- control measures. As a result of CSC’s work, FEMA times 18 inches thick, with a nugget of information staff no longer leaf through paper reports to find about insurance claims, premiums, or payments bur- the data they need. Instead, they browse insur- ied in them somewhere. ance data posted on NFIP’s BureauNet intranet Bill Barton and Mike Miles don’t claim to be site, select just the information they want to see, able to do anything about the weather, but the and get an on-screen report or download the data Chapter 3 • Business Reporting, Visual Analytics, and Business Performance Management 129

as a spreadsheet. And that is only the start of the needed it, and asking for many new types of reports. savings that WebFOCUS has provided. The number Fortunately, Miles and WebFOCUS were up to the of times that NFIP staff asks CSC for special reports task. In some cases, Barton says, “FEMA would ask for has dropped in half, because NFIP staff can generate a new type of report one day, and Miles would have it many of the special reports they need without call- on BureauNet the next day, thanks to the speed with ing on a programmer to develop them. Then there which he could create new reports in WebFOCUS.” is the cost of creating BureauNet in the first place. The sudden demand on the system had little Barton estimates that using conventional Web and impact on its performance, notes Barton. “It handled database software to export data from FEMA’s main- the demand just fine,” he says. “We had no problems frame, store it in a new database, and link that to with it at all. And it made a huge difference to FEMA a Web server would have cost about 100 times as and the job they had to do. They had never had that much—more than $500,000—and taken about two level of access before, never had been able to just years to complete, compared with the few months click on their desktop and generate such detailed Miles spent on the WebFOCUS solution. and specific reports.” When Tropical Storm Allison, a huge slug of sodden, swirling cloud, moved out of the Gulf of Questions for Discussion Mexico onto the Texas and Louisiana coastline in June 2001, it killed 34 people, most from drowning; dam- 1. What is FEMA and what does it do? aged or destroyed 16,000 homes and businesses; and 2. What are the main challenges that FEMA faces? displaced more than 10,000 families. President George 3. How did FEMA improve its inefficient reporting W. Bush declared 28 Texas counties disaster areas, practices? and FEMA moved in to help. This was the first serious test for BureauNet, and it delivered. This first compre- Source: Information Builders Success Story, “Useful Information hensive use of BureauNet resulted in FEMA field staff Flows at Disaster Response Agency,” informationbuilders.com/ readily accessing what they needed and when they applications/fema (accessed January 2013); and fema.gov.

SECTIOn 3.2 REVIEW QuESTIOnS 1. What is a report? What are reports used for? 2. What is a business report? What are the main characteristics of a good business report? 3. Describe the cyclic process of management and comment on the role of business reports. 4. List and describe the three major categories of business reports. 5. What are the main components of a business reporting system?

3.3 DATA AND INFORMATION VISUALIZATION Data visualization (or more appropriately, information visualization) has been defined as “the use of visual representations to explore, make sense of, and communicate data” (Few, 2008). Although the name that is commonly used is data visualization, usually what is meant by this is information visualization. Since, information is the aggregation, summarization, and contextualization of data (raw facts), what is portrayed in visualiza- tions is the information and not the data. However, since the two terms data visualiza- tion and information visualization are used interchangeably and synonymously, in this chapter we will follow suit. Data visualization is closely related to the fields of information graphics, information visualization, scientific visualization, and statistical graphics. Until recently, the major forms