Mergers and value

20 April 2009

and they all lived happily ever after?

Today’s big news is of course that Oracle and Sun Microsystems “have entered into a definitive agreement under which Oracle will acquire Sun common stock for $9.50 per share in cash.”

As Sun’s press release goes on to say, “the transaction is valued at approximately $7.4 billion”. At the time of writing, Sun’s stock was up nearly 36% and Oracle‘s was down just over 1%. The price Oracle is paying represents a 42% premium over Sun’s closing stock price on Friday – that’s a big premium.

What is interesting is that the previous mooted IBM / Sun deal appears to have foundered at least partly on issues of price (though potential antitrust issues were also a concern). IBM was rumoured to have offered a price identical to what Oracle will now be paying. So what, taking Larry Ellison’s deep pockets to one side, was the difference?

Well while there seemed to be some synergies for IBM in the earlier deal (a big say in the future of Java obviously being one that would have attracted both suitors), the acquisition of Sun is unarguably a much more transformational event for Oracle. Despite Sun’s recent problems in shifting big iron (funny how UNIX platforms are now viewed that way isn’t it?), Oracle post-acquisition will have a product set ,matched by few companies. In fact it will probably be matched by only one: IBM. So, while buying Sun might have made business sense for IBM, it would not have changed the nature of the organisation overnight. Oracle’s announcement today would appear to have done just that, positioning them as the other big beast in the “buy everything from us” jungle. Whether this deal proves successful for all concerned (and not just Sun’s shareholders) is a question whose answer will probably not be clear for a long time.

A comparisson of Oracle and Sun's positions with key competitors in the Forbes Global 2000

A comparisson of Oracle and Sun's positions with key competitors in the Forbes Global 2000

Stepping back from all this IT fervour for a moment, it is perhaps instructive to compare the merger madness that seems to have taken over the sector with trends outside the technology industry. Here the picture is very different. Over the last 10 years the majority of sprawling conglomerates have been split up; previously cherished businesses have been spun off, or sold to competitors. This has all been in homage to the business school orthodoxy of focus and core competencies. Many an internationally renowned name now sells just a fifth of its previous product set, with other assets now owned by those who can presumably generate greater profit from them and who feel that they are more compatible with their own core strategy. Deals where two similar companies have swapped assets and businesses to create two more distinctive entities have been common. While it is always notoriously difficult to assess the impact of such trends, general opinion seems to be that this phenomenon has generated greater value (or at least destroyed less value) than the previous focus on mergers and acquisitions.

So where does this leave IT with its rash of mega mergers over the last couple of years? Well it could of course be argued that IT itself is a single sector (and thus an area of focus and core competency) and that mergers within the technology sector are not the same as say a consumer electronics firm taking over a Hollywood studio (Sony / Colombia TriStar) or old media taking over new (TimeWarner / AOL). But many elements of Sun and Oracle’s businesses are quite different from each other. Ellison must believe that he can run a more diverse stable and still breed winners. The track record of Oracle successfully managing acquisitions is mostly impressive, so he may have a point. Perhaps bucking the trend towards being highly focussed is a masterstroke. The merger may prove to be a Waterloo for the world’s third biggest software and services firm; but whether they are playing the role of Wellingtion or Napoleon remains to be seen.
 



 
Continue reading about this area in: Combinatorics.
 
Much of the following was originally conatained in a comment, but I then thought that it was more appropriate to add this to the main article.

Some thoughts on this area from bloggers that I follow:

I will add more as I come across them.

Also here is an interesting graphic from MySQL.com, which (if you believe it) shows the impact of the Sun acquistion on Oracle’s market share:

UPDATE: The above chart reflects: “According to the recent JoinVision study ‘Open Source in the Fast Lane’, IT specialists indicated they deploy MySQL 30% more frequently than Oracle, SQL Server or DB2.” Not quite the same thing as market share.
 

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The latest and greatest versus the valuable

20 April 2009

A World of Bytes by Curt Monash

This article expands on some comments I made on Curt Monash‘s latest blog posting: Why the basically good choice of Aneesh Chopra for US CTO scares the bejeesus out of me. In this, Curt argues that:

[the new US government CIO and CTO may be] so focused on shiny new technologies that they won’t address some of the devastatingly critical challenges of government IT.

Curt then goes on to list some of the important areas that he is concerned will not recieve enough attention. Although Curt’s piece was directed at a very specific area, I think that it raises some general questions. Here are the comments that I made on his blog:

“As you allude to, one of the main problems that IT faces is its focus on the new and shiny, sometimes to the exclusion of the older, but more worthy. I’m by no means a technology Luddite, progress is to be desired, but there has to be some reason for it; something beyond just being neat.

This is a double-headed monster in my opinion. First IT types like me are often drawn to the new and sexy – maybe that’s why we got into the business in the first place. Second, the flashy – particularly when it makes it to general business publications, can generate a “me too” attitude in senior executives, sometimes deflecting IT attention from less glamorous, but more necessary work.

As with most things in life, a balance between both elements of IT is probably what is most necessary.”

I have touched on this area already a couple of times. It was one of the issues that I identified in Problems associated with the IT cycle, where I said:

“On top of this we can add some attributes of IT staff which, although generally desirable, can have a downside as well. Many IT people want to be involved in the latest and greatest technology – this is not always what is going to add most value to the business.”

Also, much of my article about dashboards relates to this issue, as may be deduced by the title: “All that glisters is not gold” – some thoughts on dashboards. In this I comment:

“[...] echoing my comments on BI tools in general, I think an attractive looking dashboard is really only the icing on the cake. The cake itself has two main other ingredients:

  1. The actual figures that it presents (and how well they have been chosen) and
  2. The Information Architecture that underpins them”

Making what I realise is something of a bold leap here, I think that this fascination with the new and technically cool is one reason that IT managers sometimes feel left out of the inner circle of executives of an organisation. In some people’s minds (sometimes those of influential people) IT is too readily associated with Sci-Fi conventions, comic books and and pocket protectors (with of course my apologies in advance to devotees of each of these). This may seem a trivial point, but such associations sometimes run deep; everyone loves a good stereotype.

Of course there are many business-focussed IT managers out there striving to deliver value for their organisations, to boost sales, or reach new customers, or reduce costs; I have been one of them myself. But these industrious individuals are sometimes still seen through the “geek” prism I have described above. Maybe it is only by focsuing more established technologies, ones that demonstrably add business value, that the profession will be able to throw off this yoke.

Although I am rather fond of using quotations on this blog, it is not typical for me to cite religious texts. However, maybe St. Paul had IT in mind when he wrote:

“When I was a child, I spake as a child, I understood as a child, I thought as a child: but when I became a man, I put away childish things.”

While the IT leads of the US government can be accused of too great a focus on what many might view as childish things, then it seems that we still have some way to go.
 

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Synthesis

18 April 2009

RNA Polymerase producing mRNA from a double-stranded DNA template

  synthesis /sinthisiss/ n. (pl. syntheses /-seez/) 1 the process of building up separate elements, esp. ideas, into a connected whole, esp. a theory or system. (O.E.D.)  

Yesterday’s post entitled Recipes for success? seems to have generated quite a bit of feedback. In particular I had a couple of DMs from people I know on twitter.com (that’s direct messages for the uninitiated) and some e-mails, each of which asked me why I was so against business books. One person even made the assumption that I was anti-books and anti-learning in general.

I guess I need to go on a course designed to help people to express themselves more clearly. I am a bibliophile and would describe myself as fanatically pro-learning. As I mentioned in a comment on the earlier article, I was employing hyperbole yesterday. I would even go so far as to unequivocally state that some business books occasionally contain a certain amount of mildly valuable information.

Of course, when someone approaches a new area, I would certainly recommend that they start by researching what others have already tried and that they attempt to learn from what has previously worked and what has not. Instead, the nub of my problem is when people never graduate beyond this stage. More specifically, I worry when someone finds a web-article listing “10 steps that, if repeated in the correct sequence, will automatically lead to success” and then uncritically applies this approach to whatever activity they are about to embark on.

Assuming that the activity is something more complicated than assembling Ikea furniture, I think it pays to do two further things: a) cast your net a little wider to gather a range of opinions and approaches, and b) assemble your own approach, based borrowing pieces from different sources and sprinkling this with your own new ideas, or maybe things that have worked for you in the past (even if these were in slightly different areas). My recommendation is thus not to find the methodology or design that most closely matches your requirements, but rather to roll your own, hopefully creating something that is a closer fit.

This act of creating something new – based on research, on leveraging appropriate bits of other people’s ideas, but importantly adding your own perspective and tweaking things to suit your own situation – is what I mean by synthesis.

Of course maybe what you come up with is not a million miles from one of the existing prêt-à-porter approaches, but it may be an improvement for you in your circumstances. Also, even if your new approach proves to be suboptimal, you have acquired something important; experience. Experience will guide you in your next attempt, where you may well do better. As they saying maybe ought to go – you learn more from your own mistakes than other people’s recipes for success.
 


 
Addendum

The WordPress theme I use for this blog – Contempt – was written by Michael Heilemann a self-styled “Interface Designer, Web Developer, former Computer Game Developer and Film Lover”. Michael also writes a blog, Binary Bonsai and I felt that his article, George Lucas stole Chewbacca, but it’s OK, summed up (if you can apply the concept of summation to so detailed a piece of writing) a lot of what I am trying to cover in this piece. I’d recommend giving it a read, even if you aren’t a Star Wars fan-boy.
 

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Recipes for success?

17 April 2009

I should acknowledge that I am indebted to a conversation that I had with John Collins on his blog, Views from the Bridge, for some of the themes I discuss in this article.
 
Recipe for Success?
 
Introduction

Towards the end of a recent article on perseverance I referred to people’s desire to find recipes for success. Here’s what I said:

Sometimes we want to find a magic recipe for success, or – to mix the metaphor – a silver bullet. We want to discover a series of defined steps to take that, if repeated religiously, will guarantee that we get to the desired goal each and every time. That’s why articles entitled “The 5 ways to [...]” and “My top tips for [...]” are so well-read on the web.

As well as my examples of internet top tips (see any number of articles claiming to tell you how to use twitter successfully to get the idea), this phenomenon is also a major factor behind the enduring popularity of celebrity business books. As far as I can see, these fall into two categories.
 
 
1. The Ex-CEO

This is where the extremely successful and well-known Mr Brown (and sadly it is still mostly Mr, rather than Ms Brown), now retired but previously President and CEO of Big Company Inc., writes (or more likely has some one ghost-write) a memoir explaining the secrets of his success. While the book may dwell on their upbringing, education, role models, or character-forming events in their lives, much of the work will probably focus on them just being much smarter, more risk-taking, or having greater insight than the competition (most likely all of these). Of course there may well be some interesting tit-bits amongst the reams of self-aggrandisement, but it is worth questioning just how applicable these might be to your own situation.

Are the things that Mr Brown ascribes his success to really what led to his glittering career? Are there perhaps other factors that are not captured in the memoir, but which, if absent in another organisation, would render implementing Mr Brown’s explicit recommendations valueless? Did Mr Brown’s greatest achievements actually have a big slice of luck attached to them (stumbling upon a market or a product by accident, a major competitor losing their way, events beyond anyone’s control shaping matters and so on)? Would the things that Big Company Inc. did under Mr Brown’s esteemed leadership actually work in another company, in a different market or country and with a distinctive business culture?

Put it this way, if you work in Financial Services, would copying what worked in Retail be a good idea? Alternatively, if two companies are both in Retail, does it make sense for a less successful company to slavishly adopt the strategy of the market leader – wouldn’t it be more sensible if they tried to develop a different strategy in order to differentiate their brand?

Of course there is always value in learning from the mistakes and successes of others, but surely there is a limit to how useful a business memoir can be in forming a business strategy.
 
 
2. The Academic Expert

Here Professor Green (probably still male), has a long and distinguished career in academia, reading and deconstructing the memoirs of Mr Brown and his peers, identifying common themes between them, doing primary research and constructing recherché models of business strategy development and execution. If there is a new management fad out there, Professor Green is sure to know about it – in fact it may well be based on an article of his that appeared in HBR.

Well there is certainly some value in trying to tease out commonalities between successful companies, but this is probably a lot harder than it might seem. While there may be some recurring themes, maybe many of our champions of business are one offs, successful for reasons other than their business models or strategies. In fact they may well be as unique as the people who lead them. Maybe there is no equivalent of the standard model of quantum mechanics (to say nothing of a deeper grand unified theory) that underpins business success – perhaps the science of business is different from the more reductionist sciences, such as physics. Maybe there isn’t a formula for business success; perhaps it is more like Darwinian natural selection (I’ll come back to this idea later).

Whichever way you look at it, again there is probably a limit to how much insight you can glean from this type of book.
 
 
Other genres

Of course this phenomenon extends into many other areas of human activity. As a youth I can remember only too well poring over cricket manuals in an (ultimately fruitless) attempt to improve my batting or wicket-keeping. My father, at the age of 72, still does the same with golf manuals.

The endless array of cooking books also in the same category and where would we be without the panoply of self-help books such as The Seven Habits of Annoyingly Organised People? All of which goes to show that reliance on recipes for success is a deeply ingrained human trait.
 
 
Recipes for success in IT

Having established that people like turning to both “My top tips for [...]” and “Mr Brown’s Glittering Career” (available at all good booksellers) how does this aspect of human nature impinge on one of my main areas of endeavour, IT?

Well it has a major impact in my opinion. In fact it is difficult to think of an area of life more obsessed with frameworks, blue-prints, road-maps, procedures, best practices and methodologies (to say nothing of ontologies and taxonomies). All of these are intended to take the risk out of activities – well at least to provide the people following them with the ability to say “well I did what the methodology told me to do”. Of course IT projects and IT development are very complex things and standards of design, coding and behaviour of systems are of paramount importance; but it still seems that IT people have a more visceral relationship with the above-stated areas than would be dictated solely by ticking the necessary boxes.

Nevertheless, having been personally responsible for instigating a thoroughgoing process of standardisation and quality control in a software house (and thereby obtaining an ISO accreditation), it would be churlish of me to argue that that there is no benefit in rigorously applying methodologies in IT.

When it comes to some aspects of project management and to change management in particular, some of the scepticism that I exhibited about celebrity business books returns. It’s not so much that a methodology or even a list of items to tick is not valuable, but that it cannot be an end in itself. The important thing is the thinking that goes into drawing up what you need to do and how you are going to do it, not the method that you use to record these and monitor progress. Sometimes these crucial ingredients get lost. Indeed there does seem to be an entire class of people who focus just on managing lists, rather than the ideas behind them, or the people actually doing the work.
 
 
The benefits of a Darwinian approach

Charles Darwin

I raised the idea of a Darwinian approach to business strategy earlier in this article. There do seem to be some crossovers with how we observe businesses in operation. We are familiar with the image of companies competing with each other for limited resources (our wallets, mine being very limited at present). We understand the pressure that organisations are under to come up with better, cheaper, more functional and sexier products (that are now carbon neutral and ethically-sourced as well).

The language of business is suffused by jungle analogies. The adaptation of Tennyson’s “Nature, red in tooth and claw” to capitalism being just one of the most well-known examples. The companies that are best at this game survive and thrive, those that are not fail and are forgotten. Companies in more mature markets are even often referred to as dinosaurs or fossils. The idea of never-ending refinement and progress pushing on is an essential part of business.

However, perhaps this evolutionary approach, so evident at the macro-level can also work on a micro-scale. Maybe, rather than relying on the thoughts of Mr Brown or Professor Green, a better approach would be come up with some ideas of our own, test them, discard the bad ones and nurture the less bad ones. In time, with appropriate development and alteration, the less bad may become good and then even great (hang on, I seem to have found my way back to business books with that phrase!).

To me, such an approach is more likely to result in something novel and valuable. Following a recipe for success can only ever be as good as the recipe itself. Thinking for yourself can transcend these limitations and I would argue that the downside is no greater than attempting to ape someone else’s ideas. In both cases the worst that can happen is only extinction.
 
 
Disclaimer – sort of

Of course this article has a degree of self reference. Relying upon your own intellect (hopefully refined and improved by other people’s input) is of course another recipe for success. However I hope it is a less proscriptive one. I recommend giving it a try.
 


 
Continue reading about this area in: Synthesis.
 

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A note to people who subscribe to this site via e-mail

16 April 2009

Oops!

The latest e-mail containing content from the site (specifically My “all-time” most-read 5 articles) seems to have got rather mangled, with the text bunched up to one side.

It looks like a problem with the use of <table>, but I’m not quite sure what the precise issue is as the HTML appears to be well-formed. Hopefully this problem will not recur and, in the meantime, please accept my apologies for the glitch.

Peter
 


PS it is a bit odd as the article appears fine when syndicated on SmartDataCollective.com here.
 


My “all-time” most-read 5 articles

15 April 2009

WordPress.com provides a handy widget that shows the articles (and pages) on this blog that have had the most hits over the last 24-48 hours. This appears as the second box from the top of my sidebar, just beneath the RSS subscription options. However this time-period is a little too short to assess the true popularity of articles. In order to remedy this, I have used WordPress.com’s own tracking stats to produce the following list, which covers the brief life of this site since November 2008.

There is clear water between the top five and the chasing pack. The next most popular article, The Top Business Issues facing CIOs / IT Directors – Results, is 176 hits back on 694. Of course one might assume that an “all-time” list would favour the earliest posts on this site. It is therefore interesting to note that the list instead features a number of more recent pieces and that the only really “old” piece is my first article plagiarising John Gray’s famous book.

I should also note that I have removed Keynote Articles (1,073 hits) from the list as this page aggregates all of my other posts, rather than being an article in its own right.

Of course this is merely a snap-shot of today’s figures and the list is already out of date as I write. I may look to update the figures occasionally, perhaps every three to six months.

1. Measuring the benefits of Business Intelligence 1,161
2. Business is from Mars and IT is from Venus 1,154
3. Trends in Business Intelligence 1,039
4. A review of “The History of Business Intelligence” by Nic Smith 894
5. Business Analytics vs Business Intelligence 880

 

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My approach to Management

15 April 2009

This is a topic that I have been asked to talk about quite a bit recently and I thought that it would be worth writing a brief article on the subject. There are many different approaches to management that can be successful and here I am not looking to present best practice, just to outline what has worked for me over the years. We are all individuals, as are the people we manage, and different things will work for different people at different times.

Helping people to climb to the top...

I first started managing people in 1992 at the tender age of 26. My preparation for this elevation was being a team leader for the previous three years. At the time I was working in a software house, having joined as a trainee analyst/programmer in 1988. As is typical in such organisations (and indeed in most other types of organisations) I had progressed thusfar by being good at design and programming, not by virtue of my amazing people skills.

As a new manager, I had little personal experience or training to fall back on. However I was lucky enough to have some one working for me who had had a long career in management. The gentleman was in his mid-50s, had previously been the IT Director of a major food company, but had decided that he had had enough of the stress of managing and gone back to programming for the last few years of his career. While having someone twice my age and many times my experience working for me might have been difficult for both of us, I guess I was at least smart enough to realise that here was someone I could learn from. In fact throughout my career I have often been lucky enough to find such people to provide advice and act as my mentor.

The person in question taught me that management was – unlike design and programming – messy and complicated and that there were no hard-and-fast rules to guarantee success. However, he did instil in me a respect for the people who work for me, a willingness to listen to them and the idea that it was my role to help them be successful and thereby help the company to be successful. The idea of achieving success through people is something that has stayed with me ever since.

Later in my career at the same company, when I was responsible for running development with 30 people working for me, I was lucky enough to have a great role-model as my manager. This person was integrity and unflappability personified. While he never shied away from addressing difficult issues, he did so in a calm and humane manner. He always gave people room to explain their views and listened to them. When it was time for him to set out his own position, he did so carefully, but clearly. More often than not, this approach brought people with him without the need to pull any of the command and control levers that he had at his disposal.

In my final two positions at the same organisation, I reported directly to the Managing Director (and owner). I had worked closely with this remarkable man throughout my time at the company, but now being his right-hand-man gave me a great opportunity to learn from how he operated. The MD was probably the most intelligent person that I ever had the pleasure to come across in a work-related environment. He was obviously very confident in his own abilities and in making assessments of complicated situations. He also would ask probing questions about areas that were of importance and had a nose for detecting any attempts to pull the wool over his eyes. The flip-side of this almost academic approach was that, if you did know your stuff and provided credible answers based in fact, then he began to trust your judgement and to allow you increasing levels of autonomy. Also, as is common with some of the smartest people, he never felt that he had a monopoly on knowledge or that he could not learn from other people’s perspectives. He was much better at admitting to mistakes, or acknowledging that some one else’s opinion had been correct than many senior managers that I have met since.

Of course there have been many other people that I have learnt from over the course of my 20 years in the IT business and I hope that I continue to learn for the rest of my career. However, the three people I have just mentioned all had a big hand in shaping my general approach to management and I doubt that the basic framework of this will alter too much in the future. Having provided this background, what does my management framework look like?

First I like to give people a good degree of autonomy, within parameters that I have set. I like to give my people assurance that one of my main roles is to be there to help when they need it. When the inevitable problems occur, I try to work with people to establish why they have happened and help people to learn from setbacks. I have found that many people respond well to being treated in this way and I think that this approach has helped me in developing managers who have gone on to greater things in their own right.

Second I have a broadly collegiate approach. This is not just to be nice, but because I believe that it is often a very effective way to work. Of course there will always be situations when decisive leadership is required and I am comfortable that this is part of my role. However in these circumstances, I think that it helps enormously if you have already built up a mutual respect between yourself and your team. Something that might sometimes be overlooked is that when you take other people’s opinions into account they can sometimes save you from making a complete fool of yourself!

Third I like to give my managers a very clear idea of what we are trying to do and why (a vision that I would also expect them to help me form), but then give them the space to achieve these objectives in their own way. Particularly coming from a technical background, as many IT managers do, it can be very tempting to think that you know best. However taking this approach can be demotivating for the people working for you, it can deprive them of a chance to learn and of course it is just possible that you don’t know best after all and that someone else will come up with a novel and superior approach.

Fourth one of my prime responsibilities is to grow talent for the organisation where I work. This means challenging your people to take on new things, delegating tasks to them even if it may be a stretch for them to carry these out in the first instance. This is the main way that people grow and the occasional false-step is a reasonable price to pay for increasing people’s experience and broadening their horizons.

Fifth is maybe the less pleasant side of management and to do with dealing with under performance. When some one working for me struggles, my first duty is to help them to be more successful. This can often require a long-term commitment to coaching and some difficult conversations about where improvement is required. In these situations I have two guiding principles: a) be as open and direct as you can be as it is much fairer on everyone and b) act sooner rather than later, the longer a problem persists the more difficult it will be to address. Taking this approach has often led to problems either being overcome, or to a mutual recognition that things are not going to work out. This latter outcome, while not exactly great, is vastly superior for all concerned to a more dictatorial approach (and also has less of a negative impact on the rest of the team).

At the beginning of this piece I mentioned that I had learnt respect for people from my first management mentor. I think that this principle underpins my entire approach. I suppose a simple summary is that I try to manage people the way that I would like to be managed myself. Of course sometimes I fall short of this ideal, but it is not a bad thing to aim for and I believe that this approach has been a significant contributor to the successes that I have enjoyed in different roles and different organisations.
 

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The Dictatorship of the Analysts

14 April 2009

Lest it be thought that I am wholly obsessed by the Business Intelligence vs Business Analytics issue (and to be honest I have a whole lot of other ideas for articles that I would rather be working on), I should point out that this piece is not focussed on SAS. In my last correspondence with that organisation (which was in public and may be viewed here) I agreed with Gaurav Verma’s suggestion that SAS customers be left to make up their own minds about the issue.

CIO Magazine

However the ripples continue to spread from the rock that Jim Davis threw into the Business Intelligence pond. The latest mini-tsunami is in an article on CIO.com by Scott Staples, President and Co-CEO of IT Services at MindTree. [Incidentally, I'd love to tell you more about MindTree's expertise in the area of Business Intelligence, but unfortunately I can't get their web-site's menu to work in either Chrome or IE8; I hope that you have better luck.]

Scott’s full article is entitled Analytics: Unlocking Value in Business Intelligence (BI) Initiatives. In this, amongst other claims, Scott states the following:

To turn data into information, companies need a three-step process:

  1. Data Warehouse (DW)—companies need a place for data to reside and rules on how the data should be structured.
  2. Business Intelligence—companies need a way to slice and dice the data and generate reports.
  3. Analytics—companies need to extract the data, analyze trends, uncover opportunities, find new customer segments, and so forth.

Most companies fail to add the third step to their DW and BI initiatives and hence fall short on converting data into information.

He goes on to say:

[...] instead of companies just talking about their DW and BI strategies, they must now accept analytics as a core component of business intelligence. This change in mindset will solve the dilemma of data ≠ information:

Current Mindset: DW + BI = Data

Future Mindset: DW + (BI + Analytics) = Information

Now in many ways I agree with a lot of what Scott says, it is indeed mostly common sense. My quibble comes with his definitions of BI and Analytics above. To summarise, he essentially says “BI is about slicing and dicing data and generating reports” and “Analytics is about extracting data, analysing trends, uncovering opportunities and finding new customer segments”. To me Scott has really just described two aspects of exactly the same thing, namely Business Intelligence. What is slicing and dicing for if not to achieve the aims ascribed above to Analytics?

Let me again – and for the sake of this argument only – accept the assertion that Analytics is wholly separate from BI (rather than a subset). As I have stated before this is not entirely in accordance with my own views, but I am not religious about this issue of definition and can happily live with other people’s take on it. I suppose that one way of thinking about this separation is to call the bits of BI that are not Analytics by the older name of OLAP (possibly ignoring what the ‘A’ stands for, but I digress). However, even proponents of the essential separateness of BI and Analytics tend to adopt different definitions to Scott.

To me what differentiates Analytics from other parts of BI is statistics. Applying advanced (or indeed relatively simple) statistical methods to structured, reliable data (such as one would hope to find in data warehouses more often than not) would clearly be the province of Analytics. Thus seeking to find attributes of customers (e.g. how reliably they pay their bills, or what areas they live in) or events in their relationships with an organisation (e.g. whether a customer service problem arose and how it was dealt with) that are correlated with retention/repeat business would be Analytics.

Maybe discerning deeply hidden trends in data would also fall into this camp, but what about the rather simpler “analysing trends” that Scott ascribes to Analytics? Well isn’t that just another type of slice and dice that he firmly puts in the BI camp?

Trend analysis in a multidimensional environment is simply using time as one of the dimensions that you are slicing and dicing your measures by. If you want to extrapolate from data, albeit in a visual (and possibly non-rigorous manner) to estimate future figures, then often a simple graph will suffice (something that virtually all BI tools will provide). If you want to remove the impact of outlying values in order to establish a simple correlation, then most BI tools will let you filter, or apply bands (for example excluding large events that would otherwise skew results and mask underlying trends).

Of course it is maybe a little more difficult to do something like eliminating seasonality from figures in these tools, but then this is pretty straightforward to do in Excel if it is an occasional need (and most BI tools support one-click downloading to Excel). If such adjustments are a more regular requirement, then seasonally adjusted measures can be created in the Data Mart with little difficulty. Then pretty standard BI facilities can be used to do some basic analysis.

Of course paid-up statisticians may be crying foul at such loose analysis, of course correlation does not imply causation, but here we are talking about generally rather simple measures such as sales, not the life expectancy of a population, or the GDP of a country. We are also talking about trends that most business people will already have a good feeling for, not phenomena requiring the application of stochastic time series to model them.

So, unlike Scott, I would place “back-of-an-envelop” and graphical-based analysis of figures very firmly in the BI camp. To me proper Analytics is more about applying rigorous statistical methods to data in order to either generate hypotheses, or validate them. It tends to be the province of specialists, whereas BI (under the definition that I am currently using where it is synonymous with OLAP) is carried out profitably by a wider range of business managers.

So is an absence of Analytics – now using my statistically-based definition – a major problem in “converting data into information” as Scott claims? I would answer with a very firm “no”. If we take information as being that which is generated and consumed by a wide range of managers in an organisation, then if this is wrong then the problem is much earlier on and most likely centred on how the data warehousing and BI parts have been implemented (or indeed in a failure to manage the concomitant behavioural change). I covered what I believe are often the reasons that BI projects fail to live up to their promise in my response to a Gartner report. This earlier article may be viewed here.

In fact I think that what happens is that when broader BI projects fail in an organisation, people fall back on two things: a) their own data (Excel and Access) and b) the information developed by the same statistical experts who are the logical users of Analytic tools. The latter is characterised by a reliance on Finance, or Marketing reports produced by highly numerate people with Accounting qualifications or MBAs, but which are often unconnected to business manager’s day-to-day experiences. The phrase “democratisation of information” has been used in relation to BI. Where BI fails, or does not exist, then the situation I have just described is maybe instead the dictatorship of the analysts.

I have chosen the word “dictatorship” with all of its negative connotations advisedly. I do not think that the situations that I have described above is a great position for a company to be in. The solution is not more Analytics, which simply entrenches the position of the experts to the detriment of the wider business community, but getting the more mass-market disciplines of the BI (again as defined above) and data warehousing pieces right and then focussing on managing the related organisational change. In the world of business information, as in the broader context, more democracy is indeed the antidote to dictatorship.

I have penned some of my ideas about how to give your BI projects the greatest chance of success in many places on this blog. But for those interested, I suggest maybe starting with: Scaling-up Performance Management, “All that glisters is not gold” – some thoughts on dashboards, The confluence of BI and change management and indeed the other blog articles (both here and elsewhere) that these three pieces link to.

Also for those with less time available, and although the article is obviously focussed on a specific issue, the first few sections of Is outsourcing business intelligence a good idea? pull together many of these themes and may be a useful place to start.

If your organisation is serious about adding value via the better use of information, my recommendation is to think hard about these areas rather than leaping into Analytics just because it is the latest IT plat du jour.
 

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The Apologists

7 April 2009

A whole mini industry has recently been created in SAS based on justifying Jim Davis’ comments to the effect that: Business Intelligence is dead, long live Business Analytics. An example is a blog post by Alison Bolen, sascom Editor-in-Chief, entitled: More notes on naming. While such dedication to creating jobs in the current economic climate is to be lauded, I’m still not sure what SAS is trying to achieve.

The most recent article is by Gaurav Verma, Global Marketing Manager for Business Analytics at SAS. He calls his piece: Business Analytics vs. Business Intelligence – it’s more than just semantics or marketing hyperbole. In this Gaurav asks the question:

Given that I have been evangelizing BI for more than 12 years as practitioner, analyst, consultant and marketer, I should be leading the calls of blasphemy. Instead, I’m out front leading global marketing for the SAS Business Analytics framework. Why?

One answer that immediately comes to mind is contained in the question, it is of course: “because Gaurav is the head of global marketing for Business Analytics at SAS”.

Later in his argument, by sleight of hand, Gaurav associates business intelligence with:

Traditional and rapidly commoditizing query and reporting

Of course everything that is not “query and reporting” must be called something else, presumably business analytics is an apt phrase in Gaurav’s mind. To me, despite Gaurav’s headline, this is just yet more wordsmithery. No other commentators seem to see BI as primarily “query and reporting” and if you remove this plank from Gaurav’s aregument, the rest of it falls to pieces.

The choice of words is interesting. Recent pieces by SASers have applied adjectives such as “traditional”, “classic” and even “little” to the noun-phrase “business intelligence” in order to explain exactly what Jim Davis actually meant by his remarks. Whether any of these linguistic qualifications of the area of BI are required, separate from the task of supporting Mr Davis’ arguments, remains something of a mystery to me.

I for one would heartily like to move beyond these silly tit-for-tat discussions. My recommendations for the course that SAS should take appear here – albeit in lightly coded form.

Short of retracting Mr Davis’ ill-thought-out comments, the second best idea for SAS might be to be very quiet about the area for a while and hope that people slowly forget about it. For some reason, it is SAS themselves who seem to want to keep this sorry episode alive. They do this by continuing to publish artciles such as Gaurav’s. While this trend continues, I’ll continue to publish my rebuttals, boring as it may become for everyone else.
 

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A business intelligence parable

4 April 2009

Once upon a time there were two technology companies, both operating in the Corporate On-Line Analysis market. One was called Credible Organisational KPI Enterprise (IT people love acronyms so much that they sometimes even nest them) and the other was known as Predictive Enlightenment Powered by Statistical Inference. However, both companies were generally better known by their respective acronyms; as was the market in which they competed.

Credible Organisational KPI Enterprise and Predictive Enlightenment Powered by Statistical Inference had parts of their respective product sets that overlapped with each other, but also had some more distinctive offerings. In the places where their portfolios diverged, each was seen as a market leader. In the shared areas, things were less clear-cut; some users preferring Credible Organisational KPI Enterprise and others Predictive Enlightenment Powered by Statistical Inference. Often those who expressed a preference did so in very strong terms, but not always with much evidence to back this up.

Well none of this mattered too much to most regular people until one day the head of marketing of Predictive Enlightenment Powered by Statistical Inference made a speech in which he claimed – contrary to all previous industry thinking – that the usefulness of general Corporate On-Line Analysis had been overstated and that only Predictive Enlightenment Powered by Statistical Inference could really offer users any benefits.

The deep insight underpinning the claims of Predictive Enlightenment Powered by Statistical Inference’s Chief Marketing Officer was that while Credible Organisational KPI Enterprise’s products relied on mostly water and sugar to make their customers happy, the revolutionary tools provided by his company had a secret, special ingredient, code-named only hydrated-C12H22O11.

These claims caused rather a furore in the Corporate On-Line Analysis world, with many commentators strongly disputing them. Several of the colleagues of the Predictive Enlightenment Powered by Statistical Inference CMO rushed to his defence. Some indeed went on to claim that Corporate On-Line Analysis was merely a subset of Predictive Enlightenment Powered by Statistical Inference, this despite most people having previously thought of both Credible Organisational KPI Enterprise and Predictive Enlightenment Powered by Statistical Inference as being different types of Corporate On-Line Analysis vendors.

While this move by Predictive Enlightenment Powered by Statistical Inference was probably intended to highlight the strengths of their product set and to better differentiate themselves from Credible Organisational KPI Enterprise, instead it just confused most people working in the area of Corporate On-Line Analysis and made them wonder whether the people at Predictive Enlightenment Powered by Statistical Inference understood their own products and market.

In the end, the people at Predictive Enlightenment Powered by Statistical Inference came to their senses, realising that what had initially seemed like a great marketing idea was actually counterproductive and even making them look slightly ridiculous. They issued a statement saying that their CMO’s comments had been taken out of context but nevertheless unequivocally retracting them.

After this outbreak of sensible behaviour, things in the Corporate On-Line Analysis world started to settle down again and everyone lived happily ever after.

BI versus SAS?
 


 
Before the legal teams of any beverage companies start issuing writs, I should point out that any similarity between the above fable and their products is wholly coincidental. Any similarity to the recent behaviour of other commercial organisations may be somewhat less of a coincidence.
 

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