I overhead part of a conversation between two traveling business people in an airport Starbucks recently, one of whom was apparently an executive, the other, an operating manager, who presumably reported to that executive.

“I need you to do a better job of getting me critical information.”

“Are you talking about the month-end reports?”

“Well, that’s part of it, but that’s not what I mean. I really need to know what’s going on in our operation. And when I can’t figure that out quickly, I need some way to get a handle on things without calling a half-dozen meetings or making a dozen phone calls.”

I don’t know whether they resolved this issue, because I had a plane to catch. I would have liked to have stayed and joined them, although they might have had some hesitation about opening up to someone they didn’t know. But this is a conversation that I am hearing, or being draw into, increasingly, both in airports and in executive suites. How can an executive “get a handle on what’s happening — 
right now?”

In many businesses, the answer to that question is less than obvious. A military-style executive might call in a subordinate and delegate the problem, specifying what kind of information is wanted. An executive with a more facilitative style might call a meeting of top officers and lead a discussion. Neither approach is likely to produce a completely satisfying result. Why is that?

Executives who have taken university-based business courses are taught the elegance of the Return on Investment (ROI) model, and the way that everything that happens in business is ultimately summarized in a single number, the ROI ratio. In marketing courses I’ve personally participated in, I have seen professors put the chart up on the screen and trace the ROI ratio back to all of the components in the business and the ways in which they each contribute to that ultimate number. If you are reading this column, I suspect you, too, have taken courses like that.

The rest of that lecture — as you probably remember — 
is devoted to dazzling the student with examples. “Name any activity in the company, and let’s see where it figures into ROI.” The student is duly impressed. Then the student gets into a real company, and finds out that the ROI model is “theory” — revered by finance, but as difficult to address directly in a real company as finding the Holy Grail. The main reason for the difficulty is that the ROI model addresses the whole company, and most reports are designed to be very, very specific for particular parts of the company. So assembling the data that fills in the whole ROI model requires summary connections among many, many reports. Not particularly practical.

Enter Business Intelligence (BI). You will find a variety of definitions of BI, and a large number of definitions on the Internet in particular, ranging from the broadest — 
“…a broad category of applications and technologies for gathering, storing, analyzing and providing access to data to help enterprise users make better business decisions.”

To the more narrow — “…a single reporting tool that is capable of consolidating multiple views of company data.”

I’m going to suggest one, too: Business Intelligence is information that helps me see what I need to do to make my business more profitable right now.

A BI system or application provides the capability of viewing through a single portal, data about company operations with simultaneous access to both higher-level summaries and the lower-level data that comprises the summary. It includes the ability to easily drill down from a strategic level to tactical and operational details. It can be used to guide managers on identifying the specific location of a problem.

Let’s take an example. You run a bank leasing division, and you have been told that your unit will need to comply with Basel II guidelines. Specifically, you will, in the near future, need to be able to quickly identify and label the riskiest customers.

If this were a game, you would be playing “find the risk.” Your first take on this is simple: you need a report listing all of our customers who are seriously delinquent. The bank has defined that as more than 25 days delinquent. So you get a report listing the accounts that meet this criterion, and it is extremely long. Maybe it’s the time of year? It is December, and construction companies, for example, may be paying slowly. Based on the overall status of the account, this may be an exception for some of these accounts.

So you refine your target, and you get a report that shows your accounts that have been delinquent for more than 25 days more than once in the past 12 months. It comes back with a shorter list. However, some of your “best” accounts are on the list. How can that be? You need more information. This time, you want to know why these “good accounts” are not paying on time, so you ask customer service, or sales, or perhaps collections, to give you some explanation as to the situation with just those “good accounts.” At best, you are now an hour or two into this process (longer, if it takes longer for you to get reports), and you still have not identified your high-risk accounts.

If you are an executive in your company, you may be a step ahead of this article. Obviously, this situation is not good enough. You know from experience that your first question (who are the risky accounts?) always leads to another more refined question (who are the consistently risky accounts?). As a result, a static report rarely offers enough information to enable you to get at the heart of a large problem. Instead, you need the ability to drill down into component data, or to sort it differently, or to drill right down into specific exceptions. You need the kind of information sources that support intelligent conversations with your operating managers.

Let’s look at the same scenario, but with a different tool. You have the same problem — finding the risky accounts. This time, though, you pull up your BI portal, and you click on, let’s say, your receivables reporting link. It initially shows you your standard “buckets” of delinquencies, say “less than 30 days,” “30–60 days,” and “greater than 60 days.” You click on “filter,” and “list accounts,” type in “>25 days,” and now get that first list of all accounts. This time, though, you can actually click on an account and see all of the contracts they have with your company, along with the delinquency status of each. Or, alternatively, you choose to reset your filter to add the wrinkle “delinquent more than 25 days more than once in the last 12 months.” Or perhaps as you look at what you find, you discover a completely different definition — 
like “delinquent greater than 31 days” is a much better indicator for a leasing business.

Regardless of how this exercise turns out, you are working more productively when you have this “BI” tool available. You are engaging in an “intelligent dialogue” with the data, and you have the basis for an intelligent conversation with your managers. Most importantly, you are seeing for yourself, in a short period of time, exactly what is happening in your business. Then, you are in a better position to make the right decision about what to do. Most important of all, you are using what you learned in that university class in the real world, because you can drill right down to the particular ratio that directly reflects the performance you need to measure.

Let’s return to the airport conversation I quoted earlier, but this time, let’s see how the executive involved might have gotten a leg up by starting with his BI portal.

“I was looking at our risk and delinquency dashboard, and I’m concerned about what is happening in several of our key accounts. It looks like they are much higher risk than we thought they were.”

“Why do you say that?”

“Did you know that three of our top 15 accounts have been seriously delinquent multiple times this year? I want to talk with you about how your group is going to address that problem.”

No more “blind leading the blind.” This executive has already seen for herself that there is a problem, and she already knows where the problem is. She can spend her time guiding her manager to focus on solving the right problems. Business Intelligence may require technical intervention to provide, but it is anything but a technical issue. BI is a tool that puts you in the driver’s seat, because you can use it right now to get to the heart of the issues that are holding your company back, and to focus your people on turning problems into places to find additional profit.

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Joseph N. Lane is a product marketing manager at International Decision Systems (IDS). IDS is a provider in developing portfolio management and origination software and services for leasing, loans and asset finance solutions. Headquartered in Minneapolis, IDS has global offices in London, Sydney, Singapore and Bangalore. Lane represents IDS at industry conferences, by writing articles and providing input to product strategy. He can be reached at [email protected] or 612-851-3301.