We all know the suits are keen to reduce costs, but do they really know where to cut, and by how much?
Probably not. BI tools data mining, predictive analytics and other BI functions can provide managers with insights about how to enhance operational efficiencies, such as identifying wasteful marketing and supplier spending, superfluous headcount and excess inventory. And the suits know they need your help.
A new survey by BusinessWeek Research Services shows sharply increased interest in using IT in general and BI in particular to improve efficiencies and otherwise reduce costs. Earlier this year more than 110 senior executives (C-level through VP) of large U.S. organizations (>1,000 employees) said that implementing IT tools that would improve operational efficiencies was their top technology implementation goal for 2009.
And use of BI is a higher priority than ever before. These executives consider new BI projects more important than data security programs. More proof: very few companies are cutting their BI spend this year.
Big spending increases are especially likely for projects that improve efficiencies. Reducing costs was cited by almost half of the respondents as the primary driver of their BI spending plans for this year.
So which corporate functions should be the primary targets of your BI smarts? After more than a decade of discussing BI projects with CIOs, CEOs, CFOs and other senior executives, I know of five fatty corporate functions that need surgery with the BI scalpel:
BI tools can analyze direct mail and other marketing campaigns and determine which list sources yield the most results. These tools also can cull incorrect/obsolete addresses and otherwise clean lists. In addition, using BI to improve the offers not only reduces marketing costs, it also increases revenues due to the higher hit rates.
Valerie Logan, the Global Strategy & Planning lead at HP Business Intelligence Solutions, told me that a large insurance company client saved $3 million by using BI to refine its marketing campaigns.
More than 40% of survey respondents said they had already implemented BI for marketing, but more than a third are working on it. Find out whether there is a BI in marketing project in your shop and sign on fast if you want a more secure paycheck for the next several years.
As companies increasingly rely on the web for their marketing and sales efforts, BI tools can automate more of the sales process they can analyze and then respond to web, fax and phone inquiries.
An automated model and offer is another opportunity for cost savings and lets you reserve live responses for more complex interactions," notes Logan. Her 17 years spent implementing data warehouses and other business intelligence systems for telecom and other industries have given her a ring-side seat of what works.
Roughly a third of the respondents currently have BI implemented for sourcing and purchasing, and another third of the companies currently are working on such a system. Using BI to identify the best suppliers is a slam-dunk cost containment measure, because it can properly weigh important non-financial metrics like quality and on-time delivery track records.
Using BI to better understand inventory needs is a classic example of low-hanging fruit for the cost cutters.
"The cost to maintain inventory is an excess cost and the extent to which you can manage supply and demand you can reduce costs," notes Logan.
Cutting heads shouldn't be based on a simplistic edict. HR analytics can help managers more thoughtfully determine headcount reductions.
Here is an example, extracted from one of my recent research projects:
"To cut costs, an insurance company considered buyouts for senior underwriters, some of its most expensive talent. But underwriters account for much of the companys revenue. It would need to replace these workers, and hiring outside would negate the cost cuts achieved by buyouts.
"Using analytics, the company found that underwriters historically had been promoted from the call center more than other departments. So laying off some underwriters and promoting senior call center staff ( who initially would be paid less than departing underwriters) offered more cost savings. In addition, the call center could more easily absorb downsizing and/or hire less-expensive talent."
Here is the complete BusinessWeek report.
So instead of whining about downsizing at your shop, figure out a way to become instrumental in helping the marketing, sales, production or HR departments reduce their costs.