What is Real Business Intelligence?

Business Intelligence Defined

Business intelligence may be defined as the ability of an organization (e.g., a business) to comprehend – to understand its situation and experience and to learn and benefit from its past and what it knows about today. By and large businesses today do not lack data. The data that they possess are a record of its experiences and a snapshot of their current situation. Granted, not all of these data come from or are stored in the organization’s computer systems. Some data are resident in the organization’s documented policies and procedures. Still other data are present in paper files in the form of documents and forms. Then, there are still other data that are available only in an informal state and carried about in the heads of the owners, executives, managers and employees of the organization.

Tribal knowledge – data carried about in the heads of the personnel within the organization – is oven the most critical to the success of the organization. Strangely enough, businesses are often extremely reliant upon tribal knowledge, yet they make little or no effort to identify it, secure it, or leverage it. The organization itself may be extremely vulnerable without ever recognizing that the success or failure of their enterprise may depend to a great degree upon whether or not John Doe or Jane Smith is willing or able to show up to do the job they have been doing for the firm for the last 10 years or so.

What Makes Tribal Knowledge So Valuable?

What is it about tribal knowledge that makes it so very valuable to the success or failure of the organization?

The answer is fairly simple: Tribal knowledge is nothing more than the ability of those who possess it to organize the available bits of data into a coherent framework, to properly assess the situation thereby, and to make timely and effective decisions that are generally beneficial to the organization’s purpose.

Allow me to set forth an example: Some years ago I worked with a rapidly growing firm that had a production manager nicknamed “Gunner.” Almost every night of the week, Gunner would take home a handful of different reports. Some of these reports consisted of quite a number of pages. Working at home in the evenings, Gunner went through the various reports and marked them up using several different colors of highlighting markers. By the time he showed up at work the next morning, Gunner had a clear view of what the organization needed to produce and the priority order in which the various assemblies and subassemblies should be scheduled.

What was Gunner doing with the reports and highlighters?

Gunner was applying tribal knowledge – a theoretical framework that he carried around in his head – to turn data into business intelligence.

Without Gunner’s tribal knowledge – in the absence of a theoretical framework – the organization had all the data it needed in its computer systems. It was, after all, the computer systems that generated the various reports from which Gunner worked each evening. However, in the presence of all these data, the organization still lacked business intelligence.

Business Intelligence Is Only Achieved by the Application of a Framework for Analysis

Organizations that spend thousands, tens of thousands, or even millions of dollars on data collection often have invested almost nothing in the development of a theoretical framework by which to assess the data they collect and store. Sometimes these organizations have not found such a theoretical framework necessary because they are still functionally entrepreneurial. In an entrepreneurial organization it is the owner or a few key executives that carry the “framework” in their heads and make virtually all of the key decisions.

Organizations that are in transition from entrepreneurial to enterprise – typically mid-sized businesses – often continue with relative success because key positions in the organization have been mentored by the owner or members of the founding group. This mentoring process passed along tribal knowledge from the founding entrepreneurs to those who now carry the burden of tribal knowledge in key departments.

Losing Their Way

The risks to those organizations that are attempting to make the transition from entrepreneurial to enterprise may be summarized as follows:

• Failure to recognize that tribal knowledge exists at all within the organization. This leads the originally entrepreneurial leadership to try to apply cookie-cutter business frameworks to their unique environment. This generally dampens future success to the same degree that it makes the organization more like its competitors.
• Failure to recognize that tribal knowledge is not the same as the “corporate vision.” Vision is not enough. Vision gives general direction to the organization but cannot generally answer finite questions about what needs to be done in the moment. Furthermore, vision alone is generally quite incapable of overwhelming immediate obstacles.
• Failure to effectively pass along the tribal knowledge that led to initial success to those personnel who must now carry the burden in the burgeoning organization. Clearly, if either of the two preceding conditions exists, then this third failure will absolutely occur. However, there may be other causes to the failure to effectively pass along tribal knowledge.
• Failure to recognize that tribal knowledge may not be static. That is, as the organization grows and diversifies, the tribal knowledge that once made the business successful may no longer be applicable in the same way, if at all.

Failure to Recognize that Tribal Knowledge Exists

When an entrepreneurial organization begins to recognize that it is stumbling in its attempts to grow, many owners and senior executives fail to recognize that it is the organization’s tribal knowledge that has made it unique and viable up to this point. The leadership fails to comprehend that it is the organization’s unique framework by which it comprehends its environment that has been its “business intelligence.”

When this lack of recognition occurs, leadership often turns to “general business knowledge” or applies the latest fads in management in the hope that these “cookie-cutter” methods will help them regain the momentum that they know they are losing. Taking this approach usually fails to return the organization the same levels of success it had before because the methods fail to recognize that it was the organization’s uniqueness – its tribal knowledge – that contributed so greatly to its prior success.

Failure to Recognize that Tribal Knowledge and Corporate Vision are not the Same

Frustrated owners or leadership in organizations trying to bridge the divide between entrepreneurial and enterprise often feel that their expanding organization has simply “lost its vision.” They may attempt various means to try to “re-establish the vision” or to get the organization “fired up” again.

These attempts may lead to even deeper frustrations. On the one hand, the organization’s leadership is frustrated because they can not seem to get the “fire” relit. On the other hand, the company’s rank and file may become increasingly frustrated because many of the “flavor of the month” programs seem to have no real or long-lasting positive affect on the organization’s ability to succeed.

Failure to Effectively Pass Along Tribal Knowledge

The firm’s leadership may recognize that there is tribal knowledge resident within their organization (although they may not call it by that name). Further, they may recognize that it is an imperative that they pass along this knowledge to others as the business grows and expands. However, these attempts may fail due to:

• Leadership’s failure to be effective in their attempts to convey this un-codified tribal knowledge.
• Leadership’s failure to find the right person or persons to become the new repository for the requisite tribal knowledge.

Failure to Recognize that Tribal Knowledge is not Static

As the business maneuvers its way from its formerly entrepreneurial footing toward an enterprise stance, the tribal knowledge that was once very effective at producing outstanding results may no longer be so effective. Perhaps the tribal knowledge needs to be applied in a different way or, conceivably, some or all of the tribal knowledge has become outmoded for the current situation.

The Remedy

Companies that are drowning in data, because they have been focused on implementing technologies that help them capture and report on more and more finite data points, should begin to think about investing in methods that will help them shape their framework (or theory) by which the data may be interpreted for effective management. More often than not, an investment in new “business intelligence” software will not prove to be the solution to their dilemma.

The organization should, instead, begin by finding a method that allows the management team to view the customer-to-cash stream as a “flow” through the whole enterprise. They must be able to comprehend – get their arms around, wrap their minds around – the interactions between the various components of the “flow.” Having done so, the next step is to identify those undesirable effects that inhibit this “flow,” or break it entirely.

This new view of the organization should be documented using a means that:

• Allows intuitive thoughts (not just “facts”) about how the organization functions to be put on paper;
• Allows the management team to read and re-read the logic of the flow affecting the organization as a whole;
• Allows the management team to discover and assess potential flaws in their intuitive thinking about how the business works (or fails to work); and
• Allows the management team to determine the kinds of effective action that need to be taken as a result of their conclusions

Such a method or means is, in fact, required to document tribal knowledge. Allowing participants to put on paper – using a rational method – their intuitive thoughts about how the organization functions is the very act of moving tribal knowledge out of the heads of those carrying it and into the corporate management domain for assessment, validation, and application.

My experience has shown me that one of the most effective methods for accomplishing this task is the application of the Thinking Process developed by Eliyahu Goldratt. This method has proven to be effective over more than two-and-a-half decades and is still going strong.

Conclusion

“Business Intelligence” is a hot topic in information technology (IT), right now. However, when IT personnel speak of “business intelligence,” they generally refer to applications that do little more than help executives and managers “slice-and-dice” existing data sets.

While this approach may bring a few valuable insights, it falls short of addressing the three basic things that every manager or executive must know in order to take effective action:

1. What must change;
2. What the change should look like; and
3. How to effect the change

Only unlocking tribal knowledge and placing what the organization knows – both from data and from its intuition – into a “framework” or theory whereby the entire customer-to-cash stream may be properly assessed will unlock the correct answers to these three critical questions.

For far too long organizations have spent time, effort and money on collecting more and more data in the expectation that, if they just collected enough data they would be able to manage effectively. However, this dream has become the proverbial “pot of gold” at the end of the rainbow. Even if you get near the end of the rainbow, the “pot” still seems to evaporate before management’s collective eyes.

What is needed is for such organizations to begin investing in the non-technology of developing a sound framework or theory that reflects the reality of their business. Only then will they have opportunity rediscover the success they once had as a booming entrepreneurial business.