“Big Data”, Business Intelligence (BI) and Key Performance Indicators (KPIs)

“Big Data”, Business Intelligence (BI) and Key Performance Indicators (KPIs)Big Data can be defined as high Volume and Variety of data that can be brought together and analyzed at high Velocity to discover patterns and make better decisions. These three V’s combine and exhibit exponential growth of data at this time.

The sheer volume of data, structured and unstructured is being generated at high speeds. It is stored, searched analyzed with new tools to find insights, relationships and trends that were previously unavailable. It represents a fundamental shift in how we do things. We no longer have to rely on small and periodic statistical sampling.

Based on past IT innovations that had impact on increasing efficiencies and productivity, one can suggest that Big Data can have a similar effect. The use of Big Data is becoming essential for companies to leverage data-driven strategies to innovate, compete, and create value. For example, some retailers embracing big data see the potential to increase their operating margins by 60 per cent.

Business intelligence (BI) allows business users to analyze and better understand their organization’s plans and results. It provides insight into what’s working correctly while identifying potential problem areas in time for corrective actions to be taken.

Organizations focus on streamlining operations, acquiring customers, increasing revenues and profitability, controlling costs and outpacing the competition. And while your company has continued to improve its operating efficiencies (sometimes by quickly learning from past mistakes), you know that you should be spending more time analyzing what’s going on and forecasting and planning for the future – rather than putting out fires and trying to solve operational problems based on gut feel. Furthermore, you need the ability to determine where to concentrate your efforts. You can’t check every detail, yet you would like to be able to monitor your operations and be alerted to potential issues when they occur, no matter where you happen to be. You need to be able to focus on quickly finding and resolving potential problems while identifying and leveraging new opportunities. You want to ensure that employee and departmental metrics are aligned with your company’s strategic goals. Your company may be relatively small right now, but it’s on a planned growth path. Right now, your company’s primary analysis tool is probably a spreadsheet.

In today’s fast-paced environment, taking full advantage of massive amounts of data available to businesses is a prerequisite for success. You need to gather and quickly make sense of all data – large and small, in diverse forms, and on multiple platforms. This means going beyond spreadsheets and basic reports and moving to a fast, engaging, and visual way of presenting data. What if you could easily pull data directly from your enterprise and personal sources, bringing them together in a repeatable, easily understood way?

Just think if you could “point and click” to manipulate data, organizing and consolidating it the way you want it without a single line of code or an additional modeling layer. You can do all this and more with a BI tool, SAP® Lumira™ software. It lets you build visualizations with an engaging drag-and-drop interface. You will create beautiful graphics and visualizations rendered in real time that support and enhance your iterative thought processes.

A Key Performance Indicator (KPI) is a type of performance measurement that helps you understand how your organization is performing. A good KPI should act as a gage, helping you and your team understand whether you’re taking the right path toward your strategic goals. To be effective, a KPI must:

  • Be well-defined and quantifiable.
  • Be thoroughly communicated throughout your organization.
  • Actually be crucial to achieving your goal.
  • Be applicable to your Line of Business (LOB).

Key Performance Indicator Examples & Definitions

Financial Metrics

  • Profit: This is one of the most important performance indicators out there. Don’t forget to analyze both gross and net profit margin to better understand how successful your organization is at generating a high return.
  • Cost: Measure cost effectiveness and find the best ways to reduce and manage your costs.
  • LOB Revenue vs. Target: This is a comparison between your actual revenue and your projected revenue. Charting and analyzing the discrepancies between these two numbers will help you identify how your organization is performing.
  • Cost of Goods Sold: By adding all production costs for the product your company is selling, you can get a better idea of both what your product markup should look like and what your actual profit margin is. This is key in determining how to outsell your competition.

Customer Metrics

  • Customer Lifetime Value (CLV): Minimizing cost isn’t the only (or the best) way to optimize your customer acquisition. CLV helps you look at the value your organization is getting from a long-term customer relationship. Use this performance indicator to narrow down which channel helps you gain the best customers for the best price.
  • Customer Acquisition Cost (CAC): Divide your total acquisition costs by the number of new customers in the time frame you’re examining. That is your CAC. This is considered one of the most important metrics in e-commerce because it can help you evaluate how cost effective your marketing campaigns have been.

Process Metrics

  • Customer Support Tickets: Analysis of the number of new tickets, the number of resolved tickets, and resolution time will become the best customer service department in your industry
  • Percentage of Product Defects: Take the number of defective units and divide it by the total number of units produced in the time frame you’re examining. This will give you the percentage of defective products. Clearly, the lower you can get this number, the better.

People Metrics

  • Employee Turnover Rate (ETR): To arrive upon your ETR, take the number of employees who have departed the company and divide it by the average number of employees. If you have a high ETR in your enterprise, spend some time examining your workplace culture, employment packages, and work environment.
  • Percentage of Response to Open Positions: When you have a high percentage of qualified applicants apply for your open job positions, you know you are doing a good job maximizing exposure to the right job seekers. This will lead to an increase in interviewees, as well.

Retail Metrics

  • Sales per Square Foot: Measures how much product you are able to sell for each square foot of space provided.
  • Average Purchase Value: Measures the average value of each purchase made by your customers and compares that to the average number of units per transaction.
  • Incremental Sales: Measures the amount of sales you've gained as a direct result of marketing and promotional activities.

For more information about SAP Business One, Big Data, BI and KPIs helping you to run your business at optimal efficiency, please contact Barry Lederman: 818.704.7000, .