Customers today are demanding better service, lower prices, and higher quality goods. With such a volatile economy in recent years and with so many businesses competing for the same customers, it is imperative for companies to continually improve their customer service or else risk falling victim to their competitors. This is one reason why many organizations are rethinking how they do business. For years, they have accumulated valuable information as a by-product of production while failing to put it to good use. When a company knows its customers’ buying patterns, interests, and demographics, it provides a distinct competitive advantage. This knowledge has become so critical in recent years that the process of managing information has become an industry of its own.
How does a company manage its strategic information assets in today’s rapidly changing business environment? What challenges arise out of that task? Are there any preventive measures that can ease the “growing pains” associated with moving from one information paradigm to the next? No matter how simple or convoluted the current information architecture is, evolving companies’ effective use of information can help them achieve a level of sustainable competitive advantage that can be measured on the bottom line.
Figure 1. The Information Evolution Model and its Five Levels
The Information Evolution Model
Companies evolve through a number of levels in what SAS calls the Information Evolution Model. This maturity model (see Figure 1) enables an organization to objectively evaluate their use of existing information resources, and to rank itself on one of five levels: operate, consolidate, integrate, optimize, or innovate. Once the organization knows where it stands, it can more effectively lay out a roadmap for improvements that optimize business returns. It is not necessary for an organization to achieve the highest level of information evolution to be considered an “intelligent” enterprise. The only absolute is that an organization’s capabilities progress from one level up to the next.
Because the process is highly driven by business objectives, the application of the model will be unique to each organization’s business focus. However, there will be similar issues and rewards as any company proactively evolves through the model. For those that wait for competitors or harmful market experiences to prod them along, the process will be painful, and there is no guarantee the company will survive this transition.
The Four Key Company Dimensions
There are four key dimensions of any company that must evolve together to avoid an unhealthy tension in the enterprise.
- People: Who is involved, throughout the organization, in the use of information?
- Process: What information-related activities must be performed?
- Culture: How do things get done in the information environment?
- Infrastructure: What are the information-related technologies, tools, policies, and governance involved?
Remember CASE tools? They were considered to be great technology (infrastructure), but quickly became shelfware because the people, process, and culture were not ready to effectively use them. This five-level evolutionary continuum ranges from a basic operational focus on the low end to an extremely innovative focus allowing companies to exploit information creatively on the high end. Most organizations today would rank somewhere in the middle to lower levels.
We’ll explore the five levels of information maturity.
Level 1: Operate
Operational companies (Level 1) function with the most basic information. This company focuses on the here and now challenges of operating today’s business, and is typically a start-up or a struggling or extremely entrepreneurial organization. This environment often exists in companies run by strong leaders and in niche markets. These businesses emphasize activities required to support day-to-day operations and don’t have long-range plans. They operate and make decisions in a chaotic information environment that is internally competitive and lacks consistent evaluation and performance criteria. Information costs are high due to redundant and inconsistent data collection processes.
Key Characteristics – Level 1
Obviously, few organizations will perceive themselves at Level 1. If any of the following characteristics sound familiar, then there are components of Level 1 at work:
- Individual leaders or mavericks have the authority over what and how information is used
- The information infrastructure, including both technology and governance processes, is highly variable and subjective
- Individuals have their own methods of finding out what information is available and analyzing it according to their personal viewpoint
Transitioning to Level 2
Organizations at Level 1 are often successful thanks to visionary leaders, information mavericks, and, more often, luck. However, most companies do not stay at this level for very long.
Pain is the catalyst for moving away from Level 1. These enterprises will feel the pain of excessive operating costs, data inconsistency, and redundancy if they do not move forward. Managers may even have missed opportunities to react effectively to market changes. These occurrences can be viewed as a call to action. In the pain-driven stages of this environment, leaders will see the risks and costs of losing knowledge when certain employees leave. The steps necessary to move from this level to Level 2 are both simple and profound:
- Develop departmental business information requirements, metrics, and incentives
- Require decisions be based on factual analysis. Begin to look for and develop managers who are analytical
- Formalize the subject-matter-expert (SME) information-analysis role within each department
- Sponsor and manage information projects that support departmental objectives, but can be later rolled up into an enterprise information system
- Develop the information infrastructure (platform, tools, procedures) to support these departmental efforts with an eye toward future enterprise integration
Level 2: Consolidate
A consolidated company (Level 2) is one that has combined information into departmental or functional databases for decision making. Individuals now leverage the same information within a department or functional group to make effective decisions. The downside is that there is little control over information from an enterprise perspective.
Within departments or functional groups, managers and subject matter experts have vested interests in maintaining data and continuing to drive departmental agendas that may not be in the company’s best interest. Department heads make more informed decisions, but they may filter out information that is valuable to the enterprise if that information reflects poorly on their department. While the cost of information is lower than in an operational company, it is still high. Although there may be uniform hardware, networks, and software in place, they are used inconsistently. Thus, the departmental perspective works against establishing enterprisewide technology standards beyond the basic infrastructure.
Key Characteristics – Level 2
More organizations will see themselves in Level 2 than in Level 1. However, within the context of the Information Evolution Model, Level 2 is a stepping-stone to the enterprise integration achieved in Level 3. Some characteristics recognized in a Level 2 organization are:
- A departmental orientation that drives decision making
- Independent departmental islands of information
- Departmental data consolidation and access without automated integration at the enterprise level
- Departmental business measures that are inconsistent across the enterprise
- Multiple interfaces and extracts against the same production data to meet the contrasting needs of various departments or functions A company reaches Level 2 when it consolidates data around business functions and proactively:
Manages departments with systems that reflect accountability and can be accumulated later as an enterprise view
- Works with information mavericks to understand their greater value to the department as a subject matter expert
- Builds information projects that support departmental objectives that can later contribute to an enterprise information environment
- Develops the information infrastructure (i.e., platform, tools, and procedures) to support departmental efforts with an eye to the future
Achieving this transition to a consolidated company reduces information processing costs, increases data analysis efficiency, improves employee motivation (by inspiring confidence in the system), and allows the company to better address customer needs. To ensure the efforts undertaken here serve as a foundation for future transitions, these efforts must be designed from a long-range perspective.
Transitioning to Level 3
Unfortunately, pain is again the motivator to leave Level 2 (Consolidate) and move on to Level 3 (Integrate). The Level 2 organization will eventually start to feel the pain of high costs, missed opportunities due to system silos, or the inability to compete or respond effectively in a timely fashion. Despite departmental business intelligence solutions, they may have difficulty meeting organizational objectives and revenue goals. For example, a company loses customers when stove-piped data prevents consistent customer interaction. If the departments have not coordinated their efforts in building point solutions to their business intelligence issues, there will be considerable reworking required to reach enterprise integration at Level 3.
Therefore the steps required to move from Level 2 to Level 3, particularly when reworking is evident, are significant and require a demonstrated business case, strong organizational sponsorship, and technical solutions that support an enterprise level of integration.
- There must be an effort to define enterprisewide business measures
- There needs to be a formal effort to link business intelligence to enterprise goals
- An enterprisewide strategy and framework for integrated information handling must be defined
- The organization needs incentives to reward employees for achieving cross-functional results
- A technical and governance infrastructure must be established to implement and sustain an integrated information environment
Level 3: Integrate
Level 3 is truly a breakthrough level that positions an organization to make business decisions that leverage the full scope of enterprise information and support streamlining.
An integrated company (Level 3) recognizes the importance of defining data and information consistently across the enterprise. Information is clearly tied to organizational objectives, which ultimately help enhance the company’s ability to create value for its customers. A result of having access to enterprisewide information—one version of the truth—is that information is widely accepted as an essential tool for success and competitive advantage.
At Level 3, companies gain a true awareness of what information can do for them and it generally serves as the catalyst for future change. In addition, company executives can start to see a clear change from the reliance upon operational systems to reliance upon intelligent systems as the corporate memory. This gives the company the flexibility to rapidly change their operational systems to meet market demands.
Forward-thinking companies quickly recognize the limitations of being a consolidated company and will plan to evolve to an integrated company before they begin to suffer from high costs, missed opportunities, and the inability to respond to threats. Moving to Level 3 takes several steps:
- Define enterprisewide business measures and strategy
- Align existing information management to achieve an integrated approach
- Create incentives for employees to attain results between departments
- Use infrastructure management to maintain the integrated information environment
The advantages of an integrated organization include a larger share of the wallet, and retention of customers and supplier relationships (due to an enterprisewide view of the customer), efficient supply chains, and faster response times to market changes and lower costs for handling information. Here, the company has a clear view of its value creation process—how it creates value for its customers.
Key Characteristics – Level 3
An organization will move to Level 3 when its data analysis and measures are obtained with increased sophistication across the enterprise. Organizations at Level 3:
- Rely on cross-enterprise information for making decisions within a larger context and relevant timeframes
- Identify alternatives and act on information from a perspective that reflects enterprise goals and objectives
- Have designed and implemented enterprise data frameworks
- Applied and accepted information management concepts
- Have an institutional awareness of data quality
Transitioning to Level 4
Typically, externally centered pain is the impetus for promoting an enterprise from Level 3 to 4. A great many “intelligent enterprises” can exist at Level 3 indefinitely. The evolution from Level 3 starts when competition gets tough, when cycle times shrink, and when the market asks for near-real-time, interactive responses within business processes. The enterprise then has to extend information boundaries beyond its own borders and maximize every opportunity to leverage experience and knowledge to stay ahead of its competitors.
Achieving Level 4 requires that a company shifts focus from enterprise information management, the crux of the march to Level 3, to a focus of market alignment and enterprise process optimization. This is a paradigm shift for the enterprise and is not to be underestimated in terms of difficulty or benefit. Both are significant. In order to achieve Level 4 successfully, companies must:
- Fully understand the value-creation process as it relates to partners, suppliers, and other constituents; they must use this expanded knowledge to design new business models based on extended-information value chains
- Implement an incremental process-improvement methodology (such as Six Sigma or TQM) that optimizes enterprise process execution
- Resolve to capture tacit (experiential) knowledge as well as quantitative information to form a continuous learning environment
- Establish critical enterprise-level metrics within process execution to ensure process changes are being implemented consistently across the enterprise
- Provide incentives for cooperation and communities of practice that encourage positive behaviors
Level 4: Optimize
Once a company is integrated, it will begin to look for ways to maximize performance to meet market demands. The scope of an optimized company (Level 4) is to ensure constant alignment with the marketplace and then quickly optimize the entire business and its value-creation processes around this new alignment. The company is quicker than its competitors to understand the marketplace and, ultimately, better serves its customers.
The organization can quickly eliminate obvious inefficiencies, but it will leverage deeper analysis to weed out more subtle flaws. The enterprise must examine the entire value chain and create intercompany communities with a shared interest in efficient operations. Part of that examination includes detecting customer-buying patterns and predicting future behavior in order to understand their needs and respond consistently.
For this to work, the corporate culture must embrace the idea of improving incrementally. Information is so integral to business processes that if a breakdown in the information flow occurs, continued operations are jeopardized; therefore, the infrastructure must be able to tolerate problems. A Level 4 company will use automated rules and pattern detection systems to respond to issues that used to be handled manually and allow decision makers to focus on edge cases.
Companies moving from Level 3 to Level 4 will realize that being an integrated company was the beginning, not the end, of a journey. The preparation for the journey focused on integrating information (Levels 1-3). Now the journey actually begins. A company reaches this level by:
- Building the ability to monitor the marketplace and quickly realigns the company to meet market demands
- Viewing the business model as an extended model, including suppliers, customers, and other stakeholders and optimizing across the model
- Building the ability and culture required to capture unstructured data as well as explicit quantitative information
- Establishing cross-divisional processes and holding stakeholders to them
- Providing employees with incentives for helping achieve incremental improvement
The company that invests in this level of optimization will see a return on investment through cost savings; lower cycle times for product development and customer acquisition; improved market penetration; and retention of customers, suppliers, and partners. Companies also begin to see a constant, incremental increase in revenue generated from new activities.
Key Characteristics – Level 4
By optimizing the information value chain, providing constant feedback on critical process measure, and leveraging best practices, Level 4 organizations achieve improved efficiency and effectiveness. Organizations at Level 4 will exhibit these characteristics:
- Mindset of incremental improvement
- Closed-loop feedback from decisional analysis to transactional activities
- Information context based on workflow
- Leveraging structured and unstructured information
- Sharing experience through collaboration
- Ascension of communities of interest over functional departments
Transitioning to Level 5
When an organization is ready to move beyond Level 4, it is typically because it has started to realize diminishing returns from its optimization efforts and technology investments. Usually, the organization needs “quantum” leaps, or needs to enter new markets due to obsolescence or strategy decay. The enterprise may see its profits and growth threatened when its products and services become commodities or marginalized by a substitute product. Perhaps a new market entrant can deliver similar products at lower cost because they are not supporting legacy environments. In such a competitive market environment, the business strategy of the optimized organization can no longer be sustained. This calls for a totally new approach, one that uses information and knowledge for innovation. The steps for moving from Level 4 to Level 5 require a significant break with past patterns, and one that emphasizes dramatic changes.
Level 5: Innovate
Companies that are not constantly innovating eventually reach the point where they are in a commoditized marketplace. Forward-looking companies recognize the need to leverage their knowledge in new ways to introduce innovative products and services so as to constantly differentiate their offerings. They are adaptive and build new product and service offerings that leverage their core competencies and information assets. Once new processes are in place, organizations quickly optimize them to ensure alignment and efficiency. By continually adding new products and service offerings, new revenue streams are created. The innovative company has a significant portion of its profit stream from new products and services.
The Level 5 environment requires employees, customers, and suppliers to contribute and evaluate new ideas. Alignment with enterprise goals is a given, and the organization rewards individuals who take advantage of information in ways that propose new, viable ideas. The company’s culture understands that failures are inevitable but should be tolerated as part of the learning process and controlled through risk management. Sharing knowledge gained during trial and error is important to the overall cultural development. Moreover, the company will often look to business concepts established in other industries and technologies to help it define new value.
When a forward-looking company anticipates the commoditization of a marketplace, it is ready to evolve from Level 4 to Level 5. To accomplish this, an organization must:
- Proactively facilitate and manage innovative processes
- Value intellectual capital as highly as tangible assets
- Develop a risk management mentality and apply it to the innovation pipeline
- Establish systems to scan information from external sources and use that information to make recommendations for new opportunities
Key Characteristics – Level 5
The Level 5 organization institutionalizes innovation in a manner similar to a “think tank.” They have a sustainable and managed model for discovering and introducing new products and services for competitive advantage. Organizations at Level 5 have these characteristics:
- New ideas are brought quickly from concept to fruition
- Employees have access to information from across a wide range of industries and sources
- Failures with learning are accepted without stigma
- Anyone in the organization can bring a new idea to the table and see it realized
- Information is used to forecast and manage new venture risk
Level 5 payoffs include higher profit margins from new products and markets, upsetting the playing field for competitors, greater customer satisfaction, and increased market share based on a sustainable competitive advantage.
Getting Started
Once an enterprise’s decision makers understand and accept the Information Evolution Model as a valid maturity model, the first step in getting on board the evolution continuum is to perform a self-assessment. “Where is our company on the model? How mature is our infrastructure, our staff, our information process, and our corporate culture?” These are good questions to ask up front. A consulting service can perform such an assessment.
Answering these questions objectively will lead to the next step: building a roadmap for improvement. This then becomes a cyclical process of evaluating, planning, and implementing real change. The goal is to build information skills, supportive business processes, culture changes that support intelligent decision making, and a solid information architecture that will be agile and scalable over the long term. Build all of these components of the intelligent enterprise iteratively, first by understanding where the enterprise is today, and then planning and executing incremental steps forward.
Our experience shows that it is not really possible for an organization to skip stages, although the amount of time it takes to mature through a particular stage can be greatly diminished by the amount of forethought and planning that goes into making the necessary changes happen. It would be rare, however, to find all four dimensions— people, process, culture, and infrastructure—at exactly the same level across the organization. There is often some disparity between corporate culture and business process, for example. Identifying the lagging dimension(s) will point to where to focus change management efforts first. Without addressing the lagging dimensions, decision makers would be mistaken to invest heavily in the other areas. This would simply create more tension within the organization.
A company can either be reactive or proactive in its approach to maturing its information environment. But we like to say that intelligent companies are by nature proactive. After all, the pressures of competition will eventually force you to either improve or get out of the business, right? But who really wants to face that choice? By being proactive in understanding the interactions of your people, processes, corporate culture, and information infrastructure, and how they support (or don’t support) intelligent corporate decision making, a company can plan and implement improvements that build on each other. These improvements can then build on information architecture with a long-term perspective, rather than being driven to implement “quick fix” improvements that often become quickly obsolete—things that need to be ripped out in order to get to the next level.
Conclusion
The need for high-quality information has never been greater. Information managers and executives have the task of knowing what information the business needs and having the means to make it readily available. Companies predictably mature in their use of information, though decisions made early on in building an information framework can affect the pace of that maturity. These decisions can either help a company’s progress along the Information Evolution continuum or hinder it. The company can face a costly retooling effort if products selected to solve problems at one stage of maturity cannot adapt to a new paradigm.
The Information Evolution Model, by contrast, allows companies to realistically assess the maturity of their current information, providing a clear roadmap for managing their evolution process without ripping the infrastructure apart. A proactive information management strategy can build and maintain a level of competitive advantage that is sustainable. That advantage has a positive impact where it’s felt the strongest: on the bottom line.
| Operate | ·Information mavericks ·No processes in place ·Chaotic at times ·Individualistic |
| Consolidate | ·Departmental team work ·Competitive across functions ·Departmental interests ·Variable quality |
| Integrate | ·Enterprisewide information ·Information-based decisions ·Awareness of improvement opportunities ·Measured outcomes |
| Optimize | ·Incrementalimprovements ·Fundamental value chain ·Outsourcing of secondary processes ·Market alignment ·Operational efficiency ·Closed loop ·Quality processes built in |
| Innovate | ·Sustainable, repeatablemodel for innovation ·Challenging normsrewarded ·Venture capitalist mentality rewarded ·No strategy decay ·Communities of interest ·Entrepreneurial spirit ·New revenue streams |
Figure 2. The Five Steps of Information Evolution
Don Hatcher
is vice president of technology strategiesfor SAS.
[email protected]
Bill Prentice
is manager of technology strategies at SAS and the primary architect of the InformationEvolution Model.
[email protected]