Time Savings Plus

Quick, what's the difference between the knowledge-based organization, the internetworked corporation, and data warehousing? If the idea of sorting out those terms throws you for a loop, you're not alone. Few members of senior management feel comfortable grappling with the kinds of jargon chief information officers (CIOs) like to toss around like so much rice at a wedding. Unlike grains of rice, though, these concepts are broad and weighty. These information-age boxcars have to do with the way multibillion-dollar companies go about coupling the huge amounts of information they depend on to run the business. Not surprisingly, because these notions are technology-oriented, they have one easily understood, common denominator that any CEO, CFO, or manufacturing VP can appreciate. They save time. Knowledge-Based At a recent conference on the so-called knowledge-based organization (KBO) last month, computer-aided design software maker Concentra Corp., which hosted the event, pointed out that the benefit of KBO is that you don't have to reinvent the engine each time you design an automobile. "We keep redesigning things over and over," says Larry Rosenfeld, chairman and CEO of Concentra, based in Burlington, Mass. "We still have many people who say, 'I think I'll design a bracket today.'" Interestingly, Concentra wants to push the KBO concept out to other parts of the organization, including manufacturing, sales, and administration. "You need to leverage your company's knowledge, not only in design, but in the sales, administration, and manufacturing environments as well," says Garreth Evans, senior vice president of Concentra. In other words, KBO has to do with all of the "human knowledge" in the organization. It's all that know-how, for instance, that the big consulting firms only recently began storing online so that their partners don't have to recreate from scratch a best-practices customer-response project for a telecommunications firm. For the knowledge-based organization, what's important is having access to the company's existing "smarts." Not all companies can do this today. In fact, many can't, and their people are forever reinventing or recreating a piece of work someone else in the company did last week or last month. Time is wasted. Internetworked By contrast, the internetworked corporation is one that is harnessing the full power of connecting all its employees, as well as its suppliers and distributors, to operate more effectively. As a result, there's a good chance these manufacturers will be more competitive than their peers--simply by virtue of being able to tell customers where their orders are, or by being able to keep inventories low, or through the ability to spot bottlenecks in production and make scheduling decisions accordingly. A key issue for the internetworked corporation is information flow--making sure there is smooth connectivity so that users at one end have access to data at the other end. The old concept of having "islands of information"--separate data systems and databases throughout the organization--made the flow of information herky-jerky at best, and often impossible. Even today, when this flow is interrupted--say, a supplier uses a different computer system and yours won't talk to it, or the Puerto Rican division still uses older equipment that is batch-operated and updated weekly--the system breaks down. At that point, the user has to tell the customer he or she will get the information and call back tomorrow. Or next week. Time is wasted. Data Warehousing Finally we come to data warehousing. Why should anyone care about whether the company's data is housed in one place or not? Who uses a data warehouse? For what purposes? Is it worth spending a few million dollars to set up a gigantic data warehouse? Where is the payback? Weighty questions all. Simply described, data warehousing refers to the practice of keeping an extract of pertinent data from the company's transaction systems. Often these are files on customers, products, sales, and even manufacturing and quality information. The data is kept on a dedicated server or mainframe for the purposes of data retrieval and business analysis. Special query and analysis software enables business managers to transform the raw data into timely and useful information for better-informed business planning. For a company eager to become more customer-focused, a data warehouse can be extremely useful. In the past, data warehouses cost millions of dollars to set up. Now, though, they can be had for a fraction of that amount. For instance, a partnership between Oracle Corp., QAD Inc., and Data General Corp. is offering a "prefab" data warehouse in the $150,000 to $300,000 range for manufacturers. "We prebuild data warehouses so each company doesn't have to reinvent the wheel," says Sue Sweeney, Data General VP for strategic alliances. As for return on investment, a study by International Data Corp. found that data warehousing generated a 401% average three-year ROI. Nine of 10 companies studied reported ROI of more than 40%, half had returns upwards of 160%, and one in four showed returns that were more than sixfold. The average payback time was 2.3 years on an average investment of $2.2 million. The reasons are simple enough. A data warehouse solves two problems. First, instead of having a dozen or more databases containing customer files, the company has just one. If your managers know which customers are profitable, which plants are losing money, or which customers are likely to purchase your new line of products, they can make better and quicker strategic decisions to fix problems or take advantage of opportunities. Second, the data warehouse is not competing with a transaction system, such as a customer-order system, that bogs down when users want to tap into it for complex business analysis queries. When this happens--you guessed it--time is wasted. Of course, saving time--or rather, not wasting it--isn't the only goal of leveraging knowledge, internetworking, and data warehousing, as we've described here. Each offers some pretty hefty business benefits of its own, including the ability to tap stored knowledge, get at information faster, and have more accurate data for decision-making, to name a few.