In the New York Times for Feb. 3, 2009, were two articles that I thought merited a retort. In the first, headlined “Wall St., a Financial Epithet, Stirs Outrage and Punch Lines”, David Segal quotes unattributed banking sources:
“Americans undersaved and overspent for decades, relying on rising property values to bankroll their lifestyles. But no one on Wall St. forced United States homeowners to take out loans on houses they couldn’t afford, or refinance mortgages to spend money on cars they shouldn’t have bought.”
That is at best a questionable assertion. There was a segment of the market that did a lot of “investing” in real estate, buying houses and “flipping” them with varying expenditures on refurbishing, driven solely by steadily rising real estate prices. Any of these people who got caught when the market collapsed probably deserves to pay the consequences.
The segment of the market that got caught up in subprime lending, however, had more than a little encouragement from the mortgage lending industry. The whole point of subprime loans was to make them attractive to people who otherwise would not have considered buying a home, or would not have been considered by any responsible lender. Banks put a lot of pressure on the government, and on Fannie May, to underwrite and repurchase more and more of these loans. The government had significantly de-emphasized regulation, on the other hand, so there was no one saying “take a breather and look at what you are doing.” The supply-side economics of the Reagan era asserted correctly that if you put it in front of them they will buy it. This was Reaganomics in action. To say “no one forced … homeowners to take out loans on houses they could not afford” is disingenuous, to say the least.
In the Business Day section of the same edition, Andrew Ross Sorkin asked whether giving bonuses to government watchdogs would have resulted in better oversight of the financial system. While such incentives might make watchdogs work harder, it doesn’t do much for the system as a whole when government policy is not to regulate at all. Energetic agents of the SEC might have had their eyes on a bonus, but if they went after a protected or favored enterprise, they would probably not get the bonus and wind up in bureaucratic purgatory besides.
Wall St. cozied up with the Federal Reserve and the SEC and lobbied very hard to get out from under the regulations that were there as much for its own protection as for ours. It got its way, and everything blew up in our faces. To attempt to shift the responsibility for over three decades of very bad business decisions off onto consumers or the government is as ludicrous as buying a corporate jet and paying big bonuses with government bailout money. It is time to move on. The press should refrain from repeating these kinds of rationalizations and concentrate its reporting on what is actually being done now to fix the mess.
In the current back and forth over whether we need a New Deal style stimulus package, and whether the first one actually did more harm than good, the elephant in the room is the outbreak of the Second World War. The new deal was based on the theories of  J. M. Keynes, who asserted that governments should not shy away from operating at a deficit in times of economic distress. In the last chapter of his General Theory of Employment, Interest and Money, he says:
“The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.â€
Keynes’ ideas were a radical departure from established economic thought in 1935, and the Roosevelt administration adopted them rather cautiously. With the benefit of this history behind us, some are arguing that the theory is proven and conservative caution will be self-defeating. Others assert the theory is not proven at all, and that the New Deal served no real economic purpose because the economy was already in recovery, as it is today.
I have to agree that the theory remains largely unproven because, first, it was never fully realized in the New Deal, and second, the economic processes had no time to play out either way because of the war.
It was, in fact, the war effort that finally put an end to the Great Depression. The demand for a sudden surge in heavy industry brought on by the war effort was easily satisfied because of the underutilized capacity that existed at the time. The momentum that was established was able to continue after the war because workers had accumulated savings, due to rationing and the lack of consumer goods for sale; when the war ended capacity was redirected to non-military production and pent-up consumer demand was released.
I personally believe, without convincing evidence one way or the other, that the State has a responsibility to intercede when the market system breaks down as it has. We can point fingers at various sectors of the economy for the next couple of centuries, but somebody has to act now to get the economic machinery up and running again. What we all must hope is that it doesn’t take another world war to do it.
There can be no doubt in anyone’s mind that the global economy is in a severe recession. We are all feeling it, and it is causing many businesses to put even the most urgent project investments on hold. IT projects are among the first to be slashed because IT is seen as a utility. Improvements in utility services can wait, as long as service levels don’t deteriorate. Business Intelligence systems are always viewed as IT utility services, and companies that don’t already have them don’t view them as a necessity. Yet it is in times like these that BI becomes a critical success factor.
Business Intelligence systems do not, as a rule, deliver new information. Most of the time, they simply deliver established and proven metrics faster and less labor-intensively. BI systems make it easier to access this information, to see how the metrics change over time, and to present them in new contexts using the ad hoc features of the user interface software. But in the absence of such systems, these basic performance metrics can be derived by people using spreadsheets in the course of their principal jobs. It may take a week or more to produce, but if you are doing it you probably just accept that. It is usually not until this derived information becomes highly divergent across multiple reports, and additional time and effort are required to reconcile the data from multiple departments, that managers become interested in BI systems that promise to deliver a “single version of the truthâ€.
Once a BI system is in place, invariably performance information becomes available to decision makers much sooner than previously. The faster availability of actionable information potentially makes the organization more agile, and therefore more competitive, since decisions can be made sooner, and results of the decisions monitored continuously. This kind of agility in adverse economic conditions can mean the difference between survival and bankruptcy.
All systems projects are of necessity collaborative. The system designer must communicate with the system’s intended users to insure that both have the same understanding of the underlying data and rules the system must incorporate. BI systems must collect and summarize data across many subject areas in the organization, and it is crucial that all users understand the definitions and origins of all the metrics and all the descriptive dimensions. In the development methodology called Joint Application Development (JAD), subject matter experts from all the user constituencies engage in a structured dialog with the system designer and discuss the data and the rules that will be encapsulated in the system. In these JAD sessions, different perceptions about the company mission, Critical Success Factors, Key Performance Indicators, and business processes are discussed and resolved by the participants, and resulting conventions and definitions are incorporated into the system specification.
This same process can and should be applied to reviewing and developing the company’s business plan in an adverse environment. If it is clear that the business needs to change because of environmental pressure, then all the parts of the business entity should be involved in devising a response. Any such response involves changes in resource allocations, which in turn drive changes in business processes. A change in one business process has impact on other business processes, and this impact needs to be understood and anticipated before it become problematic, across the entire enterprise. Subject matter experts from all the affected functional areas need to negotiate how to make the necessary changes. In addition to resource allocations and procedural changes, the review must also identify how the effects of these changes will be monitored and controlled. A BI system is ideally suited to this, so there is compelling logic to incorporating a BI initiative into this kind of enterprise makeover. The process of translating the reorganization plans into a set of data definitions and rules would help to highlight concepts that are not well defined or understood before they become contentious, and would facilitate the total planning process. And the resulting system would come on line in parallel with the new plan, immediately delivering information that reinforces the project goals.
Suppose an extensive business plan revision is not required, but something must be done to cut costs and allocate resources more efficiently. The collaborative JAD approach is again an effective method of pooling the subject matter expertise of the entire enterprise to develop a plan that addresses current and anticipated constraints. It will highlight potentially self-defeating actions (such as layoffs that result in a knowledge drain), and even if it can’t prevent them at least insures that the decision is made with proper due diligence. Once again, piggybacking a BI systems initiative on the process can facilitate the analysis and result in improved monitoring of results and help identify opportunities for improvement.
Finally, in the event that no change to the business model is anticipated, the issue comes down to whether, in the absence of an effective BI system, the enterprise will be in a position to discover and take advantage of new business opportunities, or deal adequately with shifts in the environment. This is a question of organizational agility that in turn depends on communication and goal congruence.
How does your enterprise monitor the performance of business components? Have you established scorecards that all employees can read, and that convey at a glance what they have achieved and how that affects the company’s prospects? If so, is a scorecard available on the next day? The next week? How is it produced? How many man-hours are required to produce it?
If you don’t have such scorecards, how do you communicate the needs of the business to your employees, and with what frequency? How would you assess the level of goal congruence in your organization? How quickly can your business respond to the potential or the actual loss of a major customer? Can it respond at all?
One of the major benefits of a Business Intelligence system is the process that goes into designing it, because it heightens awareness throughout the organization of the enterprise’s mission, its strengths, and its vulnerabilities. The resulting system encapsulates that knowledge in a tool that can be used for management decision making and for employee motivation. That makes a BI system an investment decision you can’t really afford to put off for better times. There may not be any.