Using BI and Decision-Making Process in Start-ups

Whether inventory management, financial accounting or storage costs, companies need access to up-to-date and reliable data at all times to plan well. In recent years, BI systems are increasingly being used by start-ups as well. Especially for data integration (ETL), data storage (Data Warehouse), data preparation or analysis (OLAP) and data presentation (planning, reporting). Reporting solutions eliminate the need for a manual and error-prone gathering of data from a variety of sources: all metrics are automatically merged into a single system and correlated in any desired combination. Thus, business intelligence has become an indispensable basis for decision-making in companies. Hardly any large enterprise today works without a BI system. Due to the implementation effort and the corresponding costs of the complex solutions, these seemed to be made only for large companies.

Especially for start-ups, BI systems offer a huge competitive advantage. For a company without a BI system, the development of a report requires enormous effort: tons of numbers are extracted manually from Excel spreadsheets, billing systems, and other programs to be saved in a new file. This goes through the hands of various employees. Such a procedure not only costs valuable working time, but it also carries the risk of severe transmission errors. If you instead use a systematic BI solution, the previously manually processed data is extracted and handled fully automatically. This significantly reduces both the risk of errors and saves human resources. Especially in start-ups, where individual employees often manage several areas of responsibility, this means a considerable relief.

The reaction times of the company can thus be shortened many times over. For as soon as a detailed search of company figures is no longer necessary, the time saved can be invested directly in the analysis. What are the current production and storage costs? Which product currently achieves the strongest sales? These questions can be answered with the help of a BI system without delay. Only those who know their numbers can react quickly and efficiently to the market. This ability to respond quickly is of particular importance to start-ups, as the planning horizon is usually much shorter than for a large company.

Even with negotiations with suppliers and customers, you are always one step ahead with BI: How high may the volume discount of a major customer be? Which supplier can achieve greater savings? Daily updated key figures provide the ideal basis for optimally positioning yourself in negotiations. Another central added value: A Business Intelligence solution is an effective early-warning system. Whether rising storage or falling production costs: If you always keep an eye on company figures, you will immediately notice changes. The analysis goes far beyond the actual daily numbers. Thanks to the comprehensive database, meaningful simulations are also available. Threatening sales or profit slumps are thus recognized at a very early stage and can be purposefully prevented or at least mitigated. For example, well-prepared and valid corporate numbers are also one indispensable basis for discussions with banks. Lending is often tied to regular reporting: with the help of a well-founded database, the desired information can not only be compiled quickly and easily. They can also be converted into meaningful formats, such as bringing graphics, dashboards or similar. Substantial forecasts create additional confidence.

Today, the spread of business intelligence in start-ups has increased significantly compared to previous years. Thus, in 2007, only half of the start-up companies had a BI application in use. Today, the market situation has changed fundamentally. Nearly 83 percent currently use a BI solution, with the remaining 17 percent using operational systems (such as ERP, CRM or SCM) and Excel. The investment in BI software is promoted not least by the weaknesses of the alternatives. In addition to ERP systems and spreadsheet software, there is a lack of functionality for preparing reports, distributing reports and analyzing, planning and coordinating various planners. Furthermore, data management functions are typically missing – above all possibilities for the integration of data from different sources as well as the use of central data memories that can be accessed by multiple users.

Business intelligence is used in start-ups mainly by controlling (89 percent), followed by management (70 percent) and sales (57 percent). As shown in the following figure.

Figure 2: Application Areas of BI in Start-ups

The areas of application of BI in start-ups show that they still tend to be used in classic departments. Controlling, as central processing, business data reporting, and planning entity uses BI software to support these tasks. Management uses BI data to extract decision-relevant information. Sales use BI primarily for customer-related analyzes.

Almost all start-up companies use business intelligence in data analytics (97 percent), 84 percent focus on report generation and distribution, 58 percent on planning and budgeting, and 49 percent on forecasting and rolling planning. However, more than half (60 percent) of the start-up companies plan to introduce improved management dashboards in the future. 46 percent want to invest more in forecasting and 39 percent in revised planning. The following figure shows the most common of the purpose of BI in start-ups.

Figure 3: Usage purpose of BI in Start-ups

It is hardly surprising that BI software is by far the most used for data analysis, reporting and distribution. Looking at future developments regarding planned use, planning and budgeting, forecasting and rolling planning can be named as primary fields of application. Users want to gain more information from existing data and process it further. The statistical methods (Data Mining), Group Consolidation and Balanced Scorecards do not appear to have found widespread adoption as a component of BI software in start-ups. Also, the information on planned or considered the beneficial use to the conclusion that they will not play an essential role in the future.

Start-ups also have significantly fewer people with BI know-how. About the introduction and use of BI, the corresponding skills must be available in the company. Here is a clear difference between medium-sized and larger companies, which would have to be resolved from the perspective of start-up companies to increase the BI deployment.