Business Intelligence/Framing stage

Understanding the frame of reference

The purpose of the framing stage is to gain a better understanding of the decision maker's view of the world. Understanding the strategy for a company requires consolidating the views of all decision makers in the strategy diagrams. The final Strategy Map is the official and explicit strategy for the company. The Strategy Map is then used to build the architecture each frame.

In the previous chapter we argued that decision makers make rational choices based on limited resources. Decision makers use values and beliefs to build cognitive lenses used to transform limited information into useful knowledge about the world. Values influence their preferences regarding outcomes. Gaining a better understanding of these cognitive structures, called a frame of reference, is the first step in the framing stage.

At the heart of the framing stage is the understanding both of the frame of reference and the need for the frame owner to carry out the strategy. Both of these items combine to influence the building of the frame. Decision makers frame policies in terms of conceptual lenses that have significant consequences for their behavior. Their reference frame filters data so they can make sense of the world. What the decision maker sees and judges as important is based on information that passes through "conceptual lenses" that all individuals use to make sense of information.

The frame must help the decision maker in this process. The business analyst must uncover are the conceptual lenses that shape how the decision maker views the world. Companies produce huge quantities of data. The decision maker has theories regarding how to evaluate the data. Specifically, he or she chooses to focus on certain details but ignores other details. The frame should facilitate this process by filtering certain data and focusing on other data.

Frame of Reference and BI Systems

How does the frame of reference help us build a Business Intelligence System? Barberg argues "Why waste time and effort on developing reports, analytical capabilities, and data marts if you have not first gained agreement on which are the most important things to measure and analyze in order to execute your specific business strategy?" This is a critical point. You focus on and measuring activities that you want to influence. Strategy makers identify important activities critical to profitability. For instance, Southwest Airlines identifies quick gate turnaround as an important activity. All activities focus on achieving the fastest gate turnaround. Southwest originally averaged a gate turnaround time of 10 minutes, with longer turnaround times requiring a written explanation for the delay. Later the average was 15 minutes. Then, after substantial growth, the airline maintained a 25-minute turnaround [1]. While the company was not able to maintain the industry first 10 minute gate turnaround, this is still a critical activity.

This is why the first step in build a BI system is to understand the strategy and the important activities that achieve operational and strategic effectiveness. BI must allow decision makers fast and efficient access to the information necessary to evaluate operational and strategic effectiveness by focusing on processes/activities.

Building a BI system requires understanding the decision maker's frame of reference regarding how they interpret the strategy and understanding how to achieve goals. Their frame of reference will show which measures of operational and strategic performance to include in the BI system. Using an architecture based on a frame of reference creates a system that allows the decision maker to effectively and efficiently access information regarding these measures.

Scorecards as Frames of Reference

This book argues that using the balanced scorecard approach allows the BI architect to build a system based on reference frames. A frame of reference is a complicated cognitive structure. It is not possible to capture the whole frame. However, it is only necessary to capture that part of the frame that is necessary for building the BI system.

In one of Norton & Kaplan’s most-referenced case studies, Mobil Oil’s North American Marketing and Refining division had been reporting and analyzing the gasoline sales of the services stations that purchased their product and sell it to the public (see Barberg). By using the balanced scorecard approach Mobil turned their focus from measuring and reporting on total gasoline sales to the sale of premium-grade gasoline only. Based on the notion that “you get what you measure” they focused on measuring a different type of behavior. This seems incomplete from a bottom up perspective as it ignores a great deal of data. However, the objective of a BSC measure is to focus attention rather than provide the most complete analysis. Again, in the realm of BI, the measures are primarily determined by the data that is available for analysis. The BSC approach emphasizes the process of identifying the “critical few” measures that drive the successful execution of strategy.[2]

Scorecards and BI architecture

The final stage in developing the frame is to use the scorecard in the BI architecture. Architecture here means blueprint. The structure of the frame revolves around bring information, based on analyzing the scorecard, to the decision maker.

One way to do this is to build an architecture with a dashboard at the center of a reporting system. A dashboard presentsa concise view of the most important measures of success. For instance, assume a decision maker at a railroad such as Union Pacific would want to know how fast terminals put trains move through terminals. Trains must remain in terminals to load and off-load cargo and take on fuel, for example. The longer a train remains in the terminal the less time it spends moving cargo. An initiative that successfully reduced terminal dwell would help free up trains. The decision maker would need to know if the initiative was successful.

A scorecard would help identify the measures necessary to determine if the initiative was successful. The initiative might be called the "Cycle Time Optimization Program." The objective of this initiative would be faster terminal turnaround. The measures of success would be terminal dwell and on-time departure rates. The decision maker would focus on these two measures to determine if initiative was achieving its objective.

The BI architecture should explicitly include items from the scorecard, here terminal dwell and on-time departure rates. The decision maker should be able to determine, at a glance, if the company is achieving this objective. This information would appear on the dashboard. If the measures were not exceeding expectations then the decision maker should be able to access reports providing detailed information on both terminal dwell and the rate of on-time departures. This would help the decision maker diagnose the problem and take corrective measures.

Conclusion

Frames incorporate knowledge into the BI system architecture. This is done by embedding scorecards directly into the BI system. This is because scorecards are a means to diagram knowledge about strategy.