The Use of Business Analytics for Performance Measurement: Concerning specific SME
needs
Master Thesis Kevin Elsenga
S2726998
MSc BA Management Accounting and Control University of Groningen
Department of Economics and Business Supervisor: Dr A. Bellisario
Word count: 11001
Abstract
The purpose of this paper is exploring the use of business analytics (BA) through the lenses of performance measurement (PM) within small- and medium-sized enterprises (SMEs), which shows how BA facilitates SMEs in the use of PM. The data is collected during an in-depth single-case study within a small Dutch waste collector, using semi-structured interviews, appropriate for doing exploratory research. The results of the case study show that BA is used within SMEs to facilitate their specific PM characteristics. The results show that SMEs use BA to balance short-term and long-term strategies, to improve decision-making processes, to affect limited resources and to increase their flexibility and reactivity. The findings are a first exploration in the use of BA from the perspective of PM within SMEs. The findings are based on a single-case study, while SME characteristics are context-specific. Future research should conduct in-depth case studies to test the broader validity of the findings in other branches and organizations.
Keywords – Business Analytics, Performance Measurement, Small- and medium-sized enterprises,
Table of Content
1. Introduction ... 1
2. Theoretical Background ... 3
2.1 Main characteristics of SMEs ... 3
2.2 Performance measurement in SMEs ... 4
2.3 Using business analytics for performance measurement ... 5
3. Methodology ... 8
3.1 Research Organization... 8
3.2 Data Collection ... 8
3.3 Data Analysis ... 9
4. Findings ... 10
4.1 Balancing short-term and long-term strategies ... 11
4.2 Improving decision-making processes ... 13
4.3 Effects on limited resources ... 14
4.3.1 Projects to achieve higher efficiencies ... 14
4.3.2 Efforts to increase the use of BA ... 15
4.4 Increasing flexibility and reactivity ... 16
4.4.1 Transparency and internal communication ... 17
4.4.2 Availability of information ... 19
5. Discussion and conclusion ... 21
5.1 Aim of research ... 21
5.2 Contribution to current research ... 21
5.3 Managerial implications ... 23
5.4 Limitations and future research ... 24
References ... 25
Appendices ... 29
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1. Introduction
More and more organizations, including SMEs, are using business analytics (BA) to increase organizational performances (Akter, Wamba, Gunasekaran, Dubey and Childe, 2016; English and Hoffmann, 2018; Wamba et al., 2019). Organizations use new and highly sophisticated technologies to collect, store and analyze large data sets, transforming raw data into knowledge used for decision-making and problem-solving (Tan, Ji, Lim and Tseng, 2017; Wamba et al., 2019). Organizations spend millions of dollars improving their systems, practices, and techniques, knowing that BA has strategic potential, can detect opportunities and increase business value (Akter et al., 2016; Shah, Andrew and Capellá, 2012; Wamba et al., 2017). But despite the increased use and acknowledgement of the benefits of BA, little is known about the use of BA within SMEs (English and Hoffmann, 2018; Garengo, Nudurupati and Bititci, 2007). As most empirical studies researching the use of BA for PM at large organizations. The focus on large organizations is problematic because SMEs are important drivers for growth in all economies (Dababneh and Tukan, 2007) and therefore deserve the same attention as larger organizations (Garengo and Sharma, 2014; Hudson, Lean and Smart, 2001a).
SMEs differ from large organizations concerning their key characteristics, as SMEs tend to be more flexible, reactive and focused on short term performances (Ates, Garengo, Cocca and Bititci, 2013; Garengo, Biazzo and Bititci, 2005; Pesalj, Pavlov and Micheli, 2019). But the specific needs of SMEs for performance measurement (PM) are often neglected within the literature. Having effective PM can help SMEs in balancing their short- and long-term focus, discovering opportunities and understanding the drivers behind organizational performances (Ates et al., 2013; Pesalj et al., 2019). Also, PM can facilitate and integrate all relevant information for decision-making, related to organizational performances (Pavlov and Bourne, 2011). Organizations use PM to control financial and non-financial objectives, preventing risks and losses and improving organizational performances (Upadhaya, Munir and Blount, 2014). But current adoption rates of effective PM within SMEs are low because SMEs cannot use PM methods based on large organizations and need to tailor PM to their specific needs (Garengo et al., 2005; Garengo and Bititci, 2007; Garengo and Sharma, 2014; Pesalj et al., 2019).
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Alaskari, 2014). SMEs could use PM to be less dependent on limited resources and their short-term focus (Garengo et al., 2005; Garengo and Sharma, 2014; Pesalj et al., 2019). But when SMEs can reap the benefits of PM, managers will make better decisions to support their strategic and operational tasks (Garengo and Sharma, 2014). And SMEs will be able to manage uncertainties, innovations, and services (Garengo et al., 2005; Pesalj et al., 2019), remaining competitive (Ahmad and Alaskari, 2014; English and Hoffmann, 2018).
Besides, current literature does not mention how SMEs use BA for organizational performances. Despite, knowing the economic contribution of SMEs and the benefits of BA on organizational performances (Dababneh and Tukan, 2007; Wamba, Akter, Edwards, Chopin and Gnanzou, 2015). This gap is why this study aims to investigate the use of BA within SMEs and how the use of BA provides for more effective PM (Chen, Chiang and Storey, 2012; Gunasekaran et al., 2018; Wang, Gunasekaran, Ngai and Papadopoulos, 2016; Wamba et al., 2017). This paper extends the streams of research by examining the use of BA within SMEs and uncover the effects of BA for PM, answering the following research question: ‘How is Business analytics used for performance measurement within SMEs?’
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2. Theoretical Background
The theoretical background consists of three different parts. Subsection 2.1 describes the specific characteristics of SMEs, highlighting the main differences between SMEs and large organizations. The second subsection shows the importance of PM in SMEs and the third part indicates the current knowledge of BA in use from the perspective of PM. Figure 1, at the end of subsection three, will link the use of BA regarding PM with the characteristics of SMEs.
2.1 Main characteristics of SMEs
The theoretical background starts with the five most common characteristics of SMEs. These characteristics will explain the differences between large organizations and SMEs. This difference is the main reason why SMEs fail to adopt effective PM.
The first and most common characteristic of SMEs is flexibility and reactivity. SMEs are known for their less structured systems and processes used for managing the organization and for decision-making (Ates et al., 2013). SMEs need to be flexible and agile to respond to opportunities and threats (Bititci et al., 2011). Giving SMEs the ability to react, learn and innovate according to organizational needs (Pesalj et al., 2019). Most SMEs perceive formalization and bureaucratization as an obstacle to their flexibility (Ates et al., 2013; Garengo et al., 2005).
Second, most managers and employees working at SMEs are engaged in multiple roles and tasks, pursuing both strategic and operational objectives (Ates et al., 2013). Managers and employees a SMEs base their decisions on personal skills and experiences, guided by the intuition of the decision-maker (Cocca and Alberti 2010; O’Connor and Kelly, 2017). And the performances and know-how of the individual are rarely measured, and if measured, the criteria are informal and based on trust (Garengo and Bernardi, 2007).
The third characteristic is tacit knowledge, which is the rarely shared information, contained by a specific person (Ates et al., 2013; Pesalj et al., 2019). Tacit-knowledge is a built-up of personal experiences and an essential factor for decision-making at SMEs (Ates et al., 2013; Pesalj et al., 2019). Informal and less structured systems and processes within SMEs are a consequence of tacit knowledge because most tacit knowledge is context-specific and limits the attention towards formalization and standardization of systems and processes (Ates et al., 2013; Garengo et al., 2005; Hudson et al., 2001a).
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benefit from long-term strategies because strategic measures and controls support the decision-making process regarding opportunities and threats (Garengo et al., 2005; Hudson et al., 2001a). A balance between short-term and long term- strategies enable SMEs to implement more effective PM, guided toward present and future performances (Bititci et al., 2011).
The last characteristic is the limited resources of SMEs. The most common limited resources are time, money and human capability (Ates et al., 2013; Garengo et al., 2005; Pesalj et al., 2019; Woschke and Haase, 2017). Another limitation of SMEs is the reliance on large customers (Hudson, Smart and Bourne, 2001b). Human capability and time become an obstacle when SMEs want to adopt PM because the managers and employees lack time to implement the corresponding controls and measure and because managers and employees do not understand the strategically focused activities (Garengo et al., 2005; O’Connor and Kelly, 2017). In addition to human capabilities, managers in SMEs are less equipped and face difficulties in creating a workable balance between strategy and operations (Ates et al., 2013; Bititci et al., 2011). Besides, SMEs have fewer financial means for improvement, training, and education, which causes smaller growth and business failure (Ates et al., 2013).
To summarize, SMEs are not just a smaller version of larger organizations and need specific attention towards their unique set of characteristics (Bourne, Melnyk and Bititci, 2018; Bourne, Pavlov, Franco-Santos, Lucianetti and Mura, 2018; Cocca and Alberti, 2010). The SME characteristics are the main reason why the adoption of effective PM methods fails (Cocca and Alberti, 2010).
2.2 Performance measurement in SMEs
PM is used by organizations to align performances with the strategy by the use of measures and controls (Ates et al., 2013; Tolonen, Shahmarichatghieh, Harkonen and Haapasalo, 2015). PM is used to integrate all relevant information and to facilitate decision-making (Pavlov and Bourne, 2011). Organizations do benefit from effective PM and increasing their performances, but the adoption of PM in SMEs is low (Ahmad and Alaskari, 2014). It takes too much time, and it is too expensive for SMEs to implement effective PM methods because the focus of PM is on long-term strategic objectives (Ahmad and Alaskari, 2014).
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2.3 Using business analytics for performance measurement
This paper uses the mainstream literature of using BA for PM because there is little to none empirical work on this topic regarding SMEs, neglecting the fact that SMEs use BA for PM. In the end, a conceptual model summarizes the theoretical background, connecting the use of BA with the characteristics of SMEs for effective PM. Chen et al. (2012) define BA as the various types and techniques used to transform data into information. Complex datasets need the proper systems, practices, and procedures to be analyzed, e.g. data storage practices, analyzing skills and visualization techniques. This results in fact-based decision-making, increased business value and higher organizational performances (Akter et al., 2013; Chen et al., 2012; Gunasekaran, Yusuf, Adeleye and Papadopoulos, 2018; Wamba et al., 2017; Wang et al., 2016).
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Woschke and Haase, 2017). Organizations use new technologies to increase their efficiencies because BA helps to understand the business dynamics and to discover opportunities (Schläfke et al., 2013). Opportunities are found through data analysis, scenario planning and other predictive methods, dealing with complexities, uncertainties and volatilities (Schläfke et al., 2013). Akter et al. (2013) and McAfee and Brynjolfsson (2012) acknowledge the discovery of opportunities, saying that BA leads to better predictions, analytics and planning because BA is intertwined within the organization as a whole and collects data at nearly every function and department. So, BA improves the capabilities of managers (Chen et al., 2012; Manyika et al., 2011; McAfee and Brunjolfsson, 2012; Tan et al., 2017). But managers and employees need to know how to use BA, and they need to develop new skills to be able to cope with the large datasets (Matthias, Fouweather, Gregory and Vernon, 2017).
To conclude the theoretical background, this paper makes the first connection between the use of BA for PM and SMEs. Figure 1 shows the conceptual model used to summarize the literature above. The first link is between BA and short-term strategy. As BA supports the short-term strategy of SMEs through its monitoring and controlling function (Raffoni et al., 2018; Schäfke er al, 2013). The second link is between BA and the decision-making processes of managers and employees, whereby BA provides for better and faster information for improving decisions (Manyika et al., 2011; McAfee and Brunjolfsson, 2012; 2011). Supporting managers and employees in pursuing multiple roles and
tasks (Ates et al., 2013). The third link is between BA and tacit knowledge, as BA increases the internal communication between employees, sharing and storing more data. Which stimulates debate and analysis within the organization (Chen et al., 2012; Manyika et al., 2011; McAfee and Brunjolfsson, 2012; Raffoni et al., 2018; Tan et al., 2017). Fourth, a link between BA and the limited resources of SMEs exists. The literature shows that BA is used to increase organizational efficiencies, increasing
Flexibility and reactive nature Limited resources
Tacit knowledge Multiple role and
decision making Short-term Business Analytics Performance measurement characteristics of SMEs a b e d c
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3. Methodology
This research consists of an in-depth analysis of the use of BA within SMEs from the perspective of PM. Carrying out exploratory research based on a qualitative single case study. The research is exploratory because more qualitative research within SMEs is needed (Garengo et al., 2005), and there is a lack of literature on the studied subject. A case study is conducted because case studies are the most capable research methods (Vos, Tsikriktsis and Frohlich, 2002). Case studies are also appropriate for exploratory research because case studies can see the complexities within their natural setting and can detect new insights (Vos et al., 2002). This study improves the understanding of the use of BA within SMEs by showing the use of BA for specific SME characteristics for PM.
3.1 Research Organization
The organization selected, called NNRD, is a medium-sized organization with 65 employees and more than 9000 customers. The NNRD is a Dutch waste collector with a lot of logistical operations. The main activities are the collection and the disposal of waste, more specifically, industrial waste. The waste is collected from customers and delivered at incinerators. The main goals of NNRD are the efficient collection and disposal of waste and being flexible toward customers and answering as quickly as possible to the customer’s needs. PM is used to control the organizational performances regarding the main goals. The systems in place can gather a lot of data about the processes in place. The two most important systems are AFAS Profit, regarding revenues, and PiterBas (PB), regarding orders, weights, time, drivers and number of containers. Qlikview and AFAS Profit are the central systems used for BA. Both systems are capable of analyzing the vast amounts of data and visualizing the results.
3.2 Data Collection
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Date Function Duration
11-11-2019 Financial Controller 60 minutes
11-11-2019 Backoffice 50 minutes
12-11-2019 Sales manager 45 minutes
15-11-2019 Company Director 70 minutes
15-11-2019 CEO 75 minutes
15-11-2019 Application Manager 55 minutes
02-12-2019 Financial Controller 90 minutes
04-12-2019 Head of Planning 40 minutes
3.3 Data Analysis
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4. Findings
Not much research has been done on the role of BA within SMEs looking from the perspective of PM. This research aims to find evidence about the facilitating role of BA regarding the specific characteristics of PM within SMEs. The data structure, Figure 2, is used to order the data into theoretical themes and aggregate dimensions. This academical approach is based on the paper of Gioia, Corley and Hamilton (2013), stating that a data structure is a crucial step to structure data sensibly and transparently. The data structure shows the main findings of the case study at NNRD derived from the gathered data. The upcoming findings section is structured around four aggregate dimensions.
Figure 2: Data structure
- Focus on current performances - Lack of strategy, mission and vision - Budgets are the main tool for control - Monthly control on goals during MT meetings - Monthly report of finacial figures and trends - Average weights, amounts emptied and revenues - Weekly MT meetings to discuss results
- Decisions no longer based on intuition - Trust data to be correct
- Information used to support conducted business - Managers and employees have multiple responsibilities - Managers and employees facing ad hoc situations - Managers are responsible for a department - Driving style analysis to reduce fuel consumption - Driving style analysis to control drivers
- Idle NNRD containers at customers
- Lean project, eliminate rides to containers not offered
- Employees should be capable to use BA (including training efforts) - Employees have to discover things for themselves
- Costs for further digitalization are high
- More transparency towards large customers - BA gives a better picture of how things actually are - BA makes data easier to read and interpret - BA can show data quickly
- The information is derived from real-time data - The information is accurate
- The information is easy to find
- Employees have the proper data-access rights
Short-term focus Short-term control mechanisms Fact- based information Balancing short-term and long-short-term
strategies
Multiple roles and task of managers and employees Improving decision- making processes Efforts to increase the use of BA Effects on limited resources Achieving higher efficiency through the use of BA Transparancy Availability of information Increasing Flexibility and reactivity
1st Order Concepts 2nd Order
Themes
Aggregate Dimensions
- Tacit knowledge is important (experience of employees) - Communication and information sharing must be improved - Data should be stored more often
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4.1 Balancing short-term and long-term strategies
The first aggregate dimension is the use of BA to balance short-term and long-term strategies. The data structure, figure 2, shows the dependence of SMEs on short-term controls. In contrast, PM uses strategy, mission and vision as a basis for monitoring and controlling activities. But not one participant mentioned anything about the strategy, mission and vision present at NNRD. And when questions where asked about it, no one could answer it.
‘That’s a good question. But no, that is not that good, but I don’t know. This is because there is much uncertainty about it [the strategy].’ Financial Controller
Not knowing the strategy is a massive obstacle for the adoption of effective PM at NNRD because a strategy is crucial to PM. PM without a strategy does not match the main idea, which is to align the performances and strategy of the organizations (Ates et al., 2013; Tolonen et al., 2015). The participants realize that a strategy, mission and vision are missing, but nobody took action to clarify it. The management team (MT) at NNRD consisting of four managers, the CEO, the business director, the sales manager and the financial controller, are responsible for the strategy and should make an effort to clarify it. When a strategy, mission and vision are in place, this will trickle-down by communicating the strategic objectives throughout the organization.
A clear strategy will assist the NNRD in managing its goals and objectives. The NNRD is currently struggling with adequate controls, especially for individuals and departments. For example, the account managers do not have any individual target to achieve, only the overarching budget.
‘Everybody has different goals. But directing office staff is different from sales staff. The sales manager knows where the account managers are, but this is a broad approach. How are you going to manage it? I think you should say: you should reach this target and you should reach that target.’ Financial Controller
A strategy should make it easier to manage because the strategy is the ultimate goal an organization wants to achieve. A clearly defined, long-term strategy can help the NNRD in setting up targets and goals for individuals and departments because, in the end, it should lead to the achievement of this strategy. So, to use PM more effectively, the NNRD should change their focus towards a long-term strategy to establish better targets and objectives.
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‘Basically, we do this once a year [determining goals and budgets]. We do the controls during the MT meetings. So, what are our deviations? What are the current developments? And what is happening? So, we do not set goals every MT meeting, but we mainly follow them.’ CEO
The NNRD controls the gross margins and budgets according to past performances. The controls compare the actual performances with the budget, and the NNRD uses the gross margins to check whether the costs of collecting and disposing of waste are lower than the revenues. The budgets determine whether a department is performing or not, used to have an overview and some control. Individual targets and goals exist at the NNRD, but the targets and objectives are informal and set during personal performance reviews. So, the NNRD uses BA for oversight and control, but the focus of the targets and goals are no longer than one year.
BA allows the NNRD to understand the underlying inputs concerning controls. The most frequently used and mentioned inputs are the average weights per container, amount of containers emptied and revenues. The NNRD uses those inputs for the short-term controls and to analyse organizational performances. The NNRD uses the data at the MT meetings to give meaning to the numbers and to discuss the current achievements. The managers mentioned that the use of BA is useful for explaining deviations because BA transforms the vast amount of data into valuable information by performing calculations and measures. E.g. the managers can see where deviations arise using BA, showing numbers as average weights per customer, costs per customer and revenues per customer. BA makes control at NNRD easier.
‘We discuss a lot of data [during MT meetings]. Like financial figures, amounts emptied, the weights and tonnages. What do we get? And this is linked to the prices of the incinerators. We discuss it every Monday. So, how do we do it, and how do we run?’ Sales Manager
The primary purpose of PM at the NNRD is to monitor and control current performances. The information gathered from BA is needed to exert the current short-term controls and monitoring activities. Which means that BA facilitates the short-term strategy at the NNRD because BA aids in the short-term controls by delivering valuable information about the operations at the NNRD and the managers act upon this information.
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balance the short-term and long-term strategies. Setting goals for the future and have control on current performances.
4.2 Improving decision-making processes
The second aggregate dimension is the use of BA for improved decision-making. The first part is about the multiple roles and tasks of managers and employees at the NNRD. All participants declare they have various responsibilities. For example, the company director, who has to manage the planning department, is responsible for the drivers and does the performance reviews. Besides managing, the company director purchases containers, materials and trucks, maintains contracts for trucks. But that is not all, other responsibilities are the invoices, concerning car parts and fuel consumption and a project called driving style analysis. Another example of performing multiple roles and tasks comes from the financial controller, who performs tasks which usually are not the tasks of a financial controller, like the processing of bank details. Managers and employees have various responsibilities and tasks because NNRD is a small organization, and someone has to do the job. Both examples demonstrate the multiple roles and task characteristic at NNRD. The participants said that the multiple roles and tasks lead to many ad hoc situations and decisions. Most of the ad hoc situations require immediate action, whereby the participants perceive the use of BA as helpful. They derive valuable information using BA to support decision-making and problem-solving. The participant used BA to solve most of the problems, but not all problems, like disputes or a truck that crashed.
‘I couldn’t function without data. […] Otherwise, I would come in here and think what’s going on? If you don’t know how the organization is doing, it will make you unhappy. I’m someone. I try to manage on facts. So, I need data. I can’t function without it.’ CEO
This quote of the CEO shows the importance of BA in keeping an overview of organizational performances. Managers and employees do use BA to assist them in their work and to surmount the different task and roles they have to fulfil. BA can help them because BA keeps track of various operations at the same time. So, BA supports the NNRD in the multiple roles and tasks of employees and managers, which is essential for the NNRD because they are small and have to do everything with the people available.
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emphasized that BA improved their decision-making process by having valuable information at hand, which is easy to read and interpret.
‘This [decision-making process] has changed in the past few years, everything was on gut feeling, and when we ran out of containers, we ordered new ones. There was no plan. So, I tried to structure it.’ CEO
The use of BA improves decision making because BA allows the decision-maker to base the decisions on facts. At NNRD BA provides the knowledge, based on the information they need. The participants use BA because they trust the information derived from BA, and they act upon the information.
‘What I have noticed. I used to do a lot on intuition, but when you have data, you also possess knowledge. And with this knowledge, you have power. So, it [BA] can convince people.’
Company Director
To conclude, BA improves the decision-making process of the NNRD in two ways. At first, the NNRD uses BA to have information for ad hoc decisions, needed to support the managers and employees in keeping an overview and being able to react to ad hoc situations. Second, the use of BA at NNRD improves decision-making because the decision-maker trusts the fact-information, having the feeling of possessing the knowledge to make the best decision.
4.3 Effects on limited resources
The third aggregate dimension is the effects of using BA on limited resources. One way to gain more resources is by achieving higher efficiencies. Several projects to achieve higher efficiencies are established at NNRD using BA. On the other hand, the use of BA is costly, and efforts to increase the use of BA come across the limited resources of the NNRD.
4.3.1 Projects to achieve higher efficiencies
The first project at the NNRD is the driving style analysis and used to save fuel costs. Fuel consumption is a substantial cost item at the NNRD. Driving more efficiently will save fuel, and a small amount of fuel spared will save a significant amount of money for a small organization as the NNRD.
‘We fill around 1.3 million of diesel per year at NNRD with all our vehicles. So, if we could save one per cent on that, it would mean a lot of money for us.’ Company Director
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‘You can get this from the system. You just run a list, and you say what you want to know. Then you will receive a list from the driver, and that driver will have a score. Let’s say the driver scores an eight on the roll-out, but a four on braking. Then we can zoom to the location at which the driver had to brake, and we can check this with the driver to know the cause of the lower score.’ Head of Planning
BA can keep track of the above factors and zoom to locations where a driver was less efficient. This control encourages the drivers to obtain an economical driving style and eventually save fuel. Less fuel consumption at the NNRD will lead to more money to spend elsewhere.
Other projects are the zero-emptying list and a lean, green-belt, project. The zero-emptying list keeps track of the customers who did not empty their container in the past year. So, these customers have an idle NNRD-container. The NNRD can use these containers at other customers to generate more revenue. The lean project at NNRD eliminates unnecessary wastes within processes and procedures. For example, customers with fixed emptying frequencies, e.g. every Tuesday, are automatically added to the driver's route on Tuesday. This service wastes a lot of time and revenue when customers do not offer their container because that is not required. BA shows which customers did empty their container and which customers did not.
‘Ultimately, it [lean] is intended to remove disruption in the process so you can work more efficiently. So, you want costs to go down and that the quality remains high.’ Financial
Controller
The projects of the NNRD rely on BA and use the information to increase some resources, like money, container, and time. The projects above are difficult to pursue without BA because it will take a lot of time to gather the same information. BA monitors and controls the usage of the different resources, and the NNRD uses the data to increase the scarce resources.
4.3.2 Efforts to increase the use of BA
But BA comes with a cost. It is expensive to extend the current BA possibilities, like a mobile application for customers to monitor their waste.
‘The possibility is there, and the developments are already underway. But the costs are very high. The digitalization is expensive. But we need it because we steer on it and we make progress because of it.’ Sales manager
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‘For this, I worked at large organizations, and I just had to press an icon, and then I immediately had all the information. But we don't have that luxury here.’ CEO
The NNRD intends to develop the possibilities of BA further, but the means are a severe obstacle at the NNRD. The CEO also mentioned that money is not the only factor blocking further development; the know-how of new digital solutions is essential as well.
‘I want to do a lot with numbers and data, but I cannot always do it, I am honest about that. In the meantime, there are people around me who can do it. It [BA] has always been here, but you also need to know how to apply it.’ CEO
Capable people are needed to exploit all the possibilities of BA. People who know how to apply BA successfully. But even with the assistance of capable personnel, not everyone is going to use BA.
‘People must also be able to handle it. They have to like it, be involved and see the added value. But you have to help some employees by delivering everything ready to be used.’ CEO
Some are not capable of using BA but need the numbers and lists to do their work. There have been a few training sessions at NNRD to learn how to use BA. But the training was only meant for managers and planners, and most employees had to figure it out for themselves. During these training sessions, it was possible to provide input for specific requirements and wishes.
‘Here, they throw you to the wolves, and that’s the case for almost everything. You have to do it yourself, that’s how we do it in here. Work hard and don’t complain; it’s a bit of the Frisian mentality.’ Backoffice employee
So, only a few efforts have taken place to increase the use of BA and to stimulate the employees to use it, despite all benefits. If employees want to use it, they have to ask someone who knows how to use BA. When that capable employee is not available, they have to learn it by doing. The NNRD can benefit more from BA if employees are trained and confident with using BA. But the NNRD cannot continuously improve their BA capabilities because it is too expensive.
4.4 Increasing flexibility and reactivity
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Tacit knowledge is still essential at the NNRD, managers and employees execute tasks on tacit know-how. The employees with the most tacit knowledge are the planners. They use their experience to manage all the different routes, waste streams, drivers and customers.
‘They can solve problems by just doing it, and they often know what is good because of the experience they have. Experience is especially important when controlling drivers and creating routes.’ Head of Planning
Flexibility is needed at NNRD because it gives the managers and employees the possibility to react quickly on situations and problems. Flexibility is essential because the employees know how to act quickly in certain circumstances. Being flexible is seen as one of the critical strengths of NNRD.
‘The most important knowledge is in the experience on the floor, we have experienced employees. That is also our strength, I guess. We can arrange things for the customer in the short term. We don’t have many lines. If a customer calls asking if we can empty the container, we can answer that question immediately.’ Head of Planning
Tacit knowledge is essential for the flexibility of the NNRD and BA can be used to increase flexibility through internal communication. BA is used to store and share data about processes and procedures, and when properly stored, others will use the tacit-knowledge as well. At the moment, experienced employees act solely on what they think is right. The processes and procedures to solve problems and to make routes are not formalized or standardized. The NNRD tries to increase formalization and the use of BA by recruiting young, highly educated personnel. The younger people need to create a balance between experienced employees who act on situations with tacit knowledge, and employees who think about the processes and structure. But this is not without danger because the younger employees are quickly involved in daily matters.
‘Then you see that you have to be careful. One [young] planner is sometimes dealing with normal planning matters. While in essence, he is not hired for it. He has to take them a step further within the process.’ CEO
Tacit knowledge is needed to maintain the flexibility of the NNRD because experienced employees can act fast, and they know the business. But the growth makes it inevitable to increase formalization to ensure continuity. But it is hard for the NNRD to formalize the processes based on tacit-knowledge.
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is busy and wants to maintain their freedom. At the moment, the NNRD did not formalize internal communication fully, but the CEO and the application manager do want to formalize it.
‘Files can be shared better. […] everyone has to record everything. Sometimes, not all files are available, and this causes a lot of work for others, not for you.’ Application Manager
But BA did change some processes at NNRD, causing more data to be stored and shared. E.g. all weight of containers emptied are shared and stored automatically. The provision of data, as mentioned above, is valuable for the organization. The managers and employees act upon this data, and they trust this data to be correct. All participants said that they need the data to solve problems and to choose the best course of action, but when the data is not stored correctly or not at all, BA will be less useful.
‘[...] more should be saved in Profit because others can also see what is going on with the customers. If you don't know it, you can't go further, and the same work will happen twice.’
Backoffice Employee
So, internal communication should be better considering the current possibilities, but data is missing too often, causing unnecessary work. When the data is stored, others can make use of the data directly, decreasing the workload. The increase in formalization regarding data storage and sharing increases internal communication at the NNRD. BA makes it easier to share and store essential information, used to act quickly and to reduce the chance of doing things twice.
Another use of BA is to increase the transparency towards customers, in particular, large customers. The participants who have regular contact with large customers emphasize that BA supports them to be transparent, and customers appreciate the transparency.
‘We show what is happening, using data and they [the customers] think along with us. [...] Especially with large customers, of course. Customers who only have one 1100L container, well, then this is not necessary. It's really about the big jobs. [...] BA makes it easier for us to manage those customers.’ Sales Manager
BA shows the customer the cost price, number of containers emptied, the actual weights and the part which is recycled. BA is used to display the results in reports. The sales manager emphasized that BA makes it easier to manage large customers because BA presents the actual numbers quickly, and the reports are easy to interpret.
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price, and we show it to them. With this [transparency], you can guarantee such customers.’
Sales Manager
BA facilitates NNRD’s transparency towards large customers. The large customers value the clarity of the reports concerning the costs, revenues, weights, and numbers of containers emptied. The large customers receive such reports every month or whenever they ask for such reports and use these reports to have insights into their sustainability. The NNRD uses BA to be able to deliver reports on demand based on actual numbers.
The NNRD uses BA to increase internal communication and transparency towards large customers. The NNRD can benefit more from the use of BA if internal communication is more formalized, sharing the tacit-knowledge throughout the organization. The NNRD wants to maintain its flexibility and reactivity and labelled this feature as necessary to compete. The use of BA allows the NNRD to react to unexpected situations because BA provides for essential and actual information needed to respond quickly. And the use of BA satisfies large customers because the NNRD can deliver reports on demand.
4.4.2 Availability of information
The NNRD uses BA to have valuable information available at all times. The availability facilitates the flexibility and reactivity of the NNRD because everyone can use the information when needed. The participants appreciate the accessibility, but they emphasize that the information needs to be accurate and easy to find.
‘I get much clearer information, and I can deliver clearer information to those who ask for it. [...] Instead of taking data from all over the place and calculating things for yourself, now you have hard figures.’ Application Manager
The NNRD ensures accurate and trustworthy data by gathering and storing most data automatically. The NNRD provided its trucks with a board computer, and a weighing system. The drivers receive their orders on the board computer and when the driver completes an order, the board computer stores and shares the data of every customer, like the number of container and weights. Thus, the NNRD ensures the integrity of the data by storing and sharing crucial data automatically. In turn, the managers and employees of the NNRD trust the data and can use actual, real-time data. BA changed the way of how actions are substantiated.
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Most employees use the data and have access to the data they need to facilitate their jobs. But rights of using the system are restricted to the function, and this could be an obstacle because some could be dependent on others. But such restrictions are not flexible, and this is why the NNRD gave employees additional rights to parts of the systems they need to do their job — increasing the availability of information. The participants agreed upon the fact that BA provided them with the information they need to do their jobs and that most information is accessible.
‘[…] To arrange things for PB, I have to manage the rights. […] In principle, everyone has a job profile and associated rights. [...] But the rights are less strict in here because just like me, I do a lot of different things.’ Application Manager
The rights of using BA at NNRD are less strict than at other, mostly larger, organization because most people have multiple roles and tasks and need more information than the function profile suggests.
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5. Discussion and conclusion
5.1 Aim of research
The aim of this research is a first exploration of the use of BA from the perspective of PM within SMEs, especially regarding the fundamental SME characteristics. A single case study is conducted at a small Dutch waste collector. During the collection of data, it became clear that BA can have a big impact on PM because BA enables support of the control mechanisms in place. This study shows the essence of using BA for PM within SMEs by answering the following research question: ‘How is Business analytics
used for performance measurement within SMEs?’
In the next subsection, the main findings of this research are linked to the literature, showing how SMEs use BA to support their PM. This paper will answer the research question using the data from the case study combined with the existing research. Afterwards, this study discusses the implications for managers, followed by the limitations and areas for future research.
5.2 Contribution to current
research
This paper uses Figure 3 to answer the research question. This model is a combination of the theoretical background and the findings section, to provide insights concerning the use of BA in SMEs. Figure 3 shows the practical application of BA within SMEs from the perspective of PM. The new model differs from the conceptual model (figure 1) derived from the literature in several ways by showing how SMEs use BA for PM. Each concept consists of the factors that are affected by the use of BA in SMEs. The next paragraphs provide an explanation of how the use of BA affect the concepts, displayed with arrows a to d, contributing to the
knowledge of using BA within SMEs for effective PM.
Figure 3: The use of BA for PM within SMEs
Limited resources
The use of business analytics
Performance measurement in SMEs
a b d c Efficiency Human capability Costs of digitalization
Flexibility and reactivity
Transparancy Internal communication Availability of information Decision-making process Fact-based information
Multiple roles and tasks Strategy
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The first concept, strategy, is affected by the use of BA for the short-term strategy of SMEs. As prior research already suggested that BA facilitates the strategy of organizations because of its capability to identify, control and monitor key aspects of the organization (Raffoni et al., 2018; Schäfke et al., 2013). But SMEs face difficulties in adopting effective PM methods because they lack a clear strategy, mission and vision (Ates et al., 2018; Schäfke er al, 2013). This study provides evidence that SMEs can use BA for effective short-term strategies because BA can control and monitor actual performances. BA support the short-term strategy in keeping an overview of actual performances compared to the budgets, and other short-term controls. Besides, the case study shows that more targets and objectives are needed to increase the effectiveness of PM in SMEs any further. The way to increase the effectiveness is to balance the short-term and long-term strategies (Bititci et al., 2011). So, for SMEs trying to adopt effective PM should consider the use of BA to facilitate both short-term and long-term strategy. BA will guide PM methods by the identification of critical aspects for performances and BA can monitor and control those aspects to ensure organizational performances.
The second concept, the decision-making process, is improved by the use of BA. The findings highlight the importance of BA for decision-makers in ad hoc situations. Knowing that BA provides fact-based information (Chen, 2012; Manyika et al., 2011; McAfee and Brunjolfsson, 2012; Tan et al., 2017), the decision-makers act upon the accurate information provided by BA. Besides, BA is used to keep an overview of all the different roles and tasks of the decision-maker. So, this study shows that the use of BA improves the decision-making processes of SMEs because BA provides the decision-maker with fact-based and accurate information, used to react to ad hoc situation.
The third concept, limited resources, is affected by the use of BA in two different ways. At first, the literature suggested that new technological developments becoming more readily available for SMEs (Garengo et al., 2005). Still, the findings show that the costs of these technological developments are too high and therefore less accessible for SMEs. Besides, not everyone is capable of using BA (Matthias et al., 2017), which is another obstacle for SMEs because SMEs are dependent on their employees. Second, SMEs use BA to increase their efficiencies. Large organizations already use BA for predictive and analytic methods to discover opportunities to improve organizational performances (Schläfke et al., 2013). The resources time and money are always scarce at SMEs, and this is why SMEs should use BA to increase efficiencies, intended to get more time and money. The findings of the case study show the use of BA to increase efficiencies and in turn, performances. The projects could not be done without BA because accurate and actual data is needed to find the opportunities.
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transparency by having available information. SMEs have less structured processes and are more dependent on tacit knowledge than large organizations (Ates et al., 2013; Hudson et al., 2011a) and this is why SMEs should use BA to increase internal communication. Using BA for sharing and storing tacit knowledge will facilitate SMEs because everyone can use this information when needed, increasing the flexibility and reactivity on a personal level. External transparency is particularly important for SMEs because they rely on large customers (Hudson et al., 2001b). The study shows that SMEs use BA to satisfy the large customers, being transparent about the conducted business at customer locations. Using BA provides SMEs with the customer data whenever they need it, increasing the chance of maintaining large customers and its revenues. At last, the organizational actors need to have access to information to respond to every situation (Bititci et al., 2011). The availability of information will increase the flexibility of SMEs and in turn, organizational performances (Gunasekaran et al., 2018). The findings show that managers and employees have fewer restrictions concerning the rights to use certain parts of the system, compared to larger organizations. BA amplifies the availability of information because BA provides real-time and accurate data.
5.3 Managerial implications
The first managerial implication of this study is that the use of BA will help SMEs in adopting more effective PM methods, as BA has the potential to improve organizational performances. Managers of SMEs should use BA to support the short-term strategies of the organization by identifying the essential aspects of the business. Also, SMEs should think about a term strategy, using the long-term strategy to set targets and objectives towards future performances. After that, the managers can use BA to monitor and control the performances regarding the goals. Besides, BA facilitates the adoption of PM because BA provides managers with better, more accurate, information for decision-making processes. Knowing that SMEs are highly dynamic and reactive, managers can use BA to act and react to unexpected situations. The use of BA will improve the decision-making of managers. But BA affects other employees as well, which is particularly crucial for SMEs because unexpected situations have to be solved quickly with fewer people.
Second, managers of SMEs should use BA to start projects to increase the efficiencies of the organization. The case study shows that BA can be used to increase resources, like time and money. SMEs should use BA to analyze specific areas of business and to monitor performances. But the data integrity and availability should be high, and the best way to do so is to collect data automatically and to make the data accessible for all managers and employees who need it.
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should increase organizational performances because it allows other employees to use this knowledge. The external transparency is essential for SMEs, as SMEs are dependent on the large customers. The findings emphasise that high external transparency increases the chance of retaining those large customers.
5.4 Limitations and future research
The first limitation is that the findings are context-specific, decreasing the generalizability. The case study is conducted at a small Dutch waste collector, having its contextual factors. Although, this study uses the main SME characteristics as concepts affected by the use of BA. Future in-depth research is needed to test the broader validity of the findings and the applicability of BA for PM between different branches and organizations. Future researchers can use figure 3 as a starting point for further research.
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Appendices
Appendix A: Interview protocol – Use of BA Intro
1. Could you tell me about your role at NNRD: What are the main tasks you carry out?
Needs to use BA to manage performance
2. How the activities and processes that to be handled with the use of BA are chosen in your job? 3. Do you know why the NNRD does so?
4. Why such processes and activities are now tried to be managed with BA?
5. What are the actions that NNRD has decided to put in place, to make sure that BA will do so? 6. Are these actions significantly different from what you were used to doing, before BA?
PM design
7. How does the NNRD decides on what indicators are important? 8. How are these indicators designed?
9. Who decides over their content and design? 10. How is BA implicated in such design?
11. Are you involved in the design of such indicators?
PM use/managing performance at the individual level
12. Is BA helping you understand the performance results about your job? 13. Do you use BA to take decisions in your daily job? Which are these decisions?
14. Do you feel something has changed in the way you used to take decisions before in this regard? 15. Has this improved your job, made it faster, more precise in the way you achieve the
performance targets you are in charge of?
16. What exactly does BA for you in this latter respect?
17. Is there any specific action taken by NNRD to ensure that the data you use from BA is understandable?
PM use/managing performance at the group level
18. Is there any meeting in which you share reflections on the results produces by performance indicators with someone else?
