Decision-Making Process in Small Medium Enterprise: Application

of Business Analytics Methodology and Linking Model

Yulia Nur Hasanah

and Pri Hermawan

School of Business and Management, Institut Teknologi Bandung, Jl. Ganesha No.10, Bandung, Indonesia

Keywords: BAM, ICIB, Linking Model, Problem Situation Structuring, SME.

Abstract: The popularity of business analysis has increased rapidly in the last decade and presents a challenge for

organizations to understand how to use it achieve business goals and create a competitive advantage. The

object of this research is the NAH Project, which is a small-medium enterprise. They overwhelmed to

complete the targets and also had difficulty in making strategies for the future to maintain their revenue. They

must find out what's popular or trends, optimizing prices for competitive advantage, finding what will be sold

next, etc. through business analytics. In developing business analytics capabilities, they must know what kind

of data that helpful and meaningful for them to know the customer expectation. In this research the approach

of Business Analytics Methodology (BAM) combined with Linking Model. BAM has four stages: problem

situation, business model mapping, analytic leverage, and analytics implementation. Linking model also has

four layers' hierarchy: process map, decision, analysis, and data items. Both of approach used to explore the

problem that occurs and helps the company to make a decision using data items. The research findings are

the 34 types of data needed by the NAH Project in developing business analytical skills to enhance their

competitive advantage.

1 INTRODUCTION

Small Medium Enterprise (SME) is a small-scale

economic activity of the people with a business sector

which is a majority of small-scale business activities

and needs to be protected to prevent unfair business

competition. In 2017, SME contributed 57.08% or

around 5,425 billion to Indonesia's GDP while the big

enterprise contributed 42.92% or around 4,078 billion

to GDP (BPS, 2015). One sector that contributes to

GDP is the creative industry. Based on the Creative

Economy Agency (Bekraf) (2017), the creative

industry contributes around 922.59 trillion or 7.44%

of the total Indonesian GDP in 2016. The fashion

sector produces an added value of 166,135.3 and or

contribute 18.01 percent to the formation of Creative

Economy GDP.

Nowdays, mostly business organization using the

business analytics and data science to explore how

they can use the available data (Hindle & Vidgen,

2018; Vidgen, Shaw, and Grant, 2017; Davenport &

Harris, 2007) because they want to have accurate

information from the data in decision-making process

(Iqbal et al., 2018) to create strategy, value, and

competitive advantage in their businesses. Business

analytics is a set of methods that convert raw data into

action by generating insights for decision making

within an organization (Liberatore & Luo, 2010).

One of the industries that are defined by data

analytics is retail and 62 percent of respondents in

retail feel that the information and analytics give them

competitive advantages (Matthews, 2018). Now,

analytical data is applied in all stages of retail

processes such as find out what's popular by

predicting trends, estimating where demand for these

products, optimizing prices for competitive

advantages, identifying customers who might become

interested and looking for how to approach them

effectively and finding out what will be sold next

(Marr, 2015).

Current research seeks to answer the following

question: how do organizations achieve their business

goals and competitive advantage by developing

business analytical skills? To support this research,

we use a research framework that aims to develop and

apply predictive analytics using the business analysis

methodology (BAM) and Linking Model to identify

what kind of the data that they need.

In the creation of strategy, value, and competitive

advantage requires an understanding of the business

406

Hasanah, Y. and Hermawan, P.

Decision-Making Process in Small Medium Enterprise: Application of Business Analytics Methodology and Linking Model.

DOI: 10.5220/0008431904060412

In Proceedings of the 2nd International Conference on Inclusive Business in the Changing World (ICIB 2019), pages 406-412

ISBN: 978-989-758-408-4

itself and where analytics will be applied. BAM is one

of the approaches that we use to understand a business

organization. The BAM approach used in this

research is the same as the research conducted by

Hindle & Vidgen (2018) which uses the business

model canvas (BMC) (Osterwalder and Peigneur,

2010) which is combined with problem situation

structuring and business modeling from Soft System

Methodology (SSM) (Checkland, 1981; Checkland &

Scholes, 1990; Wilson, 1984) namely CATWOE

Analysis.

After analyze the business situation, the next is to

identify what kind of the data that they need using

Linking Model. Linking Model developed by Pape

(2016) that separated business analysis into four

hierarchial. This method help the company to find the

data that will be useful and valueable to get

competitive advantage and achieve their goals

2 LITERATURE STUDY

2.1 Business Analytics

Analytics is used to find, explore, describe, and

communicate patterns or trends in data and produce

information that is known from data sources (Starkey

& Schniederjans, 2014). While business analytics is

an advanced stage where information that has been

obtained through analytic is used to develop or

improve business performance. Business analytics

plays an important role in a business organization in

creating strategies for competitive advantage and

making decisions. (Liberatore & Luo, 2010; Starkey

& Schniederjans, 2014).

The application of business analytics for enhance

the decision-making process such as to increasing

customer profitability, risk reduction, human

resource decision, business performance tracking,

etc. Furthermore, business analysis can be a strategy

for competitive advantage such as price leadership,

sustainability, service effectiveness, etc.

2.2 Business Analytics Methodology

Business Analytics Methodology (BAM) (Hindle &

Vidgen, 2018) is an approach that supports an

organization to get value from business analytics starting

from initial thinking to getting complete analysis results.

BAM is also a process of business understanding to

explore the business goals and conditions of a

business organization which is then analyzed to find

and determine parts of businesses that require

analytics.

Basically BAM has two interrelated work streams

namely top-down analysis and bottom-up analysis.

Top-down analysis is a process that focuses on the

business model of an organization to develop

business analytics. While the bottom-up analysis does

analytics on data.

This BAM approach combines business model

canvas (BMC) (Osterwalder and Peigneur, 2010)

problem situation structuring and business modeling

from SSM (Checkland, 1981; Checkland & Scholes,

1990) namely CATWOE Analysis. dalam melakukan

top-down analysis to structure, map, and develop

business models.

The application of BAM involves four activities

(Hindle & Vidgen, 2018) namely, problem situation

structuring, business model mapping, business

analytics leverage, and analytics implementation.

1. Problem situation structuring: in this stage the

rich picture used to see how the business model

function as a whole and the world view from

various stakeholder becomes clear.

2. Business model mapping: this stage uses a

Business Model Canvas (BMC) supported by Soft

System Method (SSM) to map business models.

The CATWOE (Clients, Actors, Weltanschauung,

Owners, and Environment) Analysis technique is

SSM tool and also used to describe the root

definition. Then, the root definition from the

CATWOE Analysis can open the opportunity for a

business model innovation.

3. Business analytics leverage: The BMC, SSM,

and CATWOE generated in previous stages used

to identify leverage point and opportunities for

business analytics that is to identify data, tools,

and analysis that are most likely to address

business objectives and make the best utilizing

scarce resources.

4. Analytics Implementation: in this stages data is

collected and build the models and deployed.

2.3 Linking Model

Besides using BAM in business analytics, to develop

business analytics capabilities start from the first step

in business analytics process that finds the type of

data that will be useful and valuable for the

organization to get a competitive advantage and

achieve their goals. In accordance with Pape (2006)

who states that to gain insight, business functions in

an organization must collect data items regularly to

analyse their activities. Linking model by Pape

Decision-Making Process in Small Medium Enterprise: Application of Business Analytics Methodology and Linking Model

407

(2016) is an approach that separated business

analysis into four hierarchical layers:

1. Process map: divides business function into

value streams

2. Decision: gather core questions where business

functions must be prepared to provide answers,

establish each decision for a process, and ensure

that the list of decisions considers all relevant

business activities.

3. Analysis: analytic and metric models, which are

relevant for certain business functions

4. Data items: the raw data (numerical and

qualitative) required for conducting the analyses.

3 METHODOLOGY

In business analytics capabilities, this study uses a

qualitative research method to get a deeper level of

understanding of everything in a business

organization by conducting interviews, observations,

and using flipcharts.

The pilot study involved the development of an

analytics strategy for the NAH Project. NAH Project

is one of the local brand sneakers from Bandung

which initially provided products in the form of

apparel & skate shoes. The founder and co-founder

of NAH Project saw the opportunity that local

sneakers needed new innovations to change the

stigma that Indonesian sneakers had quality &

designs that were able to compete. With a new goal,

presenting sneakers products made with research &

development that is relevant to the needs of the

Indonesian market with guaranteed quality. Their

vision is to become “Indonesian cultist sneakers

brand who dominates sneakers market through

innovation and breakthrough”. NAH Project has

several divisions in it, namely customer service,

billing and operational, sales and marketing, research

and development, and creative marketing.

We have conducted interviews with the founder

and co-founder to find out overall about the

company, and what problems are being faced from

their view. In addition, we also interviewed each

division also using flip charts as media for each

division to write down the current business

processes, constraints, and strategies in the future.

The process took about three and a half hours for five

divisions.

The analysis process using the business analytics

methodology (BAM) approach starts from problem

situation structuring using a rich picture which is

NAH Project and we should be figuring out all

factors that influence the business objectives of NAH

Project. Afterwards, we conduct existing condition

analysis about NAH Project using Business Model

Canvas (BMC), Softs System Method (SSM)

especially CATWOE to get information about the

root definition of the relevant purposeful activity

system. From this process we conclude several

business problems that occur in the organization.

Last, the Linking Model is conducted by

analysing the business process to get the value

stream, then analysing all about the decision in the

value stream, the decision will have the analysis

before making the decision, and then analysing what

type of the data that used to make an analysis to make

a decision.

4 FINDINGS

4.1 Problem Situation Structuring

NAH Project has several divisions, namely customer

service, billing and operational, sales and marketing,

research and development, and creative. While other

divisions such as production, shipping and quality

control are held by third parties, namely PTS.sc. The

results of the interview with the founder of NAH

Project, he feels that his company is known as a

company that only sells local shoes at low prices. In

fact, he wants his company to be known and valued

as a company that provides local products of the

highest quality and full of innovation at an affordable

price.

Based on Figure 1. the key feature of rich picture

is "more than cheap local sneakers" as desired by the

founder. The business goals of the NAH Project is to

become "Indonesia cultist sneakers that dominates

the sneakers market through innovation and

breakthrough" to transform the stigma of low quality

local sneakers into local sneakers that have quality

and design that can compete with branded sneakers.

However, in the course of the NAH Project there are

several constraints in value creation, customer

satisfaction, and customer loyalty. In the future the

people trends, need, desire, and expectation will

change, so NAH Project need innovation and

breakthroughs that meet with the customer

expectation to keep the company going, and maintain

the revenue by keep selling the product.

ICIB 2019 - The 2nd International Conference on Inclusive Business in the Changing World

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Figure 1: Rich Picture of NAH Project current strategic

situation.

In the rich picture there are four cross swords that

show constraint. NAH Project collaborates with

PTS.sc to carry out the manufacturing process where

until now NAH Project does not have a fixed vendor

and cannot fulfil the market demand. So that it

becomes a problem in customer satisfaction because

customers will difficult to get the product. Then, due

to the limited stock of available products, customers

always ask customer services about product

availability. The number of messages that enter is

enough to make this division overwhelmed because

every 10:00 am there are about fifty messages that

have not been read.

In the process of research and development, the

NAH Project currently only has one product designer

who only redesigned the sample of shoes given by

PTS.sc, because there is no clear direction about what

values will be raised in product design. In the

marketing strategy, NAH Project uses social media

as its media because they realize that social media is

currently the most effective marketing to increase

brand awareness. NAH Project collaborates with

photo and videography agency to create maximum

content marketing and also collaborates with digital

marketing agencies to maximize marketing. In

addition, social media also makes it easier for NAH

Project to communicate directly with customers. At

present, NAH Project intensively communicates with

customers through social media and receives a lot of

input and criticism from customers, and this greatly

helps the NAH Project in innovating and developing.

However, from the results of interviews with those

responsible for sales and marketing it is known that

to date they have never conducted market research

and only rely on input from customers through social

media and website.

4.2 Business Model Mapping

In identifying business models, we use the Business

Model Canvas (BMC) and CATWOE Analysis. The

business model canvas (BMC) displays the important

elements contained in a business model and shows

how a business model generates revenue. While

CATWOE Analysis is an SSM tool and also used to

describe the root definition. Then, the root definition

from the CATWOE Analysis can be an open

opportunity for a business model innovation. The

NAH Project's Business Model Canvas is shown in

Figure 2.

Figure 2: Business Model Canvas of NAH Project.

In CATWOE Analysis, we are conducting

interviews with seven people from the NAH Project

team and found that their customers were people who

liked sneakers who wanted to find another alternative

by trying local sneakers. Currently, customers know

that sneakers from NAH Project have affordable

prices and can only be obtained through online

purchases. A large number of customers coupled with

the existing technology system is not enough to make

customers difficult to get goods and product

incompatibility often occurs in terms of size. They

always give criticism and suggestions through social

media and websites. The high use of social media

made the customers very enthusiastic when the NAH

Project offered new products and they were looking

forward to the new product. In its progress, the NAH

Project has an internal team (customer service, billing

and payment, sales and marketing, creative

marketing, and research and development), investors,

and third parties that help the NAH Project in terms

of marketing. There are many requests for NAH

Project products, they have a goal to change the

image of a local sneakers brand by using innovation

and breakthrough. However, they also hope that their

sneakers products will also become sneakers

Decision-Making Process in Small Medium Enterprise: Application of Business Analytics Methodology and Linking Model

409

products that can compete with branded sneakers but

still at affordable prices. To do this they have

founders and investors who will decide to make

changes, terminate the project, or choose whether to

continue the changes. Furthermore, there are also

external factors that affect the government policy,

national and regional economy, Indonesia factory

capability, media, community, trend, and technology.

Table 1: CATWOE Analysis of the NAH Project.

CATWOE

Application to NAH

Project

Customer

(who

People

who’d

love

benefits/disbenefits?)

sneakers,

and

would

find

alternative

trying

local sneakers

Actor (who perform the

NAH

Project’s

team,

NAH?)

investor,

and

third-

party

Transformation (what is

To change the local brand

the NAH?)

sneakers

image

through bringing

innovation

and

technology apply

Weltanschauung

(what

Local

brand sneakers

makes

the

NAH

that can compete with

meaningful?)

branded sneakers with

affordable price

Owners

(who

can

stop

Founder and investor

the NAH?)

Environmental

Government

policy,

Constraints

(what

National and regional

aspects

affect

the

economy,

Indonesia

business unit)

factory

capability,

media,

community,

trend, and technology

According to Table 1., the root definition constructed

for the NAH Project is: “NAH Project change local

brand sneakers image in the community by

innovation and technology apply in order to be local

brand sneakers that can compete with branded

sneakers at an affordable price”.

4.3 Linking Model

Based on the business analytics process by

Schniederjans (2014), the first step in the business

analytics process is the database. Linking model is

used to find the type of data that NAH Project should

collect before analysed and used the insight for

decision-making. Linking model is the approach by

Pape (2006) that divides the business analysis into

four layers (process maps, decisions, analysis, and

data items). In this case, the author chooses a key

activity and customer relationship from the NAH

Project, because both of these are core processes that

are in the NAH Project.

From the analysis there are four value stream (VS)

namely, concept to development (VS1), content

creation to publication (VS2), and order to cash

(VS3), and customer relationship (VS4). Each value

stream has a process in it. There are 11 process map

(PM) namely, Product Design (PM1), Production

(PM2), Pricing (PM3), Content Creation (PM4),

Publication (PM5), Order Process (PM6), Order and

Payment Verification (PM7), Resolving Customer

Problems (PM8), Warranty Process (PM9),

Conversation (PM9), and Educating (PM10) (See

Figure 3).

In the decision stage, based on the process map

this research gathers core questions where the

business function must be prepared to provide

answers to making a decision. This research conducts

interviews with each NAH Project division that deals

with the value stream to find out what decisions they

make. There are 63 decisions which separated by

process map.

In making a decision need some analysis that

supports a decision. Based on the core questions that

must be answered by each division, this research also

collects 42 of analysis carried out by each division to

answer all the core questions. To do the analysis, data

that can be supported is needed. In this research 34

data were obtained (Table 2) required by the NAH

Project. These data can be either numerical or

qualitative data that can be collected by each business

function.

5 CONCLUSIONS

NAH Project has a business goals to become

"Indonesian cultist sneakers, who dominate the

sneakers market through innovation and

breakthrough" and they have rot definition as “NAH

Project change local brand sneakers image in

community by innovation and technology apply in

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Table 2: Data items.

Data

Product history

Number of order

Inventory

Sales

Customer preference

Target segment information

Economic condition

Technology condition

Customer complaint

Customer question

Social media usage

Customer activity

Customer interest

Customer opinion

Social traffic

Customer information

Customer payment information