View from the Top

New software lets you troubleshoot your company at a glance

From his office window overlooking the main floor of the Harvard Cooperative Society, CEO Jerry Murphy can glance down and see customers shopping. They make their way through the narrow aisles of the crowded department store, picking up a sweatshirt here, trying on a baseball cap there, checking out the endless array of merchandise that bears the Harvard University insignia.

Watching Murphy, you can well imagine the Coop's founders, who started the store in 1882, peering through the tiny windowpanes to keep an eye on the shop floor. Was the Harvard Square store attracting steady traffic? Were the college students buying enough books and supplies for the Coop to make a profit? Back then, it was tough to answer those questions precisely. The owners had to watch and wait, relying only on their gut feelings to know how things were going from minute to minute.

Now, more than a hundred years later, Murphy can tell you, down to the last stockkeeping unit, how he's doing at any given moment. His window on the business is the Packard Bell PC that sits on his desk. All day long it delivers up-to-the-minute, easy-to-read electronic reports on what's selling and what's not, which items are running low in inventory and which have fallen short of forecast. In a matter of seconds the computer can report gross margins for any product or supplier, and Murphy can decide whether the margins are fat enough to justify keeping the supplier or product on board. "We were in the 1800s, and we had to move ahead," he says of the $55-million business.

To do so, Murphy installed an executive information system (EIS). An EIS is a sophisticated software program that analyzes the data an executive deems critical to his or her business and delivers the analyses to a computer screen as easy-to-read graphics and text reports. An EIS can, for instance, spot a potential cash-flow problem before it happens, enabling a CEO to avert a crisis. Or it can show that seasonal inventory is not moving as fast as it was last year, which might prompt a company president to reduce prices to avoid getting stuck with extra goods. Its ultimate purpose is to give executives the detailed information they need to assess the state of their company and make informed decisions.

Executive information systems are not new: they hit the market in 1984, and large corporations have been using them for years. What's changed is how much more available they are to small and growing businesses. Cheaper, easier-to-use desktop computers and software have brought the price of entry -- including hardware, software, and technical help -- down from an average of about $100,000 to about $20,000. Most of the costs come not from the hardware or software but from the people hours needed to organize the information so the software can read and analyze it.

Do you need an EIS? There's no clear-cut way to decide. The factors to consider are your company's size, the complexity of your business, how quickly your data change, the volume of detail you record -- and how determined you are to stay on top of ebbs and flows on a daily, or even an hourly, basis. "At some point you can no longer keep your company in your head," says David Friend, chairman emeritus and founder of Pilot Software, an EIS vendor in Cambridge, Mass. If your sales are more than $10 million and you provide an elaborate service, such as consulting, you're probably ready to start EIS shopping. If your sales are at $2 million and you sell a straightforward product, like bicycles, you might want to wait a few years.

Even when you're ready to take the plunge, setting up an EIS is no simple feat. Sophisticated programming is needed to feed the information already in your existing databases into the EIS in a way that will allow the EIS to answer your questions. If your data are still in your file-cabinet drawers or in the minds of your managers, you'll have to create databases from scratch. "Virtually every company, large and small, struggles with getting its data in order," says Jeffrey Stamen, president of IRI Software, an EIS vendor in Waltham, Mass.

Your most important role in setting up an EIS will be determining what kind of information is critical to measuring your company's progress. You'll have to tell the system what you want it to analyze and report -- say, overall sales for this year compared with sales for last year or, if you've built your company on customer service, the number of complaints in a given week and how each situation was resolved. "Most crucial," says Friend, "is that you answer the question, What's the single most important aspect of my business?"

A veteran of three start-ups, 71-year-old Mitch Mohr has always had a keen sense of what's key to running his businesses. Well before the CEO of Celluphone Inc., a cellular-phone activation service in Los Angeles, ever touched a keyboard, he was keeping careful watch over the highly specific factors that measure success in the cellular-phone business.

What he hadn't been following was the computerization of the industry. So it fell to his son, Mike, executive vice-president of the $25-million company, to convince his father that an EIS could give him a clearer, more detailed picture of the business than the paper reports he'd been scrutinizing for years. "I've worked for 45 years without using computers," Mitch would tell Mike again and again. "Why do I have to use them now? We're in the cellular-phone business, not the computer business." Then he'd proceed to yell out the door to his assistant to bring him another paper report.