Microsoft Excel – The Poor Man’s Business Intelligence Tool

I love Excel. I use it for both business and personal use every day to evaluate situations and make the most informed decisions possible. For over a decade I’ve used Microsoft Excel to do some pretty amazing things: analyze portfolios of stocks to determine best investment choices, create sophisticated mechanics for evaluating team and company performance, uncover the sources of well hidden business problems and develop highly complex resource and project planning tools. It’s an excellent tool when used properly. However, the capabilities of Excel can be abused – namely jamming it in as a critical piece of your business infrastructure when you really need something more robust.

Excel is like a pickup truck – a versatile tool capable of performing many small tasks very effectively. But a pickup truck begins to become more of a burden when used for bigger jobs. We’ve all been there once in our lives borrowing our friend’s pickup truck to move. When making the decision to use your friend’s truck it seems like a great way to save money without sacrificing much efficiency. Sure it might take a few extra trips but it will be worth it to save the money, right? By the end of the move it always takes a few more trips than you anticipated, making you wonder if you would have saved more money renting a truck versus the money you spent on gas due to the extra trips. Add in the extra energy and time required using the pickup – time that could have been spent unpacking boxes. Was it the right decision in the end?

Using Excel in your business has similar ramifications. You save money up front by not having to invest in software or consultants, but cost effectiveness may be an illusion if you use it for the wrong job. I stand by Excel when it comes to small jobs, but bigger jobs introduce many more risks. Excel is prone to user error – the risk of inaccuracy grows rapidly with each cell that requires manual entry or copied formulas. Errors in worksheets either lead to misguided decisions or lost time spent tracking down the source of the problem. Introduce the concept of connecting workbooks to external sources such as databases or (gasp!) other Excel workbooks and the complexity and risk of your solution increase dramatically. Entire meetings can be derailed by simple mistakes in Excel and lower the general confidence for using spreadsheets as a decision making tool. At best you have lost opportunity cost and at worst you have lost profit.

Here’s a short list of red flags that Excel is probably not the best tool for the situation:

1. It takes hours (or days) to update an Excel workbook
2. No one really knows exactly how you arrived at an important calculation – “I don’t know…it’s just the formula”
3. Meetings are spent disputing the data rather than making decisions
4. More time is spent correcting mistakes in the spreadsheet than analyzing the business problem
5. Everyone uses their own version of an Excel workbook to solve the same problem
6. Your Excel file is greater than 10Mb – this is usually an indication that you need a database somewhere in your infrastructure. Excel becomes quite limited when you use it as a data repository
7. Posing a new business question that your existing Excel reports do not answer takes days of updating formulas to finally answer the question

This list of seven can probably be expanded to seventy. The point is not to succumb to the illusion of Excel’s low barrier to entry to solve all business problems. Instead use Excel as a prototyping tool as a step toward creating the right solution for more complex business processes. You want to be spending more time evaluating information to make sound business decisions than trying to figure out why cell B62 keeps saying #REF!, right?