Creating intelligence-driven corporate performance
Business intelligence enables organisations to realise the value of their information but this is now being linked to corporate performance management, which gives firms the ability to compare their business expectations with reality. Sarah Burnett explains how.
By Sarah Burnett, Butler Group
Across both public and private sectors, the most successful organisations are differentiating themselves from others on the basis of their ability to manage and utilise information. The era of using IT for automation is now giving way to the era of information, where business competitiveness is focused on the ability to react quickly to customer needs and opportunities, changing market conditions and regulatory constraints.
A combination of these factors drives the market for business intelligence (BI). As one of an important set of information management solutions, BI enables organisations to realise the value of their information assets. That value is released, for example, when companies are able to examine sales figures in detail, to identify new cross-sell and up-sell opportunities, whilst minimising costs of expensive sales campaigns.
This is particularly pertinent in these times of economic hardship. In an uncertain global economy, organisations need greater assurance that the decisions they make are not exposing them to unnecessary financial and operational risks. While organisations reviewed their risk management strategies in the aftermath of last year’s financial crisis, many still lack organisational risk awareness and management skills. BI can be used to increase awareness and visibility of risks.
And BI is not just about technology. The needs of the business, be they short-term points of pain or long-term goals, have to take precedence. Organisations should aim to reflect the hierarchies that exist within their management structure in a joined up approach to BI to align it with their overarching strategy.
BI should embed the collation, analysis, and dissemination of relevant information into the organisation’s operational and decision-making processes at all levels, so that its use becomes part of everyday activities. If that is achieved, then the detection of significant events and changes can be automated, facilitating the selection of timely and intelligent responses, and enabling the proactive management of corporate performance.
The corporate connection
The notion of corporate performance management (CPM) has become increasingly connected to BI. It joins the discipline of business intelligence with enterprise budgeting and planning to give the organisation a window onto performance: the ability to compare expectations with reality – what was predicted or planned to actual performance.
At the highest level, CPM delivers a series of metrics that allows the organisation to achieve an accurate and balanced view of performance. It recognises that the various elements of the business will need subtly different interpretations of performance, based on their specific goals and targets, which will blend internal and external views and financial and non-financial (operational) measures.
These features make CPM highly desirable but the market remains a moving feast and you may be inclined to reach the perfectly logical conclusion that you are best off waiting for a year or so for the boundaries and responsibilities to become more clearly delineated. This is not the case. In many markets and vertical sectors, the requirements for some kind of CPM solution are very real and pressing. Holding off for another year is not really an option, especially when the drivers are compelling:
- Focus on performance – In every organisation business units are being asked to show clearly how and where they are creating or adding value to the organisation as a whole. Business managers and executives can take advantage of CPM to get access to performance data in order to track activity and outcomes to ensure that they are delivering on value-generating objectives.
- Compliance – Whilst it would be incorrect to view CPM as a compliance solution - as compliance is multifaceted and complex, and requires the coordination of numerous technical and non-technical resources – CPM is able to support the transparency of process that is an essential part of a compliance strategy. Moreover, CPM forces organisations to examine critical compliance-related areas; issues such as data quality, data accuracy, data retention and accountability. The resolution of each of these issues can deliver business benefits in its own right.
- Flexibility and change management – Change is fraught with danger – and the more rapid the change the greater the potential risk. CPM puts in place a framework for top-level change management, incorporating critical elements such as scenario planning, risk analysis and optimisation.
- Risk management - BI and CPM can work together to deliver a more comprehensive risk management solution. The combined capabilities can help companies control the level of risk that the business is exposed to, for example, preventing financial losses due to credit card fraud.
In the current climate, one would have thought that the market for CPM solutions would be booming, as business leaders seek to control their companies and institutions better. But organisations are being ultra cautious in all areas of IT spending, even though CPM should be viewed as a mission-critical business investment project.
Although many factors influence the performance of an organisation, the decisions business users make every day are critical to success. CPM solutions help individuals make these decisions and enable organisations to answer three key business questions: How are we doing? Why are we doing this? What should we be doing next? In terms of CPM offerings, this equates to: scorecarding, dashboards and financial consolidation; reporting and analysis, and planning, budgeting and forecasting.
Most organisations do, of course, have systems in place to measure and monitor aspects of business performance, but all too often these systems stop at the finance department. CPM extends this practice to other areas of the business and provides operational managers and employees with actionable business intelligence, i.e. information that is both relevant and timely.
Sarah Burnett is senior research analyst at Butler Group