In a previous blog post, I discussed the importance of data management capabilities of a business intelligence (BI) solution. To recap briefly, the Pareto chart below reveals the most sought-after functionalities of BI software solutions according to TEC data, with data management and business performance management (BPM) coming out on top. Now let’s discuss the second most popular functionality of a BI solution: BPM.
Many organizations today lack the necessary tools to effectively measure business performance and gauge how aligned it is with the overall strategic goals of the organization. However, these BPM tools are essential for understanding the organization not only from a historical perspective to generate standard (historical-based) analyses, but also from a practical business perspective to get real-time information and set realistic goals and expectations (based on facts rather than on “gut-based” decisions). In other words, BPM enables organizations to assess how well they are achieving their business goals and how to improve upon this.
More methodology, less technology?
By this I don’t advocate avoiding of technological considerations, but rather focusing on meeting the real business needs. The functional features of a BPM application enable organizations to assume a methodological approach to fulfilling tangible business requirements.
Gary Cokins, an internationally recognized expert and guru in the business performance space, sums it up nicely in a recent interview with TEC:
BPM itself is not a new methodology, which everyone now has to learn, but rather BPM tightly integrates business improvement and analytic methodologies, which executives and employee teams are already familiar with. Think of BPM as an umbrella concept. BPM integrates operational and financial information into a single decision support and planning framework.
So, most companies today are already measuring performance to different degrees. The key value of a BPM application is that it facilitates performance measurement and allows for continuous improvement—thereby aligning performance to three types or levels of requirements:
1. Organizational—the strategic perspective based on the competition, resources, market status, etc.
2. Process—the internal processes required to achieve the business strategy.
3. Job—the tasks required to complete the individual’s job.
This alignment, however difficult, can be achieved by doing the following:
• Having a performance measure tightly associated with each business objective. Ideally, objectives can be used as the basis for deriving performance measures—but both need to be defined clearly, as should their scope and duration.
• Combining the appropriate performance measures. Rarely can a single metric give a broad panoramic view of performance. And though some measures are more relevant than others, a combination of measures is frequently needed to assess performance vis-à-vis overall business goals. The design of better scorecards, as well as dashboards containing the necessary metrics and/or key performance indicators (KPIs) may provide more concrete and consistent measures of performance.
• Considering a BPM application that can be adapted to an organization’s requirements and methodologies to improve performance.
And consider the words of SAP’s Timo Elliott from a recent interview with TEC:
The key area of improvement that is required is to always remember that BI is about people and the business, not about the software architecture. The technology is, of course, often a challenge, but when BI projects fail, it’s almost inevitably a problem with organization, culture, expectation setting, and business alignment. If you run a BI project, you should be spending more time on these things than the underlying IT infrastructure.
The same rule applies to a BPM project. Organizations must do the following to reap the rewards of a BPM software solution:
1. Establish and prioritize business needs.
2. Ensure the BPM solution is technologically compatible with their business needs and existing IT infrastructure.
3. Establish business and technical feasibility for the implementation.
What to look for in BPM solution
Organizations need to evaluate BPM solutions by considering a proper blend of technology and methodology. This is needed because although BPM solutions combine a group of management and analytics tools to provide the necessary functionality to measure, compare, and recommend actionable items from a business perspective, they make use of high-end technologies to do the leg work. So, some key functionality features of a BPM solution are as follows:
1. Advanced (management) reporting. Organizations need to look for a solution that delivers information that suits their needs. They should consider the reporting of financial and accounting information that is compatible with the formats they need: XML, XBRL, etc.
2. Dashboarding and scorecarding. As this is a core functionality feature, organizations should consider BPM applications that will let them gain a view of their company by allowing them to define and manage metrics and KPIs, as well as the necessary tools to visualize them according to their needs.
3. Advance analysis. Predicting and forecasting are becoming prominent capabilities for any organization. Those organizations that base their decision making on mining of historical and real-time data, as well as forecasting may quickly see a competitive advantage. In addition, those with online analytical processing (OLAP) capabilities can analyze data from different perspectives, and gain significant insights.
4. Financial modeling. Organizations may need to model their financial cycles and procedures. This means creating abstract representations of the organizations’ financial scenarios specifically for decision-making purposes. They can do this in terms of
a. budgetary and planning capabilities
b. ”what-if” scenarios
5. Financial consolidation. This is a key functionality feature for multi-location or multinational organizations, specifically for the reconciliation of multisource data.
6. Strategy/objectives management. Organizations should look for tools that can help them formulate, manage, and simulate their strategies as well as those for monitoring their execution.
These six functionality features comprise the basic capabilities of a BPM solution, which will need to be aligned with an organization’s business processes and goals. Of course, chances are organizations will need to adjust their priorities and modify this functionality set accordingly.
When evaluating and selecting a BPM solution, organizations should also consider having a single-platform solution to cover their functional requirements, capabilities for scaling, and integration with third-party solutions, as more often than not, they’ll need to incorporate the BPM solution within an existing IT infrastructure. Therefore, the solution must be adaptable, flexible, and capable for integration.
Today’s organizations are keenly aware of the importance of measuring, analyzing, and improving their business performance. But before embarking upon this interesting yet challenging venture, organizations must assess their methodology, processes, as well as analytical maturity and willingness to undergo changes or innovate. To sum up, here’s a quote from one of Timo Elliott’s posts:
The real trend this year is not the technology. It’s about helping business people make better decisions, and actually change the way companies do business. Analytics has always been about transforming business, but the recent huge changes in analytic technology have created interesting new opportunities for business innovation.
As always, I welcome your thoughts—leave a comment below, and I’ll respond as soon as I can.
I have appreciated this essential information that you have supplied to me. Is it possible that i can have this information in full by providnig me the full source or the full text book. I am eager to use these as my management tool.
I work for a hospital and we need
to organize our work more effectively.
A lot of rules in healthcare are changing very
fast and we need to involve these changes
into our internal processes.
A really interesting and useful article for actual management challenges! I agree with Patrick with the petition of having the full source or the full text book.
Thank you for your comments.
Thank you for sharing. Incorporating fast change rules is always difficult, but as I say. Prioritizing can make the difference, you might want to consider both the impact and cost for establishing priorities to your adjustments: which one will have the most benefit in terms of performance and savings/ROI, consider a “first things first” approach.
Patrick and Pier,
Thank you for your comments, this piece is based on my experience. There are plenty of good and interesting stuff out there but this time I would suggest these couple of interesting information sources for you to consider:
A great book from Gary Cokins:
As well as from David Parmenter:
Thank you again, and please stay in touch!
Hi a real appliciate the six key of BPM as the tool to deriver to the business perfomence but what about the management life cicle.