I wanted to keep this book as timely and undated as possible, but given the current marketplace and latest wave of BI technologies, I feel this is one subject that must be addressed. The BI marketplace is abuzz with discussions about the impact Corporate Performance Management (CPM) may have on any enterprise. I consider it the most rational and valuable approach to what we once thought of as Executive Information System (EIS) solutions. According to some of the industry pundits, nearly half of all large corporations will have implemented a CPM framework by 2005.
What makes CPM different from its predecessors? To begin with, the scope of users that interoperate with the CPM data and analyses is far greater than the traditional “mahogany row” group we saw in the EIS days. Key measurements and how information or results are tied to key performance metrics should be closely tied to workflow within an organization. CPM is about tying together transactions to BI to workflow to e-mail and so on.
From an executive's view, most BI solutions deliver some information that they find useful. Most often, the minions and players beneath them are scrambling to deliver key information to higher levels of management, and the execs play little or no part in these processes. I submit to you that this is a mistake.
If you take some time to explore CPM, you'll quickly see that it is intended to be a systematic means of using all technologies, including BI tools, to deliver information to all individuals at all pertinent levels and allow them to react to and act upon the results.
For example, suppose that our current problem is in supply chain management and that we have a correlated problem with customer satisfaction. Our current analytics environment is very effective in delivering the bad news just a bit late to plan and act upon it. Our “data supply chain” is moving at a mule-train pace, while our customer difficulties are in real time and are increasing.
It isn't enough to identify the problems or to effectively analyze where we are. We must set goals, monitor progress, and know where we are at any step along the way. One intriguing aspect of CPM is that the proponents of such solutions all emphasize the need to tie transaction systems and BI together. These approaches recommend a “closed loop” or process-oriented system with key elements being tied to measurements across the enterprise and at the top of the corporate food chain.
One consistent theme is that real-time analysis should be performed only for real-time problems. The number of BI solutions that strive for real-time analysis is quite high, yet the number of customers who use this level of timely data to their advantage is minimal. Real-time systems are usually attempted because the heat is on from the top and everyone wants to make sure they aren't chewed on because their numbers aren't up to the minute. So what? If you know minute by minute where your sales are and they aren't very good, what are you prepared to do about it?
Okay, here we go again. If you think data is often ill-prepared for BI analytics, wait until you see how far off it may be from attaining any CPM solution. The metrics and measurements for many CPM implementations emerge from several sources and they may be disparate in form, format, location, and timeliness.
Because of the process-based nature of CPM, we often discover that our flow of information and analysis is out of sync with how we run our operations. Deadlines for one key decision point may not be attainable if we cannot deliver the data at the proper level and point in time. Much like trying to close the books for accounting, we now have to coordinate key decision points with specific dates of updating information and analysis processing.
I have discussed BI and end-user workshops as one methodology for effective implementation. If one used CPM methodologies to develop the enterprise BI strategy, the interplay of organizations and the creation of meaningful metrics and processes would be significant byproducts of these efforts.
Another term applied to CPM and CPM-like tools is analytic applications. You might ask, “Aren't all BI efforts analytic in nature?” The answer is, “no.” An analytic application typically is oriented to the goal of providing key metrics that may require a series of steps and intermediate results in order to deliver a final set. These applications tend to be complex and multi-threaded in nature. They far transcend the installation and use of a common query and reporting tool, although such tools may be part of the solution.
“If you can't measure it, you can't manage it” is an old adage, but it's true nonetheless. If we look at a theoretical executive dashboard such as the one portrayed in Figure 9-1, we see that three key business factors are being displayed.
The outermost dials represent metrics that have been derived from several sources or processes. The innermost dial displays data that is combined from its two neighbors. Some CPM systems allow the user to examine “What if?” scenarios by grabbing the dial on display (or a slider bar, etc.) and adjust it to where he wants to be. The underpinning metrics are then adjusted accordingly so the user can see what he might have to attain to achieve this new target.
A quality CPM system would also factor in what elements the user is actually allowed to affect within his sphere of influence. It does little good for me to adjust the sales figures upward by 50 percent if I am not in a position to make that happen.
The actual business impact of a specific metric and its components may be demonstrated by mapping out spheres of influence or any similar graphic.
In planning for CPM or other complex metrics, we can ask several questions and develop strategies for intradepartmental and interdepartmental views of the underpinning business data, as illustrated in Figure 9-2.
Suppose we have a metric composed of elements A and E and C. Both A and E are 100 percent tied to the overall larger metric, but A has a greater impact. We may opt to represent the relative size of a metric by its associated cost or revenue—what are the dollars involved? Element C is the same dollar value as element as Element E, but only 30 percent of its value is of importance to our key metric. That may be because it is composed of other elements, and 30 percent of their total makes up some input to our larger metric.
Do such diagrams and exercises make much sense? Well, it depends on how serious you are about defining your business processes and developing interrelated CPM systems. What if I am at a level within the organization where 100 percent of my view of the world and span of control is one of the sub-elements that make up Element C? What if I am constantly getting hammered about performance and making improvements from management above me, yet I have very little clout and am woefully lacking in information? Figure 9-3 illustrates the view from the driver's seat for Element C.
The corporate view as illustrated in Figure 9-3 may as accessible as the moon. The sub-elements of my world haven't increased in size or importance because I only have to deal with them; I have no direct control over them. I am in a position of full responsibility without the freedom to act. An integrated CPM system would expose this in an instant, and perhaps (but there's no guarantee) executives would change the way we are structured or how we perform our roles. We may become more proactive and able to use our experience and expertise effectively after we become an integrated part of the process and not just a line item.
Whatever you receive in analytics output has to be accurate, timely, and understandable. It also must be encapsulated in a manner that I understand and can work with. It does little or no good to hide critical information in complex reports that are produced a week after I should have had them. It is also useless to deliver information to me that pertains to my area to some degree but is out of my current span of control. I need a system that gives me what I need to do my job and affect the bottom line.
Many corporations allow their users to set up what metrics and BI input they receive without close scrutiny at the required information. I have seen some individuals actually hide the information they do receive for two reasons that are counterproductive to business motives.
They don't know enough and do not want their management to call them on it.
They are receiving information that may help others within the company but do not share it because it has a competitive edge. In today's world of ruthless business practices and headcount “adjustments,” who can blame them?
Business Intelligence disciplines that follow a CPM model are oriented to address the following issues:
What data is available that supports my operation at a best-practices level?
How do I get information in a timely and relevant manner?
What is the best format for me to receive and to disseminate information that is critical to the business?
What are the processes to provide feedback such that critical, missing information may be addressed without looking like a whiner or appearing to just be concerned about my own position?
How do I convey things of importance to my superiors and to those who report to me?
How do we portray both the good and the bad news?
What other individuals and business areas should I be trading knowledge and information with?
Do we have common data points and a means to exchange critical information?
CPM solutions are group based or inter-process based. The flow of information and actions expected based on it are well defined and oriented toward the goal of staying on top and growing the bottom line. They do not take on a tattletale aspect unless you or your executives allow this paradigm to be set.
The most effective BI solutions include the ability to push information to users. The ability to set critical thresholds or triggers and launch a result, report, or note is essential to BI today. Monitoring and launching functions and products can save you more than all the frantic querying and reporting on the planet.
The recent drive toward tying real-time and historical data is partly a result of the emerging CPM trend in BI. Knowing what happened after the fact is not enough information anymore. If a firm sells big-ticket items, and there is a critical situation such as a potential discontinuance or cancellation, this should not be left in the hands of voice-mail and e-mail systems to track. Potential losses should have a closed support/reaction loop with critical individuals. If one key player has failed to respond to the crisis, others need to know this right away.
One trait that is being added or embellished in many BI tools and that is absolutely key to CPM is the ability to set “flags” that draw attention to critical events: Flags are colored differently, raised to must-see status, and highlighted so the viewer cannot overlook them. Maybe all I want is the bad news because I simply do not have time to worry about the good. But here is where corporate culture can either make or break effective BI/CPM.
Suppose that you are in a sales position that included a very effective, easy-to-use customer and results tracking function. Now suppose that the individual you report to has immediate access to up-to-date sales information but is constantly asking you, “Where are we month to date? Why aren't you keeping me informed?” I have seen this behavior again and again. The natural inclination is to tell your boss to “Read the bleeping screen you bloody baboon!” But you do need your job. So you look up the information your boss wants, maybe put together a new report with a slightly different twist, and then go back to putting out the five critical fires you were working on.
Executives can either establish an adult, responsible BI framework or wield a heavy hammer. There is nothing effective about your BI efforts if you have to call others to get information for you. If you have helped set up an environment that is insular, threatening, and counterproductive, then all the BI on earth won't help you.
CPM is about setting up effective analysis and communication of goals, targets, and results. It is not about standing behind the bully pulpit and making everyone report. If there is a problem in a key business area, then one should determine if any information and process would help eliminate or substantially reduce it.
If you are of the mindset that adding interactive tools to the arsenal of already over-worked and under-informed staff will solve the overall lack of information, then you will fail; and those who rely on you to set a proper course will never receive what they really need to succeed.
This is an area that you must heavily investigate and apply your cultural dynamic to how the decision is made. I have seen a large number of very effective RYO solutions in which someone delivers key metrics that are tailor-made and created from scratch. I have seen only one in an extremely large account that was done well, but the individual responsible for its creation and maintenance was absolutely brilliant. This was an aberration, not the norm in any sense of the word.
The conundrum we face is that all “packaged” applications seem to have things we like and things we don't like or things that we feel need tailoring. The surge in ERP, CRM, and SCM solutions also produced a dilemma in that most didn't provide the analytics that many customers felt were needed to properly pluck the desired information from them. Hence, many BI tools vendors went into high gear trying to deliver interfaces and access to these solutions.
We have the lengthy development cycle and extensive testing, plus ongoing maintenance required, when we do it on our own. We have the expeditious approach by buying out-of-the-box solutions that may limit our scope of analysis. There is a third approach: the toolkit.
Several CPM providers offer toolkits that provide modules and building techniques/methodologies to create a CPM system that is a combination of predefined analyses and customizable elements. I prefer this option.
One major prejudice will significantly hinder your success in all three options; you cannot spend an inordinate amount of time picking over the nuances of how the data must be displayed. I have spent hours and hours trying to get a chart or report exactly the way a customer wanted it because he had the money and was immovable in his degree of “nit-pickery.” Take the closest, most straightforward output styles, and get on with making money and running the show.
Be prepared to spend significant amounts of money on CPM and, if you are not ready to do so, do not waste your time. Low-cost Corporate Performance Measurement should ring immediately as an oxymoron. I suggest the following approach as a means to derive significant benefits from CPM and to be able to place the onus of responsibility on the vendor you have chosen.
First, get your ducks lined up on the inside. If you set up presentations and demos from several vendors that are known in the industry, be prepared to be very confused. The features, functions, and interfaces will all blur in a short presentation time, and you and other reviewers will have a difficult time voting for a winner.
I am a proof-of-concept fanatic. If you have gone through an exercise such as that depicted in Figure 9-4, you will have a clear picture of what you are trying to deliver and why. You should have some idea of the business changes that will occur if implemented properly and the associated ROI.
Most of all, you should have identified what has to happen and in what time frame. If the most elegant solution takes weeks to change effectively and doesn't scale well, what is the point? The solution provider has to meet your expectations, not the other way around.
Suppose that we have taken the proper steps and have a very clear view of the CPM that we intend to deliver. Do we initiate an RFI and invite vendors to make presentations? Yes. But, we place some caveats on these vendors and set up a presentation mode that appeals to our specific requirements and negates some of the sleight of hand that normally occurs in product demos.
The following might be suggested steps for such an approach:
Complete the infrastructure work and meetings as shown in Figure 9-4.
Make sure that you have thorough documentation that covers the associated data intended for your CPM.
Have workflow and interchange diagrams or statements, along with key timings and critical paths, in hand.
Assign a project manager in each functional area and an executive sponsor who will verify that checkpoints have been met and validate the outcome.
Establish critical factors as to how you will arbitrate disagreements among the units. This is a collaborative effort, but anyone can have an agenda.
Have an experienced IT architect assigned to work through technology issues. You cannot select a solution that runs only on platforms or systems that are totally contrary to the standards set in-house.
Set a time line for implementation. Hone in on elements that deliver the largest ROI or the quickest time to implement. Take a lesson from data warehousing projects; do not try to boil the ocean.
Do your homework. Be very careful of references and other firms that have implemented CPM being used as a measuring stick. One thing you may not be able to replicate is their culture. Information is only that; it's how you use it that counts.
Challenge the vendor(s) selected to propose an implementation plan with a POC. One of the most critical elements should be how the data is going to be delivered, maintained, and updated within your time frame.
Establish a reasonable but rigorous time line, and establish criteria for acceptance of failure. If a vendor suggests that they can deliver a total solution and that it will take four months, but you have to pay after phase I, would you have enough information to give them the nod?
Make sure that the data used is real data and that it goes through the actual steps that will be required on a regular basis. Remember, any vendor surviving in this tough market will be able to deliver CPM. Their integrity and overall ability to deliver a CPM system isn't the question. The question is whether they can deliver your solution and in the manner you require.
You must have a concrete, documented set of steps and a methodology whereby you either approve the purchase or pass. One tactic that many vendors take is to heavily discount their wares in the hope that you'll say, “What the heck! Let's buy it and work on it; look at how much we're saving!” You aren't saving a penny in the long run, and you are going to constantly struggle with your CPM system in an attempt to get it to work.
If you are an executive with significant business responsibility but are not as comfortable with IT issues, keep your radar in full operation and your baloney detector on stun. All the clever and snazzy graphics will not help you run the business in a different way if they do not deliver exactly what you need and in a manner you understand.
Challenge the users, challenge the vendors, and challenge yourself. An executive dashboard seldom includes an autopilot control; it just presents key information. For example, suppose that one of your key requirements is to always see items in the red and out of acceptable range. Does the proposed CPM solution provide the ability to show trends such as which line items have been in the red more than 50 percent of the time over the past three years? Ask for things you want to see, and ask the vendor to clearly describe how they are delivered.
Many CPM and BI vendors will respond to requirements that are not available out of the box by suggesting an S.M.O.P.—a simple matter of programming. If you get to this level of requirement, you need to caucus and determine whether this is essential to the system or an adjunct and nice-to-have feature.
Again, I highly recommend that you examine CPM solutions and their role in enterprises globally. The natural affinity that they present in tying groups and processes together such that information sharing spans groups and ties it all together may allow you to survive and thrive in the business world of today and tomorrow.