Did Somebody Say Strategy?

What tools make up Business Intelligence and performance management?

Over on CapGemini's CTO blog by Andy Mulholland, we've been having a good conversation around business intelligence.  The question came up as to what's a clear list of tools that comprise Enterprise Performance Management, here's our take.

The list includes:

1. What do we want to happen in the business?
- Financial modeling & scenario planning (eg: Enterprise Planning)
- Strategic Finance (like the old Alcar product)
- Operational modeling (like ABC, ABM)
- Scorecards, strategy maps

2. How do we want it to happen?
- Enterprise budgeting, planning & forecasting
- Workforce/Rescource planning, project planning, capEx planning
- Operational Planning (Eg: Interlace)

3. What actually happened in the business?
- Financial reporting
- Operational reporting
- Management reporting
- Statutory consolidation & reporting
- Dashboards, Scorecards

4. Why did it happen?
- Financial & operational analytics
- profitability analytics
- predictive analytics

And then a way to bring the data & relationships together in a meaningful way:
- Master Data management
- Data Quality management

We use these 4 areas in our Strategy to Execution management operating system model.  The model includes those technologies as well as processes and roles for each area.  Have a look at our whitepaper.

We have a number of other resources on this topic on our website and our blog, and we also put together a generic 'information architecture' based on how some companies who have embraced these ideas are proceeding.  See: http://businessfoundation.typepad.com/bf_blog/2008/11/world-class-information-architecture.html

Workforce Analytics

In our Aug 18 blog post, Transform HR into a strategic business function , we talked about the strategic importance of the Human Resources function.  FYI - here's a good blog on HR transformation from Andy Spence.

Shortly after I wrote that, I read a brilliant article entitled The Metric System in CFO magazine regarding workforce analytics.

It covers some interesting topics in-line with strategic HR:

• productivity within Starbucks (see related article in BusinessWeek on how Howard Shultz had to embrace performance measurement)
• HR has settled into a ‘comfort zone’
• Senior management wants to know why HR can’t behave more like its functional siblings (IT, purchasing)
• HR involvement in planning & forecasting
• meaningful HR metrics need context
• Tie out to strategic goals
• scope of focus

Also see our related blog entry: Key Performance Indicators for Human Resources

The Art and Science of Forecasting

The July/Aug issue of CFO magazine has a comprehensive article on forecasting that we highly recommend - read Imperfect Futures

It covers a variety of topics including:

• External drivers
• Top-down meets bottom-up
• Forecast Scenarios
• SaaS tools
• Risk integration (eg: optimized hedging strategies)
• Creating more accountability in the forecast
• Prediction Markets (see our post on AMR Research)

Speaking of prediction markets, CFO magazine makes available a free community to try out Crowdcast prediction markets - sign up at http://cfo.com/predictionmarket

It lets you place "bets" on a variety of topics including:

• Capital Markets (# IPOs this quarter for example)
• Economic Indicators (eg: home sales, unemployment rates)
• Topical (when will BofA pay back TARP funds, Emmy for best comedy series, etc)

Here are my current bets

Looks like I’m a bit of a contrarian and slightly optimistic!

AMR Research on Prediction Markets

(We recently posted this in the LinkedIn Prediction Markets Cluster group - http://www.linkedin.com/groups?gid=1179587 )

In this week''s "First Thing Monday" email from AMR Research, Bruce Richardson details AMR's opinion on Prediction Markets and startup Crowdcast.

Based on this article in NYT: http://bits.blogs.nytimes.com/2009/06/25/start-ups-software-crowdsources-company-forecasts/?scp=1&sq=Crowdcast&st=cse

Bruce will post the e-mail in his blog shortly (check http://blogs.amrresearch.com/enterprisesoftware/ )

In the meantime, here are several screenshots from Crowdcast that Richardson explains in the blog post:
1. http://www.amrresearch.com/research/highimagequality/0908AENT-Richardson3F01.png
2. http://www.amrresearch.com/research/highimagequality/0908AENT-Richardson3F02.png
3. http://www.amrresearch.com/research/highimagequality/0908AENT-Richardson3F03.png

Transform HR into a strategic business function

In our discovery sessions with company executives, we blueprint their enterprise value chain across all business functions: Sales, Marketing, Operations, HR, Finance, and so on.  We’ve noticed in many cases that the head of Human Resources tends to be very tactical and administrative (benefits administration, EEO and other regulatory compliance, policy, etc.) and not very strategic and transformative (change champion, learning & knowledge advocate, performance accountability, productivity czar).

There is an enormous opportunity for the HR function to make a significant difference in the business.

I happened to read several articles over the last few days that call for HR to take a more strategic role in the business:

From the Economist.com: Human resources transformation

From the WSJ: How HR works with R&D to build on an innovation strategy

From Harvard Business School: HR’s new Mandate: be a strategic player

Tom Davenport on the Rise of the Chief Performance Officer

And I’d like to point out that our top most-visited blog articles are HR related!  They are:

Measuring the right things

Key Performance Indicators (KPI) for Human Resources

So what’s the call to action?  Help your organization see the entire value chain across all business functions, through all layers of the business.  You’ll find most roads lead back to people-related value drivers and you’ll quickly show just how strategic HR can be.  From there you can see how better visibility, alignment, and focus on performance and value creation will impact both the top and bottom lines.

5 Kinds of Business/IT Alignment

Have a look at our article in BPM Magazine on Alignment:

http://bpmmag.net/mag/design_align_key/
 
We talk about 5 kinds of alignment necessary for effective business intelligence and enterprise performance management initiatives (they are also true for any Business and I.T. initiative):

1. Strategy To Measures

2. Horizontal: Business Function to Business Function

3. Vertical: Though all layers of the business (Strategic, Operational, Tactical)

4. External: Customers, Suppliers, Partners, Regulators

5. Financial to Operational

And there's even a bonus alignment in the article!

[photo courtesy Ruth Dimon, (c) 2008]

Pervasive Business Intelligence presentation

Check out our new presentation on LinkedIn: "Pervasive Business Intelligence" 

Link: http://tinyurl.com/m6pnqf 

It's our first go at SlideShare, so candid feedback is appreciated: what did you take-away from it? 

A variety of resources

I thought I’d share some resources I use around the web and in print...enjoy:

1. Just found this guy, “Oz” from GA, : http://www.mootbox.com/  “80% Business & Finance Matter, 20% Assorted Randomness” Twitter: twitter.com/osize  - lots of good business book reviews
2. Nutshell Mail : http://nutshellmail.com - delivers  a summary of your facebook, twitter, and e-mail activity to your inbox at predetermined times (a personal aggregator)
3. Cathy Smith - http://www.linkedin.com/pub/cathy-kinneavy-smith/8/1/55a  excellent feature article writer/editor, hire her to do your profiles (business, government, non-profit)
4. http://www.ted.com/index.php   TED - brilliant ideas shared succinctly in video
5. The DFJ Entrepreneurial Thought Leaders Seminar (ETL) weekly seminar audio podcast, Entrepreneurial Thought Leaders
6.  Driven to Perform: Risk-Aware Performance Management From Strategy Through Execution , new book from SAP on GRC and Enterprise Performance Management (more detail in future blog)
7. http://www.missioncontrol.com/ the future of productivity!
8. http://mayogenuine.com/blog/about/ executive coaching: high performance, high integrity, and fun!
9. Imagination Cubed online drawing collaborative online chalk board from GE (free!)
10. What are you thinking?  http://www.managingthought.com/  and upgrade your conversation.

Sustainable Execution - 10 rules for survival

In his book, Strategy for Sustainability: A Business Manifesto , Adam Werback outlines nature's 10 simple rules for survival and says that those rules can help business respond and lead better ("nature is far harsher than the market: if you are not sustainable, you die.")

Here are his 10 along with how an eXtended Performance Management discipline (enabled by processes and technology) can support them:

Nature’s 10 Rules for Survival	Supported by a performance management discipline
1. Diversify across generations.	In the DEBATE about strategic objectives (especially revenue growth), build financial and operational models the include scenarios for mergers, acquisitions, and divestitures of products, customers, geography, and capabilities.  Continue to optimize your models by connecting them to learning done in the DECIDE process – especially drivers, constraints, and assumptions from budgets, plans & forecasts (and actuals).
2. Adapt to the changing environment -- and specialize.	Base your analysis (UNDERSTAND) on what you learn from GATHER (actuals, variances, events) as well as what you created in DEBATE (eg: forecast accuracy, actual ROI, and so on).  Commit to changes in DECIDE via enterprise planning (workforce plans, for example).
3. Celebrate transparency. Every species knows which species will eat it and which will not.	When you interconnect all parts of the performance management framework to a common business language, common data, definitions, meta-data, and master-data, and you use performance management tools to give visibility to the organization, you create transparency – not just for results, but also for the cause & effect of those results as well as the reasons why you were after those results in the first place (strategic objectives, targets, models, and plans).
4. Plan and execute systematically, not compartmentally. Every part of a plant contributes to its growth.	This whole framework is predicated on systematic planning for the enterprise: financial & operational.
5. Form groups and protect the young. Most animals travel in flocks, gaggles, and prides. Packs offer strength and efficacy.	Packs, or work teams, divisions, SBUs, projects, and so on, generally live at the intersection of a business function and a layer in the business (strategic, operational, or tactical).  Have the performance management framework honor their unique perspectives, yet interconnect with the rest of the organization.  Help “protect” the pack with the right HR KPIs.
6. Integrate metrics. Nature brings the right information to the right place at the right time. When a tree needs water, the leaves curl; when there is rain, the curled leaves move more water to the root system.	Measure the right things. Cut out the noise. Focus and align on the most material and volatile drivers of value in the business. Turn the data into actionable information.
7. Improve with each cycle. Evolution is a strategy for long-term survival.	The whole cycle fosters continuous improvement (as in the DECIDE to DEBATE example above).  Performance management maturity comes by interlinking (in both directions) each component of the framework.
8. Right-size regularly, rather than downsize occasionally. If an organism grows too big to support itself, it collapses; if it withers, it is eaten.	A part of your continuous DEBATE is around resources (FTE, PPE, etc.) – what is the optimal level of the workforce, of facilities, of capital, to deliver on our strategic goals?  Agree in the DEBATE and execute via plans in the DECIDE.
9. Foster longevity, not immediate gratification. Nature does not buy on credit and uses resources only to the level that they can be renewed.	A balance of short-term and long-term targets are required to execute beyond just the quarter.
10. Waste nothing, recycle everything. Some of the greatest opportunities in the 21st century will be turning waste -- including inefficiency and underutilization -- into profit.	Measures and results around efficiency, productivity, waste, utilization, and so on are all baked-in to the performance management cycle.  Benchmark yourself internally and externally to see what’s normal and give yourself ‘exceed’ scenarios in your forecasts to overachieve.

Growth through Innovation on a tight budget

I enjoyed this article by Joann Lublin in the WS

Smart Balance Keeps Tight Focus on Creativity

It highlight's Smart Balance's approach to Lean Innovation through a virtual business model that encounters fewer roadblocks than traditional company innovation models.  Steve Hughes, CEO, recommends these actions:

• Establish a clear vision and long-range blueprint
• Outsource all activities someone else can do better 
• Relentlessly commit to continuous improvement 
• Develop a strong internal team and external business partnerships 
• Create a focused new-product process mixing creativity and practicality 
• Invest in building the brand, rather than physical assets

  With "most" of their revenue growth coming from new product sales, it looks like their model works.