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

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

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? 

The #1 job of every CIO

Reading these two surveys from CIOInsight got me thinking....

#1 - Top Ways the CIO Role is Changing

From CIOInsight at http://www.cioinsight.com/c/a/IT-Management/What-Tomorrows-CIO-Will-Have-to-Do-419113/?kc=CIOMINUTE05132009CIO1

(the survey lists 36 ways! here are the top 5) (“RC” refers to Role Changing)

1. Driving Strategic Use of Information
2. Reducing Business Costs
3. Leading Enterprise Change Initiatives
4. Driving Business Model Innovation
5. Expanding Current Customer Relationships

# 2 - Top CIO Business Priorities for 2009

From CIOInsight at http://www.cioinsight.com/c/a/IT-Management/Top-CIO-Priorities-for-2009/

(the survey lists 23 business, management, and technology priorities, here are the top 5 business) (“BP” refers to Business Priority)

1. Improving Business Processes
2. Delivering Better Customer Service
3. Cutting Costs
4. Generating More Business from new and Current Customers
5. Innovative New Products/Services

I have an inkling that there could be one grand-unified initiative that addresses all 10 items above.  Bear with me:

- BP1, BP3 and BP4 can lead to RC2

- BP1 and BP5 can drive RC1, RC3, and RC5

- RC5 is one way to get to BP2, BP4 and BP5

- RC3 and RC4, BP1, BP4, and BP5 are examples of RC1

...and so on.  The point is that these 10 items are interrelated.

So the grand-unified initiative ingredients would:

- Be Customer focused (expanding relationships, delivering better service, attracting & retaining, cross-selling)

- Include processes and technology to help Connect Marketing (capture) to Sales (close) to Development (Innovate) to Fulfillment (deliver), etc.

- Reduce transaction costs (lead-to-close, order-to-cash, procure-to-pay, and so on)

- Get everyone in the organization focused on the most important things (customer sat, revenue, and cost)

So it sounds like the # 1 job of every CIO is to enable the alignment and focus of the entire organization on the most important things.

Where do you start? Uncover and agree on what “the most important things” are from each business function perspective, and aligned with strategic objectives (start with the executive leadership team)  and document the agreement in a standard way (our clients use our Broadsheets to do that).  

What IT really needs is more business direction

We concur with the findings of the recent I.T. priorities poll conducted by InformationWeek Analytics and Intelligent Enterprise.com - it mirrors what’s true with our clients as well: 

305 business technology professionals ranked “better guidance from business leaders” as the number one thing that would improve their productivity.

(Here's the article by Doug Henschen)

The article goes on to say that I.T. is asking business leaders inside their companies to do a better job of communicating mission, strategy, and direction to help I.T. deliver enabling solutions with more business impact.

If you don’t already have a fast, repeatable methodology for truly aligning business and I.T., check out the Business Foundation method.  We literally get each functional business leader on the same sheet of paper with I.T. on what are the most important things to measure, monitor, plan-for, and analyze.  It shows senior management that I.T. “gets” what the business is up to and it helps I.T. prioritize the portfolio of initiatives to those that have the biggest impact on:

• Revenue Growth
• Cost Reduction
• Cash cycle velocity, and
• Asset Utilization

Then we put it all together and show what the impact is on strategy execution.  I.T. is left with the design and plan for the top initiatives that will deliver on what the business really needs along with an audit trail of specific business guidance and an ROI approach that the business can get behind.

The business executives who go through our method (along with I.T. every step of the way) see it as a valuable use of their time.  Comments have included:

“I’ve been waiting for this conversation for 2 years!” (CEO of $4B Chemical Manufacturer)

“We found 13 systems out there we had no idea about” (CIO of $6B Mining company)

“This is my accountability map!” (CEO of $3B Private Healthcare company)

“It was like being on the psychiatrists couch.” (CEO of $1B High Tech company)

“You’ve brought structure and insight to an unstructured and complex conversation.” (COO of private consulting company)

“This is our North Star for management system initiatives.” (VP of I.T, $6B Mining company)

“I really like your approach - we uncovered some new ways of looking at the business today.” (CEO of $2B Software company)

We even had one client who realized after the initial 2-hour discovery sessions that each executive on the leadership team had a different take on what the strategic objectives were and none of them were in synch.  Right after our workshop, they convened an off-site C-level meeting and quickly aligned on what the business strategy actually was.  So the CIO that brought us in got kudos for exposing that problem and having an impact on the business at the top level....without installing any new software!

The results included one CEO who said directly to the CIO at the conclusion of our read-back presentation: “That’s what I want!  I don’t care what it takes....$12M, $19M...we need THAT!  Let me know what you need and if anyone in the organization resists, have them call me.”

The CIO was stunned! 

Management Excellence

Oracle’s EPM Strategy group has recently introduced the domain of ‘management excellence.’  This is taking the ideas of operational excellence (process, efficiency, etc.) into management.

There are several pieces they have published on the the topic including:

• Introduction and overview of management excellence
• Organizing for Management excellence, Part 1
• Organizing for Management excellence, Part 2

The first article appears in the first issue of the “Journal of Management Excellence,” a new quarterly publication that has been a dream of Frank Buytendijk’s for a while now.

Certainly the evolution of Enterprise Performance management will take us into better/deeper systems integration, but, more importantly, it will focus on processes.  Just as transactional systems have focused on transactional processes, such as Order-to-Cash, Procure-to-Pay and so on, EPM systems will focus on those management processes that move organizations from strategy to execution in a repeatable, sustainable way.

They define the overall management process as Strategy-to-Success (or “S2S”) and use it as the framework to address each step of the value chain in an organization.  They include the following areas in the S2S chain:

• Stakeholder environment
• Market model (combining competitive intelligence with business intelligence)
• Business model (including scenario analysis)
• Business Plan (with an emphasis on rolling forecasts)
• Business Operations (including benchmarking, cross-domain analysis and master data management)

All of which lead-to and are driven by business results, with corresponding performance indicators on scorecards and dashboards.

We will see more of this on EPM maturity models and client’s roadmaps.

What CEOs want from CIOs

Thanks to Bob Evans of InformationWeek for this article that sums it up nicely:

1. Create new products, and help business units do so more rapidly

2. Create new revenue by innovative leveraging of existing applications and systems

3. Deepen the company's engagement with customers, both old and new

4. Create and enforce global standards for processes and applications

5. Unlock new ways to find, deliver, and assess higher-value information

6. Reverse the 80/20 glut to make those first six possible

7. Create a massively transparent organization with all metrics focused on business value

8. Demonstrate forceful leadership and take responsible ownership

9. Don't align and don't whine

The article cites experts such as:

McKinsey Consulting

Gary Loveman (CEO at Harrah’s Resorts)

Ram Charan Rajive Johri (CEO First National Bank of Omaha)

Randy Mott (HP CIO)

Also see our blog entry on What the CEO wants you to know.

Very good article on the value of Corporate Performance Management by PwC

PriceWaterhouseCoopers Advisory Services recently published a very thorough article entitled “Corporate Performance Management: Achieving value by effectively anticipating and managing change.” The full 12-pager is available here: http://www.pwc.com/extweb/pwcpublications.nsf/docid/273BFCF0AB767B44852573CB00505985/$file/pwc_oracle_managing_change.pdf It picks up where their “Agile Foundation for Change” white-paper left off and shows a way to ‘operationalize’ that agility. Even though PwC consults on both Oracle and SAP, this paper references Oracle fusion solutions for example technologies. There are some good points in the paper for anyone interested in Enterprise Performance Management (aka Business Performance Management, Corporate Performance Management and so on) including:

• Strategy to Execution
• People, Process, Technology, Data, Structure
• Budgeting, Planning & Forecasting
• Governance, Risk & Compliance
• IFRS requirements
• Innovation
• Standard costing
• Continuous Improvement
• Change management

Enjoy!

Drive Business Performance (Book Review)

I finally read Drive Business Performance: Enabling a Culture of Intelligent Execution (Microsoft Executive Leadership Series) by Bruno Aziza and Joey Fitts.

Bottom line: this is a very good book on the business benefits and high-level “how to” of enterprise performance management (EPM).

While the authors refer to this domain simply as ‘performance management’ (more on this here), it’s not to be confused with the annual Human Resources review process, but rather all of the people, process, and technology involved in sustainably executing your strategy.

This book is not too technical nor too theoretical. It has the right balance of business perspective, systems enablement, and process maturity to give a good overview of the promise of EPM and strategy execution. It makes liberal use of case studies, examples and stories to illustrate points and give more depth to the insights.

Some highlights:

• Fact-based, data-driven decision making (p.12)
• Strategic, Operational, and Tactical Decisions (p28)
• The Foundation for Decisions: information & trust (p32)
• Competitive Benchmarking (p16)
• The ‘right’ metrics (p49, 69)
• Line of Sight visibility (p.93)
• Accountability Mapping (p 226) and also how difficult it is to visualize and map metric relationships (p. 69) - of course this area is of special interest to me since it’s what we do
• A very good “uber” model for determining where to focus your efforts (p.254)

They also follow-up the book with more information on their companion website at http://www.cultureofperformance.com

A few things could be improved (perhaps for the second edition):
- There is a disconnect early on in the book between modeling and planning. Financial Modeling is lumped together with scenario planning later on (p. 195, 212, 217) and is probably collapsed early on with “Plan.” But the distinction is important enough that they should be “un-collapsed” and addressed separately in the model from the start. There was an attempt at this on pages 38 & 39, but I think it was buried and not highlighted. On page 38 in figure 2.2 they say Planning answers the question “What do we want to see happen” and at the top of page 39, under Plan capabilities, they say it addresses “how to model what should happen.” I think it would be more helpful to say that:
         Modeling (financial & operational) helps answer the question “what do we want to happen” (and includes things like strategic objectives/targes, assumptions & constraints), and
         Planning (financial & operational) helps answer the question “how do we want it to happen” (and includes resource allocation, more specific targets, and accountability down to the planning unit level). This really is an untapped area of EPM that should be on most people’s roadmaps.

- More detail on statutory consolidation and reporting, especially with the emphasis on IFRS vs. US GAAP happening these days would be good (it’s briefly addressed on page 214)

- I’d like to see real examples of competitive benchmarking and how EPM impacts financial performance (eg: Revenue Growth, Operating margin, cash cycle, etc.)

- Perhaps more on the functional issues of performance management, that is, how points of view differ across marketing, sales, finance, operations, and so on. - And, of course, more leadership in the use of the term “Performance Management” versus EPM, BPM, CPM, IPM, etc.

All in all, a very good read and certainly belongs on the bookshelf of any EPM manager and any CIO and CFO....hopefully dog-eared and well-worn.