Did Somebody Say Strategy?

The Intelligent Company (Book Review)

Book Review

The Intelligent Company: Five Steps to Success with Evidence-Based Management by Bernard Marr (2010, WIley).

I was first introduced to Bernard Marr's work in 2004 when he wrote "Business Performance Management: Current State of the Art" for Hyperion while I worked there, and then later in this excellent book:

Strategic Performance Management: Leveraging and Measuring Your Intangible Value Drivers

Marr has taken his extensive experience in Enterprise Performance Management, Balanced Scorecards, Strategy Maps (and the list goes on), combined it with the latest research and case studies on analytics, business intelligence, and other areas, and boiled it down to a holistic framework for Evidence-Based Management (EbM).

While the framework is simple & straight-forward, the components (people, processes, data, technology, culture) that make it up can be far-reaching and complex - hence the need for this book to bring it all together.

Some of the highlights of this very accessible book, for me, include:

- the intersection of EbM and Enterprise Performance Management;
- 21 pages of Balanced Scorecard and Strategy Maps examples and better-practices;
- treating Key Performance Indicators (KPIs) as performance conversations;
- good introduction to developing and using Key Performance Questions (KPQ's);
- the importance of experimentation and testing (and the removal of bias) in business performance;
- excellent summary and recommendations on various data collection methodologies;
- tips on visual business intelligence and creating performance dashboards;
- the importance of addressing culture as the foundation of success in EbM.

The book is loaded with quite a few real-world examples from organizations including:
Tesco, BMW, Enterprise Rent-a-car, Thomas Cook, UK NHS, Scotiabank, Purolator, Saatchi + Saatchi, Royal Dutch Shell, Unilever, Yahoo, CapitalOne, Harrah's, Coca Cola, and eBay.

I would like to have heard more on Marr's take on how EbM enables the debate in business, perhaps within experimentation & testing or scenario development, or in choosing options to make decisions and commitments, but that is a small nit to pick in this sweeping handbook for the design and implementation of an evidence-based management system and organization.

Highly recommended.

CFO as Strategic Partner

This month's CFO magazine has a good article on what it takes for the CFO to become a "true partner in setting company strategy." By Russ Banham.

Here are the key points from the article:

Skills needed
- management/leadership ability
- ability to think strategically
- insight & vision
- intellectual curiosity
- solves complex problems
- experience in finance and operations ("finance and business talent")
- understand the business "end-to-end"
- knowledge of the whole thought process around strategic objectives
- confidence

Responsibilities
- manage costs AND help drive growth
- continued relentless focus on cost containment
- provide facts & analytical truths
- execute (turn ideas into reality)
- "quantify and contextualize a path to myth-bust and to disrupt the status quo"
- understand the needs of business units and business functions, especially their growth initiatives
- resource allocation

Tools to use
- financial and operational analytics
- analysis of customer data
- predictive analytics (insights)
- healthy debate (over strategic direction)
- spend time on the front lines

Relationship with the CEO
- partner with the CEO to help chart strategic growth
- ability to voice independent, fact-based opinions
- "depersonalize the debate"
- hold collaborative dialogues
- be the "critical bridge in the value-creation process" between CEO and Business Units

Also see
Top Concerns of CFOs

More Concerns of CFOs

CFO: Be Clear About the Cloud

David McCann at CFO.com wrote about Cloud strategy from Finance's perspective.

Here's his advice:

1. Stay Alert - opportunities to move to the cloud will present themselves piecemeal.  In the meantime, avoid investing in too much server capacity.

2. Spread the Wealth - re-consider consolidating all your IT with one vendor while balancing interoperability issues.

3. Do a Test Run - prototype in the cloud

4. Get Ready for a Change - realign your IT skill sets with the needs of how the business is changing

5. Take Care with Contracts - who owns, uses & controls your data?  Beware costly up-charges.  Factor in costs to move applications to the cloud and don't underestimate configuration changes.  Don't ignore service level agreements.

6. Know Where your Data Is - especially understand various legal requirements for potential different jurisdictions.


Here's the full article.

Also see: Your Cloud or Mine

Determine your Key Performance Indicators

I was reminded of Neal Williams' Balanced Nine Step Process the other day:

1. Define your strategic objectives
    - eg: 5% profitable revenue growth
2. Create questions aligned with objectives
    - eg: what % of sales are from new products/services?
    - eg: what % of sales include cross-selling initiatives?
3. Write English descriptions of KPIs
    - eg: Sales Productivity by Product
4. Assign targets, goals, and benchmarks
    - benchmarks can be internal (ie: vs. last year) and external (vs. industry)
5. Diagram the navigation paths
6. Determine if KPIs are drivers or outcome metrics
7. Check the availability and condition of data
8. Check for compliance and balance
    - compliance with company standards and definitions
    - balance of leading/lagging and financial/operational/non-financial
9. Assign owners and users

For more, see Wayne Eckerson's article, "How to Create and Deploy Effective Metrics"

Business Intelligence vs. Enterprise Performance Management

Here's my response in "The Culture of Performance" LinkedIn Group on the question of Business Intelligence being confused with (Corporate) Performance Management:

I would agree with Tricia that BI tools are used for managing data (as are MDM tools, data warehouse tools, and so on), but I would respectfully argue that Business Intelligence (not just the tools) is also part of managing performance and some consider BI to be part of CPM (and EPM as Oracle, SAP, E&Y, PwC, etc. call it). Howard Dresner (the guy who coined the term 'business intelligence') has called CPM "BI with a purpose."

One way to look at it is to consider CPM (and EPM and the unfortunately named Business Performance Management - the other BPM) as the management processes and technology (ie: not OLTP) that help you execute on strategy. I look at it in 4 distinct major processes:

DEBATE
* given your strategy, what's the best way to make your numbers (and operational targets)? Organic growth? M&A? divestiture? product extension? price/mix adjustments?

* this includes financial & operational modeling, scenario planning, target setting and so on

DECIDE
* once the best scenario is identified, how will you deploy your resources (cash, people, equipment, time) to make your targets - by business unit, product line, geography, etc.

* this includes budgeting, planning, & forecasting - essentially documenting commitments in the organization

GATHER
* as you are busy making widgets, delivering services, and acquiring customers, how are you doing?

* this includes financial, operational, management, and statutory consolidation and reporting

ANALYZE
* why did you get the results you got?

* this includes financial & operational analytics, data mining, variance analysis, benchmarking, and so on.

And all of your analyses (which are based on the information you gathered and the variances to commitments) go on to feed the DEBATE as you optimize your resources.

The last two: gather & analyze, are traditionally considered BI. All 4, when integrated and aligned with strategic objectives, are Corporate/Business/Enterprise Performance Management.

So, to Ken's points, these categories have already converged and it's now called EPM. Unfortunately, there is a lack of leadership in this space for propagating a consistent definition, and software vendors have their own product agendas to pursue.

You can find more on this in my blog post at
http://businessfoundation.typepad.com/bf_blog/2008/02/what-enterprise.html

Popular Management Techniques ROI

Every Saturday I spend 2 hours in a Recording for the Blind and Dyslexic studio narrating high-school and college text books and reference materials (if you live in a city with a studio, I highly recommend volunteering for this organization - it's extremely well-run and worth while).  Sometimes I come across interesting material related to my field of work.  This one was eye-opening.  Even though I've heard this from Tony Mayo, it didn't resonate like it did after reading this (underlines are mine):

"Staw & Epstein (2000) studied the adoption of popular management techniques (PMTs) and their implications for (among other things) CEO compensation....Additionally, Abrahamson (1996) described the emergence and adoption of PMTs as fashion cycles.  That is, at any given time, older practices tend to be viewed as deficient and newer practices tend to be viewed as better.  Institutionalization theory predicts that adoption of PMTs will be motivated more by a need for legitimacy than a desire for efficiency....Studying the 100 largest Fortune firms in 1995, they gauged PMT usage through news articles on the sample firms.  Their evidence showed that adoption of PMTs had no impact whatsoever on firm performance (regardless of the effectiveness of implementation).  Further, CEOs of firms that adopt PMTs tend to be paid more, regardless of whether or not the adoption was linked to firm performance.  Finally, the authors show that when press reports highlight PMT adoption, CEOs tend to be paid more, again regardless of the firm's performance or the effectiveness of the actual implementation of the PMTs.  They add that the effects show up in short-term compensation, and their analyses clearly link the compensation effects to the adoption of PMTs, not to reputation increases or effective implementation."

From Strategic Leadership: Theory and Research on Executives, Top Management Teams, and Boards (Strategic Management Series) Oxford University Press, 2009

Pages 314-315