How do Business Intelligence and Performance Management Fit Together?
Performance Management: Making it Work
Information Management Online, April 6, 2006
The late Nobel Prize-winning nuclear physicist Richard Feynman learned a
valuable lesson as a child. His father showed him a picture of a bird species
and told Feynman its name in several languages - all uniquely different. Then
his father noted that regardless of the bird's various names, it did not in any
way affect the reality of the bird's existence or its physical features. The
lesson for Feynman was that no matter what name people use for something, it
does not alter what that something is. We can apply that lesson to the confusion
today about the difference between mainstream business intelligence (BI) and
performance management (PM).1 Advertisement Are BI and PM different words for a species of bird or two different birds
... or animals? Is BI part of PM? Or is PM part of BI? There is ambiguity because the underlying inputs, processes, outputs and
outcomes of an organization - whether a public sector government agency or
a commercial business - may arguably have some parts that belong to BI, while
others belong to PM. The key word in that sentence was "arguably." This argument
arises because IT-centric people often see an enterprise as a ravenous consumer
of billions of bytes of data intended to manage the business (a BI view). In
contrast, leaders, managers and employee teams typically view the same
enterprise as an organism with a purpose and mission (a PM view); they desire
solutions and applications that achieve results. How can BI and PM be
reconciled? The enterprise is like that single species of bird - nothing can
change its existence in reality. There are two things related to this topic that most folks can agree upon: 1)
BI involves raw data that must first be integrated from disparate source
systems and then transformed into information; and 2) PM leverages
that information. In this context, information is much more valuable than data
points, because integrating and transforming data using calculations and pattern
discovery results in potentially meaningful information that can be used for
decisions. For example, an automobile manufacturer's warranty claims can be
globally analyzed to detect a design problem. In another instance, the history
of an individual's credit card purchase transaction data can be converted to
information that, in turn, can be used for decisions by retailers to better
serve the customer or provide customized offers to sell more to them. A recent survey by the global technology consulting firm Accenture reported
that senior U.S. executives are increasingly more disenchanted with their
analytic and BI capabilities.2 Although they acknowledged that their
BI (regardless of how they personally define it) provides a display of data in
terms of reporting, querying, searching and visual dashboards, they felt their
mainstream BI still fell short. An organization's interest is not just to
monitor the dials; it is, more importantly, to move the dials.
That is, merely reporting information does equate to managing for better
results. Actions and decisions are needed to improve the organization's
performance. Having mainstream BI capability is definitely important; however,
it often came about as the result of departments needing advances that their IT
function could not provide. Extending BI across the organization so that mini-BI
applications can talk is a mission-critical differentiator for organizational
success and competitiveness. Managing and improving are not the same thing. Many people are managers, like
a coach of a sports team, and they get by. Improving, on the other
hand, is how an organization wins. To differentiate BI from PM,
performance management can be viewed as deploying the power of BI, but
the two are inseparable. Think of PM as an application of BI. PM adds
context and direction for BI. As in physics, BI is like potential energy, while
PM is the conversion of potential energy into kinetic energy. Coal, when heated,
provides power to move things. Using a track-and-field analogy, BI is like the
muscle of a pole-vaulter, and PM is that same athlete clearing higher heights.
BI is an enterprise information platform for querying, reporting and much more,
making it the foundation for effective performance management. PM drives the
strategy and leverages all of the processes, methodologies, metrics and systems
that monitor, manage and, most importantly, improve enterprise
performance. Together, BI and PM form the bridge that connects data to
decisions. With PM, the strategy spurs the application of technology, methodologies and
software. As methodologies - which are typically implemented or operated in
isolation of each other - are integrated, the strength and power of PM
grows. Technologies, such as software, support the methodologies. Software is an
essential enabler, but the critical part is in the thinking. That is, one must
understand the assumptions used in configuring commercial software and, more
importantly, have a vision of the emerging possibilities to apply the new
knowledge that BI and PM produces. Like the bird that Feynman's father described, we should not waste valuable
energy debating BI versus PM - we may get caught up in semantics. Rather,
we should progress to where PM deploys the power in BI with its enterprise
information platform so that organizations can advance from managing to
improving.How do Business Intelligence and Performance Management Relate to Each
Other?
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