APR 6, 2006 1:00am ET

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How do Business Intelligence and Performance Management Fit Together?

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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

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.

How do Business Intelligence and Performance Management Relate to Each Other?

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.

References:
  1. The information technology community distinguishes between "little" business intelligence for query and reporting and "big" business intelligence for the platform where information stored and managed. This article emphasis is on the latter.
  2. Accenture.com. "Companies Need to Improve Business Intelligence Capabilities to Drive Growth, Accenture Study Finds." 2005 News Release. 

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