This month, let's further decompose CPM. What are the core pieces of a total CPM solution, and how do they interact with one another? To answer that, let's take a step back, and think about the question not so much technically, but humanly. Managing business performance is, after all, a human endeavor. With the human requirements defined and understood, the system requirements fall into place.
To spell out the human requirements, begin by assuming the role of a business manager, and ask some basic questions: If I am responsible for the performance of all or part of my enterprise, what do I need to know and do so as to be successful, and how can a system help me in this regard?
To begin with, as one responsible for managing performance, I need to know what business I am in. I need to know what goods or services I am selling, the value of those offerings and to whom they are so valued, and how I should go to market with my wares. While it is probably self-evident that I need to understand these points, recounting them is more than just a statement of the obvious. The answers to these questions are the very cornerstones of my firm's strategy, and setting that strategy may require a significant amount of research and organizational debate and reflection. Furthermore, I will periodically need to review, tweak or even recalibrate that strategy owing to competitive pressures and other market dynamics. The very nature of the business I run will likely change over time - potentially, significantly. Suffice it to say, I need to know what my business is all about, if I am to manage it.
Having admitted, however, that I need strategic awareness so as to manage performance, I have not yet crossed over into the realm of a CPM system. Strategy definition, though it may entail synthesizing, examining and mining many different types of data, thereby calling upon various DW/BI tools to supply the fodder for strategic research, ultimately falls under the domain of human judgment. The setting of strategy is not subject to systematic automation. Strategy definition is a precursor to and source of input for the CPM system. The CPM system comes in to the picture once strategy has been set.
Once my firm has crystallized its strategy, I will benefit by fleshing that out into specific metrics by which I can measure performance against those strategic goals. Here is where a CPM system begins to help. The CPM system captures those metrics and tracks performance against them and may even track the way in which numerous metrics are interrelated or linked so as to understand cause-and-effect relationships between them. For example, if I am a manufacturer, I may want to track metrics on the timeliness and quality of parts received from my suppliers, rate of production, turnaround time on customer orders and cash flow. These are all good metrics to capture in and of themselves, but I may also want to understand the trigger effects between them. That way I can more quickly and effectively respond to issues and opportunities as they arise; for example, a key supplier is late or ships a defective batch of parts, which halts production, which causes delays in order fulfillment, which causes angry customers to short-pay their invoices. The CPM system helps by comprehending this chain of outcomes (whether I preconfigure the system with the intelligence that these metrics are in fact linked or the system infers it statistically from historical data) and alerting me, along with others in the organization who need to be in the know, as the events begin to unfold. So, the CPM system helps by codifying what I most need to measure, linked to other measures and events which affect those key metrics and facilitates my organization's response to those events.
Let's break it down further. Is there a framework by which we can organize the different types of human assistance a CPM system can provide? I would propose that we can visualize these human benefits along three intuitive axes, depicted in the Figure 1.
Figure 1: Framework for the Human Element of CPM
First, the CPM system can help in areas over which I have varying levels of control. That is to say, there are some performance factors I can control directly - factors such as how much labor I employ, how I choose to price my products, how my processes and tools operate or how I go about marketing and advertising. Those highly controllable factors are generally those which involve a spending choice - i.e., they are generally the elements of my cost structure, things which I can either choose to pay for, or not. Some performance factors I can influence, but not entirely control - customer and employee satisfaction come to mind. And some performance factors I have little to no control over; I can merely respond when they happen. Regulatory requirements, weather/natural events and competitor actions are all good examples of performance-influencing factors to which I can merely respond.
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