This month we continue our look at real companies enjoying the benefits of business performance management (BPM). Organizations should not overlook the bread-and-butter functionality that BPM has been providing almost from the start. This would include shortening the monthly close cycle with a streamlined financial consolidation process, and making budgeting and planning less painful by reducing the reliance on spreadsheets.
Hyatt Hotels and Hyperion
Hyatt Hotels was a company with strong needs in these areas, which they addressed by purchasing Hyperion's Financial Management (HFM), Planning, Strategic Finance and Essbase. In recent years, Hyatt Hotels acquired the AmeriSuites hotel chain and reorganized their international and domestic business units into a single global business. It soon became obvious that they needed a single, comprehensive platform for finance and analysis.
Prior to their BPM purchase, worldwide consolidation was taking months, and producing multicurrency reports was a challenge. With their new BPM system, Hyatt is now closing the hotel's books in two days at month end. Multicurrency reports are now handled as a standard part of the system. In addition, much of the painful work of moving data and posting manual intercompany eliminations has been automated. Forecasting had been done on an annual basis in the past due to the time required. Now Hyatt is forecasting on a quarterly basis.
While Hyatt is very pleased with the end results, some lessons were learned along the way. They did have an ambitious scope which led to their implementation of several of the major modules simultaneously. In hindsight, they would probably take more of a step-by-step approach. In addition, they wish they had looked at re-engineering some of their financial processes prior to automating them. They did spend some time up front focusing on data quality. Users are now able to easily perform ad hoc analysis on any data they have permission to access. The good news is that everything they look at from a data perspective is now "clean." The challenge has become helping users interpret and properly apply that data.
With the new system in place, the finance team is able to spend more time on analysis and providing feedback to operations. This, in turn, has elevated finance's role in the organization. The next areas that Hyatt plans to look at are really focused on the forward-looking aspects of BPM 2.0. They want to make more nonfinancial information available to management. They want to understand the impact of external factors such as macroeconomic and regional market trends on their business. Ultimately, they want to see what's ahead and have the time and ability to react.
Eneco Energie and Cognos
It has been said that BPM can provide a significant competitive advantage. Eneco Energie of the Netherlands is a good example. They are the third largest energy provider in their region, but not a big energy producer. They purchase product in the open market and then resell to consumers. As they prepared for deregulation and intense competition in their market, they knew that they needed BPM and business intelligence capabilities to complement their SAP Financials already in place. They selected Cognos Report Studio, Metrics Studio, and Analysis Studio to work alongside Microsoft SQL Server and Business Scorecards Accelerator. They built their data warehouse first and implemented Cognos as their data access and analysis platform.
Preparing for deregulation, Eneco knew that they would have to deal with customer churn, look at profitability and cost analysis related to customer retention and the purchase of product, and more tightly manage their entire operation. When deregulation hit the energy market in the Netherlands, 10 percent of their customers defected in a matter of weeks. This was offset somewhat by an 8 percent influx of customers from their competitors. Utilizing their new BPM system and looking at the profitability of the defectors, the board arrived at a surprising conclusion: it made better sense to let them go. It turns out that the majority of this group either paid late or didn't pay at all and complained often. With this knowledge in hand, when any of the defectors decided to return on their own accord, Eneco signed them at more profitable terms.
Another capability Eneco achieved with their BPM system was a more comprehensive customer view. By analyzing a collection of data from more than 2 million customers and identifying trends, they could develop an early warning system for potential customer defections.
The benefits of BPM at Eneco extend beyond direct payback and financial ROI. They have a balanced scorecard that reflects the activities of all divisions. The company's supervisory board has a cycle of monthly reviews of all key aspects of the company utilizing this scorecard. They have key performance indicators that look at customer churn, customer satisfaction, new customer growth, accounts receivable, working capital and the success of marketing campaigns targeted at customer retention. This enables Eneco to anticipate future opportunities and challenges, while also bringing senior management and division management into strategic alignment.
Both companies profiled have achieved significant but very different types of benefits from their BPM systems. How a company initially utilizes BPM is primarily dependent on where its current pain points are. With a proper vision and roadmap in place, most companies eventually grow beyond their first phase BPM benefits to take full advantage of all that BPM has to offer.
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