Everyone agrees that actionable information is a noble goal. We have found that business performance management (BPM) enables actionable information with the following concrete elements:
- BPM enables faster comprehension of rapidly changing data from multiple sources through its extract, transform and load (ETL) capabilities.
- BPM systems enable sharp focus on key business metrics through use of scorecards and dashboards.
- BPM systems can proactively alert managers to significant variances from expected results with e-mail alerts and stop-lighting in reports.
Catherine Duffy is a senior systems analyst at software company Macromedia in San Francisco. She was the primary leader of a BPM project that involved building an application using TM1 from Applix. Macromedia already had "one version of the financial truth" in an Oracle data warehouse; however, manipulating the data in that warehouse was difficult.
Like many companies, Macromedia had conducted all its forecasting on Excel. Macromedia also has approximately 20 users on a purpose-built budgeting application. A key reason Macromedia chose TM1 is its RAM-based architecture, which Duffy credits with speeding up response time significantly. "We have instant access through our Web reporting, and our sales managers are constantly plugged in. We can see rollups and do weekly forecasting in our Excel model with much better turnaround time. Drilling from top to bottom is fast."
At Macromedia, actionable information means different things to different users. For their product management group, it's a marketing-based revenue forecast that looks at history, what is planned and their known seasonality factors. The sales group builds its forecast customer by customer. "Every quarter, we do an 'interlock' where we compare the two approaches to find a meeting of the minds. We identify discrepancies and discover what underlies them," says Duffy.
After some initial bumps, with users being challenged by the many options available, the BPM system caught on. "Once the sales managers had a full quarter cycle under their belts, they were thrilled with it. After getting to desired data very quickly and asking for more screens, and getting those too, they saw its power. It has changed how many people do their jobs," comments Duffy.
Actionable information was also an important win at Lockheed Martin. "Internally, it's meant we benchmark continually against competitors, and we now have a changed approach to managing our balance sheet," says Mike Gabaly, managing director of Lockheed Martin Financial Shared Services. (See BPM The Real Benefits, Part 2, in the November issue of DM Review.) "In addition, we developed new capital metrics around our assets, liabilities and all our operations. Our culture has solidified around performance."
While improved decision making and competitiveness are cited by nearly every software vendor's marketing material, the claims are often stretched beyond reality. Nevertheless, we find that competitiveness and decision making are in fact boosted when companies achieve the following benefits:
- An ability to view, track and manage the business at a more precise level.
- A shorter closing cycle.
- Automation of error-prone, slow manual processes of data handling and forecasting.
- Reduction of time required for rote spreadsheet analysis tasks.
- Easy access to information, company- wide, in the form that individual users need.
- A work culture in which employees embrace ongoing measurement and focus on improving performance.
Fred Carl, a project manager at L-3 Communications, notes that prior to installing a BPM system from Cognos, the defense contractor's finance department spent 85 percent of its time gathering information and just 15 percent analyzing. "Now it's the exact reverse," says Carl.
Faster delivery of information allows, of course, for more timely decision making. "In the old system, we could only get the full view every three or four months," reports Carl. "Now, we have it every month, and in some programs, it's every week or two."
In terms of data presentation, L-3 has developed dashboards that are accessible by many employees. Acceptance was not instantaneous. "It took time for many managers to grasp the system and let go of their paper reports," says Carl. "We have found, at times, a mentality that if it is not produced by a mainframe, it cannot be right."
L-3 has found that better decision making is making decisions more frequently. That, and considering more viewpoints on the data, enables more frequent and accurate adjustments of their business. "Before, decisions were based on gut feel and stale history," says Carl. "Now the assessments are founded on more facts."
L-3 cited a situation where missing the annual spend budget in one business unit by $3.6 million was avoided because the problem was spotted at the beginning of June rather than late October as would have been the case without its BPM system. The early detection enabled corrective action in time to solve the problem.
BPM can deliver meaningful payoffs on two levels. First, the strategic if somewhat less tangible benefits such as tying execution to corporate strategy. Second, the concrete benefits you can count, such as saving millions of dollars or closing in three days rather than three weeks. Our work with companies that have adopted BPM has also highlighted a common theme about which many users are enthusiastic: a change in their work culture to being performance-oriented, greater awareness of the marketplace consequences of actions, and more rapid and aggressive response to competitive changes. In upcoming columns, we'll examine how you can achieve similar benefits for your company by looking at the tasks and challenges that accompany business performance management.
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