A company’s Business Intelligence (BI) solution is, of necessity, a living, evolving system. Today, BI has evolved from the delivery of KPIs for executive decision-making into a tool that can optimise organisational performance. The benefits of applying BI to enhance Performance Management (PM) are significant and as more organisations move in this direction, it will become critical to maintain operational and business competitiveness. PM is more science than craft, however, and growing your BI system to this level is no easy task.
As businesses have discovered, expanding a BI system to deliver better, more insightful reports requires a concerted effort from managers and the IT department. Managers need to better define information requirements and identify information gaps; and IT needs to ‘clean’ the data, integrate or create data sources to inform the reports, and ensure data can be presented or accessed in a suitable format for fast decision-making. Using BI for PM takes this process one step further: it requires the linking of BI to business processes.
Performance management is all about measuring, planning and analysing information to make better decisions about strategy, resources and tactics. The key is to understand that the decisions and processes that drive performance (good or bad) can be identified and controlled to improve outcomes, cut costs and optimise outputs. The journey begins with analysing and optimising business processes.
A good example in a retail environment may be the process that determines the shelf price of a particular item. This would answer the regional manager’s question of why the product generates a better income in one store; while in another it sells in greater volumes. Hooking the BI system into the databases that provide information on availability of the product in a certain region, the input costs (such as transport of the item to the store) and the volume of product sales in the region could provide some answers, allowing the manager to better distribute this product to optimise revenues.
Each successive step on the ladder to BI-driven PM, although arduous, delivers exponentially bigger benefits. Understanding how store managers determine shelf price and perhaps refining policy in regard, for example, is the first step in optimising the distribution of every single product sold by the retailer in every store in the retail chain.
However, dynamic thinking needs to be applied. Defining and optimising a business process will require the services of a business analyst. Creating access to the data will require the assistance of an IT person. Developing reports that identify and track the KPI of every product, however, requires the incorporation of technical business rules. This needs to be done by a business or line manager (or subject matter expert) in conjunction with the business analyst.
It’s an expensive exercise, but BI is a tool that, once integrated to business processes, can provide real answers. There are top down and bottom up benefits to be had as the BI system now allows top, middle and lower level managers to interrogate business data and receive information they can rely on.
The BI system can also assist to improve accountability and responsibility within the organisation. By linking the BI system to the workflow, problems are not forgotten or swept under the rug. The BI system will escalate alerts when identified thresholds are reached (e.g., stockholding dips below a minimum or sales targets are not met) until these problems are resolved through the required actions or responses.
There are a number of immediate benefits to be had. First, it cuts costs and improves productivity. Managers and staff down the line are more informed and have a better idea of the impact of their actions, or inaction. There is also a strong learning curve as cause and effect is clearly spelt out – no-one has to play guessing games. And, importantly, leadership has a finger on the pulse of business at all times.
Seven steps to BI-driven PM:
- Understand process of enabling PM and the principles of PM, as well as the
benefits in terms of cutting costs, enhancing performance
- Take a phased approach – per department or per system (eg, procurement,
transactive, logistics, sales, financial, etc)
- Assess the strength of the underlying infrastructure and ensure production
systems are not overtaxed by BI system – ie, build the right information
architecture, including datamarts and warehouses that will enable easy
manipulation, and access to data.
- Make use of experts to analyse and implement BI as a PM tool.
- Ensure the buy-in and active participation of upper, mid and lower
management, as well as subject matter experts to identify information needs
and ensure business rules are implemented.
- Introduce and vigorously encourage the use of this system.
- Continuously refine your BI driven PM system – a healthy business grows
and evolves, and so must the associated BI system.
BI is without doubt becoming an important driver of business performance management. Getting it right requires an investment of time, resources and money. However, it’s an investment that will contribute directly to the sustained success of your business.
For more information, contact:
Jennifer Mbesa / Gerrit-Jan Albers