Performance Management and Business Intelligence: A Power Combination
The history of business management reflects continuous improvement in the methods and tools used to drive company performance. Since the beginning of the industrial age, company leaders and managers have sought to predict, plan and control company performance―in part to satisfy shareholders and in part to advance their own careers. Just about any lever that affects business performance has been studied, and disciplines ranging from industrial engineering to industrial psychology have informed and influenced how managers go about the central task of achieving targeted performance.
Today, in the face of intense global competition, the pressures on managers to perform are high, and thus it is increasingly important that companies capitalize on the best available methods and tools. In this context, our research shows that more and more companies are adopting business performance management (BPM) and business intelligence (BI) to drive performance and profits. In concert with BeyeNETWORK, we conducted a survey in which 200 people from a wide range of industries participated, sharing their experiences with BI and BPM and their insights into the results BPM and BI initiatives have had for their companies. The companies ranged in size, with 18% being very large (>$5 billion annual revenue) and 74% being small and medium-sized businesses. Key findings follow.
BPM/BI Alignment Findings
- Sixty-six percent (66%) of companies that have both business performance management and business intelligence initiatives underway are attempting to formally align and coordinate these efforts.
- Seventy-eight percent (78%) of companies seeking alignment state that their BI initiative is aligned to support the business focus of their BPM initiative.
- Companies with coordinated BPM and BI initiatives are three times as likely to have achieved major business performance improvements compared to organizations with uncoordinated efforts.
- Companies that have exploited available BI and BPM technologies to support their business improvement initiatives have had higher success rates in achieving business objectives than those who have not exploited them.
Business Performance Management Findings
- There is widespread adoption of BPM: 41% of respondent companies have BPM initiatives, 23% are considering or planning one, and 18% recognize that their company would benefit from a BPM initiative. Based on this data, it is reasonable to conclude that BPM has become a mainstream tool within the managerial toolkit.
- Of the companies that are using BPM:
- Seventeen percent (17%) report that BPM has delivered major performance enhancement, another 28% report moderate performance enhancement, and 16% report minor performance enhancement. In total, 61% report that BPM has had a positive performance impact.
- The predominant uses of BPM are for planning, budgeting, forecasting and generation of scorecards and dashboards. More than half of companies with BPM initiatives report the use of these key BPM capabilities. This suggests that companies are attracted to the basic BPM value proposition―the systematic use of advanced planning and control methods and tools. In effect, BPM provides a closed-loop performance control system with the ability to align, measure, manage and improve all core aspects of business performance―which ultimately improves profits.
- Fifty-five percent (55%) have invested in BPM products/tools, which provide scalable core functionality to efficiently and effectively execute recurring planning/budgeting, control and business improvement processes for organizations of all sizes. At the same time, 27% have not invested in BPM products/tools, and 37% report that they rely on manual processes, static reports and Excel spreadsheets to generate performance measures and key performance indicators (KPIs). This suggests there is a large value creation opportunity for companies that have not invested in BPM products/tools, given that the cost of manual processes for generating performance measurement information often exceeds $100,000 per year and sometimes exceeds $1 million per year.
- There is widespread use of BPM to measure business performance after the fact (63%), to analyze and correct the root causes of under performance (49%) and to use past performance to predict future performance (35%). In the future, there will be an increased emphasis on using BPM to correct performance problems and predict future performance as companies mature in their use of BPM.
- There also is widespread adoption of business intelligence: 67% of respondent companies have BI initiatives, 15% are considering or planning one, and 6% recognize that their company would benefit from a BI initiative. Based on this data, it is reasonable to conclude that BI also has become a mainstream tool within the managerial toolkit.
- Of the companies that are using BI:
- Twenty percent (20%) report that BI has delivered major performance enhancement, another 41% report moderate performance enhancement, and 19% report minor performance enhancement. In total, 80% report that BI has had a positive performance impact.
- The predominant uses of BI are to improve core processes that drive performance and profits, including financial management (64%), sales and marketing (59%), business performance management (47%), operations/supply chain (42%) and customer service (37%). It is interesting to note that 47% of respondent companies are using BI for BPM purposes―most likely for scorecarding and dashboarding but possibly for budgeting (historical financial data), root cause analysis of performance problems (trend data) and predicting future performance. This suggests an overlap and confluence between BI and BPM capabilities and methods―and the need to coordinate BI and BPM investments and execution.
- Eighty-eight percent (88%) have invested in BI products/tools, which provide scalable core functionality to deliver business information and analytic applications that are used to measure, manage and improve the performance of key business processes and to thereby drive profit improvements. Over 50% have used BI for more than 3 years, 26% have used BI for between 1 and 3 years, and 19% are just getting started. In terms of scope, over 50% report that BI is used by many or all functions within their companies.
Viewed as a whole, the survey results clearly demonstrate that BPM and BI are widely adopted and, used individually, they have had very positive impacts on business performance. More importantly, survey results indicate that superior business results can be achieved when BPM and BI are aligned, supported by technology, and managed as a power combination. Given the complexity and information intensity of modern business, it is easy to see why leaders and managers would want to have the best possible tools for driving performance and enhancing their own professional success. In the next section of our research report, we examine key challenges and barriers to successful use of BPM and BI in concert to drive business performance.
Read the entire study.