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BI Trends: The Next Generation of P…
BI Trends: The Next Generation of
Performance Management
Information Management Special Reports, June 10, 2008
Kirby Lunger
Every year, technology research firm Gartner surveys 1,500 CIOs. For the third year in a row,
the firm’s 2008 survey revealed that business intelligence (BI) applications are the top
technology focus for CIOs.1 At first glance, this may seem strange given the consolidation
activity in the BI industry.
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Bob Kaplan and David Norton, the creators of the balanced scorecard (the most commonly used performance
management system), recently commented that “breakdowns in a company’s management system, not managers’
lack of ability or effort, are what cause a company’s underperformance.”2,3 They define a management system as
the “integrated set of processes and tools that a company uses to develop its strategy, translate it into operational
actions, and monitor and improve the effectiveness of both” and point out that “the failure to balance the tensions
between strategy and operations is pervasive… with various studies published in the past 25 years indicating that
60 percent to 80 percent of companies fall short of the success predicted from their strategies.”4
So why are CIOs spending so much time and energy on BI? These technologies are the
platform for communicating, managing and measuring strategic, operational and tactical
performance. The issue is that although organizations are spending a lot of time and money
on implementing and evolving these systems, the systems are still failing to meet the needs
of companies to accurately assess the drivers of strategic outcomes.
Systems that enable a process to link the measurement and management of drivers to
outcomes are the next generation of BI and performance management technologies.
Why the Management Process Fails Today
BI technologies are implemented to support management processes. In order to explain
how these technologies will evolve to address the next-generation management process,
let’s examine an example of a best-in-class process.
Since the balanced scorecard has emerged as one of the most commonly accepted
management processes, a company that uses this system will be the subject of the
management process example. In this case, an investment management company has
implemented the balanced scorecard system. In this system, a strategy map is a one-page
visualization of the company’s strategy; each “bubble” on the map represents a company
objective
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objective.
A strategy map is divided into four perspectives:
Financial: "What will we have to achieve for our shareholders to view us as successful?”
Customer: "To achieve my vision, how must I look to my customers?”
Internal process: "To satisfy my customers, at which processes must I excel?”
Learning and growth: "To achieve my vision, how must my organization learn and
improve?”
The financial and customer perspectives are measured as outcomes. In other words, the
success of these objectives is measured by transactional, generally historical, data that
comes out of a general ledger or some kind of accounting or financial system. The internal
process and people perspectives are drivers. This means that the achievement of these
objectives is tracked by quantifying “fuzzier” measures. This driver information is usually not
contained in any centralized system, but rather sits on an employee’s desktop; in a content
management or document management system; on a portal or intranet site; etc. This content
is almost always inaccessible to today’s BI platforms.
So what happens in practice? If this investment management firm is using specific
measures to track success against the objectives on the strategy map, the company usually
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does a great job of providing data for its leadership team on outcomes. When looking at the
strategy map in a monthly management meeting, the CEO will get great summary
information as to where the company stands against the financial objective, “Increase assets
under management” (out of the company’s financial systems) or on the customer objective,
“Provide high quality experience” (customer satisfaction survey data from the call center or
retail locations).
Where the management process falls down both from a process and BI system perspective
is what happens when the organization tries to report on driver information. For an internal
process objective such as “advance strategic account management,” the BI system does not
translate the text in the customer records fields in the customer relationship management
(CRM) system to determine if account managers are making the right number of “touches” in
the field with their key accounts, and does not measure the sentiment of a voice-to-text
record from the call center to determine if a customer from a specific account is happy with
their account team. For a learning and growth objective like “develop next generation of
leaders,” the BI platform does not link to data about how much training the young leaders’
program has conducted, since this sits on the training manager’s desktop.
As a result, there is often a lot of scurrying around behind the scenes to try and resolve this
information gap by conducting manual analysis and hard coding this into the monthly
management report in the BI system. More often than not, however, the leadership team
receives a report that takes them back to square one. They get lots of transactional “after the
fact” data, with no perspective on how they can change behavior to influence these
outcomes. The organization is back to that old BI analogy: “It’s like driving a car by looking
only in the rearview mirror at where you’ve been, not where you’re going.” Even worse, the
leadership team does not even realize that the driver information in the system or the report
most likely does not have the same integrity or completeness available in the outcomes
information, leading them to make poor strategic decisions based on faulty operational and
tactical data.
A Better Management Process Enabled by Next-Generation Performance Management
Solutions
Imagine a different scenario. Envision an architecture where the BI platform is not
constrained by looking only at transactional information, but rather can access and present
content from both financial and other types of information. This changes the conversation
both about outcomes and the activities driving these outcomes.
In the case of the investment management firm’s outcomes information, a report on the
status of the measures associated with the financial objective “increase assets under
management” will include not only the historical information out of the company’s accounting
systems, but also will contain the financial forecast out of the organization’s CRM system,
along with associated commentary about certain major segments or opportunities based on
an analysis from major retail investment Web sites using customer sentiment about the
company’s prospects and products. The customer objective to “provide high quality
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experience” covers both the customer satisfaction information from existing company call
center or retail channels, and also provides fuzzier content such as commentary from blogs
or industry Web sites about how the company ranks in overall experience quality relative to
its competition.
The impact is even more significant in the driver areas. For the “advance strategic account
management” objective, the company is now able to measure account manager activity
against key accounts by measuring frequency of customer communications through email
and phone records, and can also determine if the marketing team is sending out new
product documents and marketing offers to the correct URLs to maintain a high frequency of
communications with key accounts. In the case of the “develop next generation of leaders”
objective, the company is able to measure this group’s performance in specific leadership
development activities, as well as defining how well they’re performing on their most recent
projects by searching their ratings on recent project reviews saved on their managers’
desktops.
The Impending Performance Management Revolution
This may sound great, but as a seasoned professional in the BI field, you are probably
thinking that this scenario sounds like wishful thinking. Part of the reason for that is until very
recently, the technology simply did not exist to support this management process.
Over the past couple of decades, dual information architectures have evolved for corporate
information analysis. For structured content, most companies now use a traditional analytic
infrastructure: transactional source systems feeding operational data stores, data
warehouses, and/or data marts, with a BI application sitting on top to present and analyze
the information. For unstructured content, some companies also maintain a parallel
environment with content such as MS Word, Excel and other content stored in a content,
records or document management system, usually with some kind of portal interface with
search functionality that allows users to locate the content they are searching for. This
bifurcated architecture developed because no one could figure out how to integrate the
precision of SQL with the fuzziness of search. You could either ask “what?” (a precise query)
or “why?” (an exploratory question), but you could not ask both questions using the same
platform.
The new generation of performance management solutions combines the functionality of
both without eliminating the benefits of either. The magic happens in the data integration
layer, where content that historically did not source well into a database can now be
transformed and loaded into a format that fits better into a traditional analytic environment. In
addition, information presentation is also evolving to provide new tools to query across all
content types in order to learn the most relevant information, to see patterns in seemingly
unrelated data, etc.
Once this trend becomes more mainstream, it will only be a matter of time before
performance management applications will allow cleaner linkages between business activity
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and business outcomes: the “holy grail” of performance management.
References:
1. Sandra Rossi Sydney. “BI Remains a CIO Priority: Gartner Survey.” Computer World,
March 2008.
2. Kit Fai Pun and Anthony White. “A Performance Measurement Paradigm for
Integrating Strategy: A Review of Systems and Frameworks.” International Journal of
Management Reviews, March 2005.
3. Robert S. Kaplan and David P. Norton. “Mastering the Management System.” Harvard
Business Review, January 2008.
4. Kaplan and Norton.
Kirby Lunger is senior vice president, Corporate Development at Attivio, Inc. in Newton,
MA. She can be reached at [email protected].
For more information on related topics, visit the following channels:
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