BI Trends: The Next Generation of Performance Management
Every year, technology research firm Gartner surveys 1,500 CIOs. For the third year in a row, the firm's 2008 survey revealed that BI applications are the top technology focus for CIOs. At first glance, this may seem strange given the consolidation activity in the BI industry.
Bob Kaplan and David Norton, the creators of the Balanced Scorecard (the most commonly used performance management system[i]), recently commented that, "breakdowns in a company's management system, not managers' lack of ability or effort, are what cause a company's underperformance." 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% to 80% of companies are fall short of the success predicted from their strategies."[ii]
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.
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.
Sample Investment Management Company Strategy Map[iii]
A strategy map is divided into four perspectives:
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 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 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 rear view 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.
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 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 e-mail 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.
This may sound great, but as a seasoned professional in the BI field, you are probably thinking 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 and business outcomes: the "holy grail" of performance management.
Kirby Lunger is GM& SVP, Industry Solutions at Attivio, Inc. in Newton, MA. She can be reached at email@example.com.
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[i] 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)
[ii] Robert S. Kaplan and David P. Norton, "Mastering the Management System," Harvard Business Review (January 2008)
[iii] Palladium Group, 2007