For a start, you can have Business Intelligence without Performance Management, but you cannot have Performance Management without Business Intelligence.
The marketing lingo of vendors has contributed probably to the confusing definitions of Performance Management and Business Intelligence.
BI is a powerful tool indeed. It lets users access and analyse data typically stored in large data warehouses or corporate databases. It also allows users to visualise complex data in an easy understandable user interface. In most cases, users have a new revelation of data after running BI, which encourages them to think hard and even make intelligent decisions. However, this is not to be mistaken as Performance Management.
Performance Management takes the data retrieved from a BI tool to the next level and actually gives a context to it. Performance Management includes financial consolidation, budgeting planning, forecasting, statutory reporting, strategic planning, predictive analysis, profitability modelling, workflows, alert triggers and much more.
Of all the points mentioned above, I would personally regard “planning & forecasting” as the key differentiator between CPM and BI. Planning & Forecasting is critical without which CPM can be very incomplete. Viewing data retrieved by the BI tool and then taking that further to a planning & forecasting mode, where you are now able to make changes to the data and actually see the implications further down the line is an invaluable service Performance Management can offer you. Planning also induces strict disciplines into an organization to actually make “evidence” based decisions. This gives new meaning and context to BI. You now know what to track in BI and actually compare it with your planning on the CPM side.
Corporate Performance Management takes what you learnt from BI and integrates it with the strategic planning of an organization, thereby allowing you to make “evidence” based decisions.
This sounds like magic! So why aren’t all companies using Performance Management?
There is probably a wide variety of reasons as to why companies aren’t embracing Performance Management just as yet. Existing belief systems, human resource skills, company culture, etc to name a few.
Much of it is to do with mind-set. Traditionally, the IT and Finance departments produce scores of Excel sheets extracted from the back end ERP systems, which the CFO and CEO browse through for weeks and months together. Then they make a critical decision which determines the future course of the company short term. This process then is repeated every so often (sometimes monthly) because the decisions are mostly “instinct” based and only short term. It was and is impossible to plan long term in this rapidly changing business environment.
A shift of mind-set from self-reliance to technology-reliance is not an easy one. The belief system is still “You tell me what I need to know and I’ll decide what to do with it!”
Soon the volumes of data began to increase substantially. The complexity of the data and the need for consolidation was another problem all together. It became very apparent that tools such as Excel, Crystal Reports and many others were becoming cumbersome, laborious, incapable and insufficient.
A Messiah named “Business Intelligence” came along. It was welcomed and readily embraced because it didn’t change anything except made (“you tell me what I need to know”) a bit easier.
However, it is just a matter of time when businesses will have to adopt performance management to keep pace with the rapidly changing environment. Many thousands of large corporate entities that lead the world economy are early adopters of Corporate Performance Management. These include some big names like Siemens, Nike, GSK, Pfizer, Novartis, Puma, H&M, BASF, Mitsubishi Electric, Syngenta, Pepsico, Dupont, NEC, Bata and many thousands more.
Obviously, the top management of these well-known giants didn’t just give into some marketing story. They saw it coming and were wise to adopt Performance Management early so as to be well prepared….and they are indeed!
In conclusion and in my opinion, BI without Performance Management is like a boat without oars. It feels great to own a boat, sit in it, have a drink and float along, but doesn’t get you anywhere. Performance Management combined with BI is a powerful tool which can help propel your organisation towards its goals….and safely at that due to its capability to help you make “evidence” based decisions.
Santosh Chandran is the Business Development Manager for BOARD Management Intelligence at Olympic Software. He regularly blogs about business intelligence and corporate performance management. You can follow him on Twitter or on LinkedIn. Please contact him directly if you would like to find out how BOARD can improve your business results through better decision making, phone 09 980 3964 or email: firstname.lastname@example.org