HOW THE INTELLIGENT ENTERPRISE DELIVERS PERFORMANCE...
Transcript of HOW THE INTELLIGENT ENTERPRISE DELIVERS PERFORMANCE...
HOW THEINTELLIGENTENTERPRISEDELIVERSPERFORMANCE MANAGEMENT.
H O W T H E I N T E L L I G E N T E N T E R P R I S E D E L I V E R S P E R F O R M A N C E M A N A G E M E N T : :
HIGHERINTELLIGENCE.
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MANAGEMENT SUMMARY
All organizations, public, private, large and small
need to effectively manage business performance.
This has never been more true than in today’s
complex, highly regulated and confusing business
environment which requires better decisions and
improved execution now!
In spite of the billions of dollars invested in infor-
mation technology to address these challenges,
managers and executives in many organizations
still make key decisions underpinned by their
own personal versions of documents and spread-
sheets. Their organization struggles to provide
a seamless flow of trusted information between
customers, suppliers and their employees. The
result is that most organizations cannot provide
their people with the right information at the right
time, and in attempting to do so are committing
significant resources to compiling and auditing
numbers instead of using them to inform the
business. Consequently, they are far more reac-
tive than proactive and ultimately they are not
efficiently and effectively managing their current
and future performance.
Leading organizations are investing in managing
information and developing predictive insights to
drive sustainable business results. These com-
panies have become masters in Performance
Management - going beyond mere users of
business intelligence to become the “Intelligent
Enterprises.”
“...a new breed of
company is upping the
stakes. ...have dominated
their fields by deploy-
ing industrial-strength
analytics across a wide
variety of activities. In
essence, they are trans-
forming their organiza-
tions into armies of killer
apps and crunching their
way to victory.”
Thomas H. Davenport,
Harvard Business Review,
January 2006
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THE COMPLEX ENVIRONMENT FORMANAGING PERFORMANCE
Delivering increased performance year on year is a
diffi cult enough task in its own right, but it’s made
even harder to achieve if the underlying informa-
tion systems are not able to accurately measure
corporate performance across the entire organi-
zation, top to bottom. As Figure 1 indicates, the
average manager and executive have a very tough
job to effectively manage the performance of their
organization.
The ability to collect pertinent information and
report on performance is no longer good enough,
although this is still quite an achievement for some
large and complex organizations. Key metrics are
put in place at all levels to frequently and consis-
tently monitor how the enterprise and its business
units are performing against strategy. These met-
rics, often referred to as key performance indica-
tors (KPIs), are derived from analytical models dev-
eloped to measure the impact of fi nancial and op-
erational decisions on overall strategy achievement.
There is a management truism that “you can’t
manage it if you can’t measure it,” and the fact is
that many organizations do fail to execute on their
strategies. Recent Capgemini research indicates
that the average company reports 132 metrics
each month. Within our sample, 59% of organiza-
tions indicated that they are, to a greater or lesser
extent, reliant on spreadsheets to report these
metrics; consequently 70% indicate that their
planning and budgeting processes do not fulfi ll
management expectations. In parallel, these com-
panies are seeing the sheer volume of data they
have to consider is increasing by 79% a year.
Organizations that have an understanding of how
their business is performing and also have a means
of improving this performance in a cost effective
way, have moved to making information a corpo-
rate asset. They have embraced an approach which
will lead them towards an Intelligent Enterprise.
“Organizations often fail to execute their strategy – failure rates may range from 60 to 90 percent.”R Kaplan and D.P. Norton. “Creating the Offi ce of
Strategy Management”. Harvard Business
Review, April 2005
Figure 1 – The Complex Environment for Managing Performance
EXECUTIONEXTERNAL PRESSURES
Shareholder
Competition
Public Scrutiny
Cost Pressure
Shared Services
Compliance
Drive forEffi ciency
InnovationSophistication
Drive forAdaptability
INTERNAL PRESSURES
My organization
is in silos
What does itmean in terms
of actions?
I havetoo much
information
Everyone’sworking todifferentpriorities
FasterAdaptation
ContinuousImprovement
Focus
BalancedPerformance
BusinessAlignment
COMPLEXITY SECFilings
CorporateDashboards
OrganizationalRestructures
AnnualReviewProcess
Rewards
Budgets &Forecasts
UnplannedObstaclesMarket
UpdatesIFRS
MatrixMgmt.
Info.Systems
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A LEADING GLOBAL MOBILE TELECOMMUNICATIONS
COMPANY WORKED WITH CAPGEMINI TO MOVE TO A
CORE SET OF OPERATING METRICS ACROSS ALL THEIR
GEOGRAPHIC LOCATIONS, CONSOLIDATED IN ONE
PLACE, SHARED BY THE SENIOR MANAGEMENT COM-
MUNITY AND SUPPORTING BOTH FORMAL AND AD-HOC
MANAGEMENT REPORTING.
THIS FORMED A SUSTAINABLE PLATFORM FOR ONGOING
ENHANCEMENT WHILE DELIVERING EARLY BENEFITS.
BUSINESS INTELLIGENCE IS NOT ENOUGH
In 1979, John Rockart published the article “Chief
Executives Define Their Own Data Needs”1 pro-
posing that systems used by corporate leaders
ought to give them data about the key jobs the
company must do well to succeed. Ten years later,
Howard Dresner coined the term “business intel-
ligence”2 to describe systems that help decision
makers throughout the organization understand
the state of their company’s world.
Thomas Davenport published the results of a two
year study “Competing on Analytics”3 in January
2006. His research identified that virtually all the
organizations identified as “aggressive analyt-
ics competitors” were the clear leaders in their
fields, and they attribute much of their success to
the masterful exploitation of data. Key examples
would be Tesco, Wal-Mart, Dell, Marriott Hotels
and Progressive Insurance.
When contemplating business intelligence, most
organizations think about more technology and
apply an “application driven” approach which was
designed for the operation recording of transac-
tions. Capgemini uses an approach that is “infor-
mationally” driven which changes the ethos of
design and build. By being driven by information,
we focus on the business decisions that the users
and stakeholders are making in the operation of
their business.
The ultimate purpose of any BI tool is to help the
organization deliver improved performance. The
tool itself is merely a key enabler that provides in-
formation to decision-makers; it is the consequent
action that leads to improvement.
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In our experience, the reason most organizations
fail to realize the benefits of their investments in
business intelligence, is because the primary focus
is on the delivery of the tools, while the critical
elements of “people and process change” and
the broader Information Management dimension
are neglected. The organizations we have helped
to achieve successful outcomes have a relentless
focus on these very areas. These and other suc-
cessful organizations also employ a technology ap-
proach which enables iterative and agile delivery.
Today for many organizations, there is a discon-
nect in the core management planning and control
processes, for example, between setting targets,
formulating strategy, planning, forecasting, risk
management, investment planning, performance
feedback, and financial consolidation. The an-
nual budget, driven by the finance department,
frequently dominates the process, and the value
it adds in its current form is increasingly being
questioned. These processes need to be linked
together in a better way, making use of feedback
loops and control at three levels: Strategic, Opera-
tional, and Activities levels. Step-by-step progress
is required through the enterprise’s processes,
methodologies, metrics and technologies. Merely
implementing a business intelligence tool is not
the answer.
We have seen examples of failed projects where
technology implementation is done without this
understanding. As a result, the Performance Man-
agement approach we use (Figure 2) is more holis-
tic, addressing the full range of what is required to
drive performance.
PERFORMANCE MANAGEMENT
Performance Management offers an understand-
ing of the performance levers which can be
managed to drive high performance behaviors
and improve decision making. It focuses on the
design and integration of a Management Frame-
work which ensures alignment of people, process,
and the use of information, to the organization’s
strategic objectives.
Various factors are driving enterprises to take a
holistic view of Performance Management.
After a series of scandals and alleged frauds,
governments are demanding higher standards
of corporate governance. Another driver is the
need to complete the work started by adopting
enterprise resource planning (ERP) systems. In
addition, many enterprises are realizing that the
more turbulent world calls for a new view of how
the business is managed, and a new approach to
preparing for the future.
An effective Performance Management program
can be framed as a consistent and adaptive
process (from budgeting and planning to con-
solidation and reporting) and encompasses three
fundamental principles: driving a forward-looking
view of the business, ensuring alignment, and en-
abling more effective decision making at all levels
of the company. This system also ensures that key
business processes are conducted under the guid-
ance of a clear and well communicated company
strategy.
n First, dramatic increases in enterprise data make Performance Management more practical.
n Second, and more importantly, stakeholders demand that management deliver predictable execution, operational efficiency and corpor- rate accountability, which collectively make Performance Management more of an imperative.
The benefits of a Performance Management initia-
tive will include more solid foundations for mak-
ing decisions, the discovery of previously hidden
inefficiencies and a more rational use of resources
in planning and control activities.
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A successful Performance Management program
will link together all of the key elements for man-
aging performance, including balanced scorecard,
activity-based costing and management, quality
management, value-based management, etc. All
involve processes, methodologies, metrics and
technologies, whose use can, collectively, be
called a Performance Management system.
They seek to align the organization and ensure a
focus on the desired outcomes (refer to Figure 3).
Appropriate tools will also be a critical factor. The
Performance Management tool of choice for many
executives remains the Microsoft® Excel spread-
sheet, predominantly because of familiarity and
ease of use.
A MAJOR GOVERNMENT DEPARTMENT WAS FACING THE
CHALLENGE OF NOT HAVING THE INFORMATION IT NEEDED TO
MANAGE AND DRIVE THE PERFORMANCE OF ITS KEY OBJECTIVES.
OVER 55% OF ANALYSTS’ TIME WAS SPENT FINDING, EXTRACTING,
CLEANING AND INTEGRATING DATA, INSTEAD OF ANALYZING AND
REPORTING IT. THE STARTING POINT WAS TO ESTABLISH WHAT
INFORMATION WAS ACTUALLY NEEDED TO DRIVE PERFORMANCE
AND THEN TO ADOPT CONSISTENT DEFINITIONS.
Figure 2 – Characteristics of Holistic Performance Management
Employee EngagementChange ManagementIncentives and RewardsPM CapabilitiesCommunications
BudgetingForecastingStrategic PlanningDashboardsData sources and Supply
LinkingPerformanceManagement
Leadership&
Governance
Objectives&
Measures
Capabilities&
Cultures
Information&
Insight
Systems&
Processes
Leadership Coaching, AccountabilitiesPM Organization, Stakeholder Management
ReportingAnalysis
Performance MeetingsDecision Making Process
Vision and StrategyObjectives and Goals
Measures and KPIsCascading
PM Frameworks (eg BSC)
THE SUM IS GREATER THAN THE PARTS
EACH ELEMENT HAS SPECIFIC AND INTERLINKED AREAS
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INTELLIGENT ENTERPRISE – A JOURNEY NOT A POINT SOLUTION
Performance Management is a continual journey,
which aims to gradually improve the effective-
ness and adaptability to a changing market for
the organization over time. The fi rst step is critical
in moving forward and can be seen as part of an
overall future plan for improvements. Figure 4
illustrates the levels of maturity that can guide the
scope and focus of future initiatives.
Over time, business managers and users will move
from traditional uses of information to more novel
and explorative uses, always aiming to maximize
the investment in information and other resources.
The roadmap will:
n be a map that shows the way forward beyond
this project
n encompass an approach that covers all the
main aspects of Performance Management
n drive collaboration between the front line
and back offi ce processes.
With reference to Capgemini research and that of
Thomas Davenport, we believe that there are
fi ve characteristics of those companies which have
become masters in Performance Management and
gone beyond being mere users of business intel-
ligence to become the “Intelligent Enterprises.”
They:
1. Make information-based decisions making a core part of the corporate DNA and culture— and this is constantly emphasized and communicated.
2. Focus on driving a step change in business outcomes, through effective exploitation of information, and will do this in partnership with customers and suppliers. This focus is managed at an enterprise level.
3. Include executives who make the develop- ment and maintenance of analytical capabilities a primary focus, and hire people
with the very best analytical skills, considering them critical to their success.
4. Seize opportunities to generate information, creating a “discover and learn” culture based on numerous small experiments.
5. Make quantitative analytical and intelligence capabilities part of their company’s story, to be shared in the annual report and in discus- sions with fi nancial analysts.
Figure 3 – Managing Performance
Mission
ObjectivesGrowthLevers
KPIs
ActionsPersonal
Objectives
“How do we lookdifferent?
How should we refl ectmarket changes inour objectives?
Do the KPIs still tell uswhether we’re makingthe right decisions?
How should we revise our targets to achieveour mission?
Did we fi ll the gap?What did we learn?
Did we make the right decision?
“If we succeed, how will we look different?
What are the criticalsuccess factors for
achieving the objectives?
What KPIs address the critical success factors?
What targets dowe need?
What initiatives arerequired to fi ll gaps?
What are my priorities?
Missionachieved
Delightedcustomers
Motivatedpreparedworkforce
ALIG
NO
UT
CO
ME
S
Effectiveeffi cient
processes
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The challenges are mostly cultural. Every enterprise
accumulates a pattern of political relationships
that can be upset by a Performance Management
initiative. Middle and senior managers will feel
the full impact of large-scale change which they
often resist. Performance Management programs
need to ensure that managers retain the ability
to manage their own performance while allowing
free and rapid distribution of shared information.
A Performance Management program will also
require taking a longer view and bringing the
costs of planning and control out into the open.
This requires a structured and holistic approach
that will bring together business, technology
and information.
Organizations that adopt this approach can
become masters in Performance Management,
with accurate and relevant information fl ows
throughout the organization, updated to refl ect
the changing demands of the business. Decision
making will be supported at all levels, projecting
the future not simply in budgeting cycles, but in
defi ning the actions which need to be taken.
Your organization’s leaders can become masters in
Performance Management - going beyond being
mere users of business intelligence to become
“Intelligent Enterprises.”
Capgemini has created
the CPM Index tool,
which is designed to help
organizations understand
where they are on the
Performance Manage-
ment journey and how
far they need to travel.
For more information go
to www.cpmindex.com
Figure 4 – The Route to Becoming an Intelligent Enterprise
DATA
INFORMATION
INSIGHT
INTELLIGENCE
Build thefoundations
Understanddrivers of value
Establish forwardlooking view
Embed continuousoptimization
Build the foundations foreffective decision making
through consistentmeasurement of results
Develop a new understand-ing of the drivers of value and how these support
delivery of strategy
Improve business confi -dence by establishing a robust, forward looking
view of performance
Continuous process of optimizing processes and resources, to outcomes
and priorities
This represents a long termcommitment to improvement
and governance arrangements that will ensure that the pro-gram remains on track and is
driven forward with energy and commitment
Performance Managementwill coordinate the drive
towards sustainable service improvements with a focus on outcomes, supported by a bet-ter performance management culture, systems and reporting
VALUE EXTRACTED FROM INFORMATION
OP
ER
ATI
ON
AL
EFF
EC
TIV
EN
ESS
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MASTER YOUR INTELLIGENCE.
FOOTNOTES/REFERENCES:
1 – Harvard Business Review, “Chief Executives Define Their Own Data Needs”, 1 March, 1979, John F. Rockart2 – IDG News Service, “Business intelligence at age 17”, 22 September, 2006, China Martens3 – Harvard Business Review, “Competing on Analytics”, 1 January, 2006, Thomas H. Davenport
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For more information on Capgemini’s approach to driving business value with the Microsoft products, please contact:
About Capgemini and theCollaborative Business Experience
Capgemini, one of the world’s foremost providers of Consulting, Technology and Outsourcing services, has a unique way of working with its clients, called theCollaborative Business Experience.
Backed by over three decades of industry industry and service experience, the Collaborative Business Experience is de-signed to help our clients achieve better, faster, more sustainable results through seamless access to our network of world-leading technology partners andcollaboration-focused methods and tools.
Through commitment to mutual success and the achievement of tangible value, we help businesses implement growth strategies, leverage technology, and thrive through the power of collaboration.
Capgemini employs approximately 68,000 people worldwide and reported 2006 global revenues of 7.7 billion euros.
More information about our services,offices and research is available at www.capgemini.com.
Eddie ShortVice President, Global LeaderBusiness InformationManagement+44 870 238 [email protected]
Ramesh HarjiHead of Intelligent Enterprise,Capgemini+44 870 905 [email protected]
Rob BearHead of PerformanceManagement+44 870 238 [email protected] Deepak DeolalikarHead of Business Intelligence,West Region+1 408 850 [email protected]
Jorgen HeizenbergBusiness Intelligence/CPM IndexContact+31 30 689 57 28 [email protected]
For more information on Microsoft’s approach to Business Intelligenceand Performance Management, please contact:
Bruno AzizaMicrosoft Business Intelligence, Product Team+1 425 705 [email protected]
Joey FittsMicrosoft Business Intelligence, Partner Team+1 425 707 [email protected]
Karl OrtnerEnterprise Partner Group+1 425 706 [email protected]
http://www.microsoft.com/bi/
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