Let’s look back at the last ten years of applying enterprise performance management methodologies, and then speculate about their next ten years.
THE PAST DECADE
The beginning of this past decade witnessed more experimentation with techniques like strategy maps, balanced scorecards, product and customer profitability analysis, and driver-based budgeting. Much of this was done with spreadsheets with increasing use of commercial software.
Undoubtedly a highlight of the past decade was three major business software vendors – SAP, Oracle, and IBM – acquiring main business intelligence and performance management vendors – Business Objects, Hyperion, and Cognos, respectively. The comparable software vendor SAS remained independent. To oversimplify, these acquisitions were heralded as a validation that business software must move up the food chain beyond basic collection and reporting of transactions to the higher value of analysis and decision support. Of course, consolidation is not integration (except in SAS’s case), but it is a preview of the future.
Another highlight was how the decade’s concluding global economic turndown accelerated the adoption rate of performance management methodologies. Organizations were preoccupied with the exhilaration of daily activities during the good times. They kept postponing implementing these methods. Now they found available time, as well as the need and higher priority, to implement and integrate performance management methodologies.
THE NEXT DECADE
My crystal ball is clear. I will gaze into it to see the future.
Despite the steady and continual implementation of enterprise performance management methodologies by some companies, there appears to be a converging consensus by this field’s thought leaders – like Howard Dresner, Frank Buytendijk, James Taylor, and Jonathan Becher. This consensus is that the disappointingly slow adoption rate of these now proven and justified methods is explained much less by technical barriers and much more by social barriers like an organization’s culture and human nature’s resistance to change or, in many cases, risk-taking. Going forward, I predict that subject matter experts will devote more energy to writing about behavioral change management than the mechanics of the methodologies. I recently wrote about this topic in my article “True Confession — My Struggle with Two Loves.”
A next decade wave that has already begun and is likely to reach ocean storm heights will be the expansion of enterprise performance management solutions to individually include analytics and business analytics to enhance their decision support. I describe this in my article “Why Will Business Analytics Be the Next Competitive Edge?”
Finally, an extension of the ascension to the higher stage of performance management methods leveraging analytics will be an emphasis on predictive analytics and their merger with risk management techniques. Belief and doubt are two sides of the same coin. As organizations pursue reductions in uncertainty and risk, they will gain competencies in forecasting and risk mitigation to maximize performance improvement.
Ten years from now, when I write a piece similar to this one, I will probably sum up my prediction in one word – optimization. By then, almost all managers will be of the Xbox, PlayStation, and Internet computer game generation. Quantitative analysis will be second nature with them. They’ll have access to adjustable types and levels of resources to maximize the experience of selected customers. The objective of their “game” will be to optimize what their organization does and how it does it as measured by stakeholders. Their stakeholders will include investors, regulators, employees, and the environment – people, planet, and profit.
There will always be winners and losers. I am hoping that environment sustainability will be a winner.
ABOUT THE WRITER
Gary Cokins, CPIM
Gary Cokins is an internationally recognized expert, speaker, and author in advanced cost management and performance management systems. He is a Manager of worldwide performance management solutions, with SAS, a leading provider of business analytics software headquartered in Cary, North Carolina. Gary received a BS degree in Industrial Engineering / Operations Research from Cornell University in 1971and an MBA from Northwestern University's Kellogg School of Management in 1974.
Gary began his career as a financial controller and operations manager for FMC Corporation and he has been a management consultant with Deloitte, KPMG Peat Marwick, and Electronic Data Systems (EDS). Gary’s third book, Activity Based Cost Management: An Executive’s Guide has ranked #1 in its topic on Amazon.com. His two most recent books are Performance Management: Finding the Missing Pieces to Close the Intelligence Gap (ISBN 0-471-57690-5) and Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics (ISBN 978-0-470-44998-1)