One of the fun but also frustrating aspects of enterprise performance management is dealing with the confusion about what it is and is not. Debates abound among IT analysts, management consultants, business journalists and software vendors, just to name a few groups.
I like to debate; that is the fun part. In a blog by Muthu Ranganathan, the SAP product manager asks the question echoed in the title if this piece.
In my opinion, Muthu tries to oversimplify this topic by stating that “analytics is the past, and performance management is planning plus analytics.” I discuss this in my prior blog “Rearview Mirrors or Windshield.” I think he underestimates the role that analytics plays in analyzing the future. Analytics is not just about slicing and dicing historical data. What do I mean?
For example, when you integrate various performance management methodologies (such as customer relationship management and rolling financial forecasts) and imbed each of them with analytics, one can quickly evaluate the impact of changes. When using forecasting, one can look at what-if scenarios and also perform trade-off analysis. An application of forecasting could include evaluating various marketing campaigns. Another one could include estimating the impact on sales from offering differentiated sales service-levels to different types of customers. These types of analysis are forward-looking examining the future, not the past.
I also argue with Muthu’s claim that “performance management is a process.” It is not. And it is not a system or software, although software technology supports the various integrated methodologies. The full vision of performance management is the integration of all the methodologies as a framework, each embedded with analytics, especially predictive analytics.
Debate is the fun part. The frustrating part is the slow adoption of organizations to embrace this integration. Too many organizations see power in having a solid foundation of transactional business systems, like an ERP system. That is only the starting line. The real race is to transform and model this raw data into information and business intelligence to drive better decisions that are truly value creating.
About the Author
Gary Cokins is a strategist for SAS, a market leader in data management, business intelligence and analytical software. He is an internationally recognized expert, speaker and author on advanced cost management and performance improvement systems. He is the author of five books, An ABC Manager's Primer, Activity-Based Cost Management: Making It Work, Activity-Based Cost Management: An Executive's Guide (Wiley), Activity-Based Cost Management in Government and his latest work, Performance Management: Finding the Missing Pieces to Close the Intelligence Gap (Wiley). You can contact him at firstname.lastname@example.org
Stuart Geros said:
Gary, your frustrations are shared. There is the issue of monitoring and the separate issue of analysis. Where both processes fail is in treating each as a silo. They cannot be separated. Integration and correlation of multiple data sets in a real time model will allow you to test the performance and analyse the data in real time. Both processes need to be automated and integrated. You need to be able to understand the impact of multiple components from disparate sources on a single business process.