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Smart Decisions: The Role of Key Performance Indicators (KPIs)
Are KPIs Accelerating and Improving Decisions?

by David Hatch, Aberdeen GroupTuesday, August 21, 2007

Scorecards, dashboards, operational reporting, analytics, and “automated alerting” present business executives with many options for gatMeasurement done in the form of a Bar Graphhering, tracking, analyzing and acting upon Key Performance Indicators (KPIs). KPI management and strategies can have a positive effect on corporate performance. But the creation, management and continual review of KPI data can prove to be a difficult process. It often involves the integration of data from a variety of disparate sources, complex formulas and calculations to derive accurate KPIs, and a host of infrastructure requirements to deliver the information in a meaningful format and via an effective medium.

Recent Aberdeen research has revealed that: 93% of firms enjoying Best-in-Class performance have enabled programs and campaigns based on customer key performance indicators.

The single biggest differentiator between Best-in-Class and all others was the propensity and completeness for measurement across all Best-in-Class determining KPIs.

Best in Class PACE Hypothesis

Businesses thrive or fail based on their ability to identify, define, track and act upon key performance metrics/indicators (KPIs). Executives and line- of-business management are increasingly feeling the pressure to establish the right KPIs to enable timelier and more accurate decisions. The faster and more accurately KPIs can be accessed, reviewed, analyzed and acted upon, the better chance an organization has for success.

This benchmark study will investigate how organizations are approaching the creation and tracking of KPIs to improve accuracy and timeliness of decisions that affect company performance.

Issue At Hand

This report will explore the business processes that executives and line-of-business management employ to accelerate and improve the quality of decisions based on key performance metrics/indicators (KPIs). Our research and analysis will provide:

  • Insight into the barriers preventing access to KPI information
  • Pointers towards best-in-class strategies and tactics for improving access to and use of key performance metrics for decision-making
  • Options and approaches for increasing the accuracy and timeliness of KPI information for improved decision-making

Aberdeen’s Hypothesis

The predominant pressure is the need to measure and improve company performance. Best in Class companies will be defined as those who have improved performance across financial, customer, process, and innovation categories while raising visibility to KPI information across the enterprise.

Aberdeen research will investigate how companies are meeting the challenge of defining, measuring and refining the KPIs that drive company performance. The study will determine what strategies and actions companies are taking to:

  • Understand the key business drivers that affect company performance
  • Establish a corporate set of key performance indicators (KPIs)
  • Align KPIs with line-of-business goals and incentives
  • Provide a method for making KPI –based performance visible to the enterprise
  • Create an on-going process for KPI review, evaluation and re-alignment

The performance metrics used to determine best-in-class are:

  1. Existence and improvement of KPIs in four major scorecard categories: financial, customer, process, HR & Innovation
  2. Increased decision-maker visibility to KPIs
  3. Improvement in KPI performance across financial, process, customer and innovation categories
  4. Improvement in “speed to decision” – decrease in time from when information is available from actual business events
  5. Improvement in quality of information upon which decisions are based

Case in Point

Take, for example, the case of a mid-tier wine importer operating in a highly regulated market. With a three-tier distribution system legally enforced, there are limited opportunities to pursue growth strategies such as vertical integration. However, during the last decade there has been increasing consolidation among the distributor and retailer channels that the company depends on to reach the consumer. This consolidation has concentrated power downstream in the supply chain, threatening margin pressure and the potential restriction or loss of distribution channels. With only limited strategic options, the company focused on the KPIs that could drive continued growth and competitive success in the marketplace:

  • On-hand / on-time inventory available
  • Outstanding “open” order value
  • Net-new accounts through distribution network
  • Promotion costs and ROMI

Through better management of the core KPIs that were driving business, the company was able to increase revenues by 12% in one year, more than twice the industry average. From an operational standpoint, the availability of inventory and open order value enabled field sales representatives to gain competitive advantage through a better view of the customer and the right price and delivery pressures to apply. Strategically, senior management could keep a pulse on the key metrics driving new business and whether or not costly marketing programs were delivering or not.

Research Methodology

Our research will provide actionable insight and recommendations on the strategies and methods that best-in-class organizations find important toward measuring and improving company performance. To accomplish this, we will conduct a survey designed to assess organizations’ current and future plans to address their strategies toward KPI information delivery.

Solution Snapshot

Solution providers include a broad spectrum of software and services companies. Very large BI software providers, such as Cognos, Business Objects and Oracle (Hyperion) have dashboard and scorecard offerings, as well as several reporting and analytics options that address KPI information discovery and delivery. There are also several smaller providers, such as iDashboards, VisualMining, and The Dashboard Company who are focused entirely on the visual representation and delivery of KPI information within dashboard interfaces. Additionally, there are several consulting firms, ranging from large players like Accenture and BearingPoint to mid-tier and smaller organizations like Hitachi Consulting and Claraview who offer a combination of management consulting and technical services to deliver a KPI-based information system.

Company Web Site
Actuate www.actuate.com
Applix www.applix.com
arcplan www.arcplan.com
Business Objects www.businessobjects.com
Board USA (Board MIT) www.boardmit.com
Cartesis (acquired by Business Objects) www.cartesis.com
Cognos www.cognos.com
CorVu www.corvu.com
Dimensional Insight www.dimins.com
Fair Isaac www.fairisaac.com
Hyperion (Oracle) www.hyperion.com
HP www.hp.com
IBM www.ibm.com
InetSoft www.inetsoft.com
Information Builders www.ibi.com
JasperSoft www.jaspersoft.com
LogiXML www.logixml.com
LucidEra www.lucidera.com
Maxager www.maxager.com
MicroSoft www.microsoft.com
MicroStategy www.microstrategy.com
Oco www.oco-inc.com
OnDemandIQ, Inc www.ondemandiq.com
Oracle Discoverer www.oracle.com
OutlookSoft www.outlooksoft.com
Panorama Software www.panoramasoftware.com
Panoratio www.panoratio.com
Pentaho Corporation www.pentaho.com
Proclarity (Microsoft Sub.) www.proclarity.com
QlikTech www.qliktech.com
SAP (BW) www.sap.com
SAS www.sas.com
SeaTab www.seatab.com
Silvon www.silvon.com
SpagoBI www.spagobi.com
Spotfire (TIBCO) www.spotfire.com
SPSS www.spss.com
Vanguard Business Analytics, Inc. www.vanguardbusinessanalytics.com
Visual Sciences www.visualsciences.com

Company Industry Focus
Adenin Technologies www.adenin.com
Amontis www.amontis.com
Appian Analytics (Global Market) www.appiananalytics.com
Composite Software www.compositesw.com
Computer Associates www.ca.com/us/
Corda Technolgoies www.corda.com
Dundas www.dundas.com
Enspiria Solutions www.enspiria.com
eProject, Inc. www.eproject.com
ConsensusPoint www.consensuspoint.com
Hard Metrics www.hardmetrics.com
iDashboards www.idashboards.com
iExecutive Dashboards www.iexecutivedashboard.com
IIS (Intelligent Information Systems) www.renewal-iis.com
InsightFormation www.insightformation.com
Intelex Technologies www.intelex.com
Intranet Dashboard www.intranetdashboard.com
KnowWare International, Inc. www.qimacros.com
NetSuite www.netsuite.com
Nimsoft www.nimsoft.com
Nuvont N/A
Palladium (Executive Strategy Manager) express.bscol.com
Performance Solutions Technologies www.managepro.com
Picis www.picis.com
Profit Metrics, Inc. www.profitmetrics.com
Project Leadership Associates www.projectleadership.net
Quadbase Systems, Inc. www.quadbase.com
Serence www.serence.com
Sharp Analytics www.sharpanalytics.com
Sherrill-Lubinski (SL) www.sl.com
Software FX www.softwarefx.com
Strategy Map www.strategymap.com.au
Strategy Companion www.strategycompanion.com
The Dashboard Company www.thedashboardcompany.com
Vanguard Business Analytics (Exact) www.vanguardba.com
VisualCalc www.visualcalc.com
Visual Mining www.visualmining.com
Visum Solutions www.visumsolutions.com

Company Industry Focus
Accenture www.accenture.com
Active Strategy www.activestrategy.com
Affusion Consulting www.affusioninc.com
Baseline Consulting www.baseline-consulting.com
BearingPoint www.bearingpoint.com
Bianix www.bianix.com
BrightPoint Consulting www.brightpointinc.com
Business Edge Solutions www.businessedge.com
Claraview www.claraview.com
Clarity Integration www.clarity-integration.com
Data Vision Consulting N/A
DecisionPath Consulting www.decisionpath.com
eVergeGroup www.evergegroup.com
Hitachi Consulting www.hitachiconsulting.com
IBM www.ibm.com/us/
InfoCube www.infocube.co.uk
InsightFormation www.insightformation.com
Intelligent Information Systems www.renewal-iis.com
Intelligent Solutions www.intelsols.com
Knightsbridge (HP) www.knightsbridge.com
Pegasus Consulting Group www.pegasusconsultinggroup.com
Project Leadership Associates www.projectleadership.net
Systems Evolution, Inc. www.sysev.com
The BMA Group www.bma.com.au
The Revere Group www.reveregroup.com
Threshold Services www.thresholdbi.com
VIP Consulting www.vipconsulting.com
Wipro Technologies www.wipro.com

For more information on this or other research topics, please visit www.aberdeen.com or contact Tina Putnam directly at 617-854-5276, or via Email tina.putnam@aberdeen.com.

Related Research

On-Demand Is Not Far Behind BI on the Technology Wish List June, 2007

Is the BI Market a Target for ERP Vendors? May, 2007

Business Intelligence for All; May, 2007

The Convergence of Unstructured and Structured Information July, 2007

Author: David Hatch, Research Director, Business Intelligence

Founded in 1988, Aberdeen Group is the technology- driven research destination of choice for the global business executive. Aberdeen Group has over 100,000 research members in over 36 countries around the world that both participate in and direct the most comprehensive technology-driven value chain research in the market. Through its continued fact-based research, benchmarking, and actionable analysis, Aberdeen Group offers global business and technology executives a unique mix of actionable research, KPIs, tools, and services.
This document is the result of research performed by Aberdeen Group. Aberdeen Group believes its findings are objective and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, stored in a retrieval system, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.

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