While business performance management (BPM) has emerged as a way to obtain timely and relevant insights to help effectively manage a business, investments in IT systems don’t necessarily guarantee better information. When results are disappointing, it’s not always a technology issue: problems often begin with the underlying metrics selected to measure business success against business strategy. For many organizations, building a successful BPM system means making a fundamental change to the way data is gathered, processed, and presented.

The Promise (and Failure) of BPM

Business intelligence (BI) can be defined as a collection of information that helps business leaders make better business decisions. As a subset of BI, BPM (when done right) can differentiate top performers from the rest by:

- Improving the accuracy and integrity of data;
- Creating efficient access to information;
- Enabling well-informed and insightful business decisions;
- Providing a central location for data analysis;
- Helping an organization set its objectives.

But how often BPM actually produces these results is an open question. Despite an annual global outlay of around $60 billion, according to AMR Research, BI rarely delivers on its promises. After making technology investments, only 38 percent of CFOs saw an improvement in the quality of their financial information, and only slightly more — 43 percent — realized faster information delivery, according to a 2008 KPMG International study.

With such poor results, it’s not surprising that many companies, even after a BI or BPM initiative, continue to rely on spreadsheets to provide the visibility and control they need — the very spreadsheets their solution was intended to eliminate.

Accuracy in Insight

To break this cycle of failure, companies should consider adopting a more holistic view of BPM programs. This means:

- Focusing less on the technical aspects of an implementation and more on the needs of the users and owners of information;
- Creating an information architecture that delivers the right metrics;
- Prioritizing data quality over quantity.

Although BPM is technology-enabled, the key to achieving better results is to move from a technology-centric, tactical approach to what I call “accuracy in insight” — a strategic approach that places greater emphasis on the information itself.

Accuracy in insight recognizes that information has true business value, but in order to leverage that value to improve business performance, a company must first have confidence in the inputs and assumptions that underlie it. Because there’s frequently a misalignment between the dynamics that actually drive the business and those used in the underlying analytical models, the first step is to ensure that the data being gathered is against the right metrics.

Here’s an example. A manufacturer created a set of metrics focused primarily on cost per unit. As a result, the company always bought in bulk to take advantage of quantity discounts. The organization’s leaders didn’t see that this strategy negatively impacted cash flow. What’s more, they failed to realize that by buying in smaller quantities tied to actual customer demand, the company could reduce the inevitable inventory write-offs and maximize profits.

Identifying the right metrics requires a clear understanding of the dynamics that affect business outcomes. It starts by identifying the business drivers, particularly those that are unique to the organization, its industry, or its customers. If you’re overseeing a BPM initiative, you’ll need an intimate knowledge of your company’s business strategies as well as its industry, and the ability to identify the trends affecting both.

It’s quality – not quantity – of data that counts. Companies should focus on the metrics that have the greatest impact on the business, instead of treating all data sources with equal emphasis. Data is useless unless your BPM technology infrastructure can effectively filter its sources to identify and capitalize on critical areas.

It’s also important to remember that although each area of the business will have its own perspective on the data, any actions that are taken on the basis of that information can have a profound impact on — and even unintended consequences for — other parts of the organization. To prevent this, you must identify correlated factors and ensure a constant flow of information across the organization so that decisions aren’t made in silos. Ongoing data governance is a priority for continued success.

A Solid Foundation

Treating data as a valuable asset instead of a by-product of operations typically involves a companywide transformation, one that frequently requires cultural and process adjustments as well as technology changes. In any BPM project, the most critical effort takes place before the technology is installed or even purchased. But if you get the groundwork right, you can build a BPM system that delivers on its promises, provides you organization with reliable insight into the unpredictable market conditions still ahead, and translates mountains of data into a business strategy that can be executed upon quickly and effectively.