1. MGS 8020 Business Intelligence Business Performance Management Apr 16, 2015

2. BPM Architecture and Applications
Agenda
Business Performance Management
BPM Methodologies
BPM Architecture and Applications
Appendix

3. Business Performance Management (BPM) Overview
A real-time system that alert managers to potential opportunities, impending problems, and threats, and then empowers them to react through models and collaboration
BPM and BI Compared
BPM is an outgrowth of BI and incorporates many of its technologies, applications, and techniques / BPM is part of the daily work of managers
BPM is an enterprise wide strategy that seeks to prevent organizations from optimizing local business at the expense of overall corporate performance
Summary of BPM processes
BPM encompasses a closed-loop set of processes that link strategy to execution in order to optimize business performance, which is achieved by:
Setting goals and objectives
Establishing initiatives and plans to achieve those goals
Monitoring actual performance against the goals and objectives
Taking corrective action

4. Business Performance Management (BPM) The Big Picture
Business Strategy
Business Objectives
Business Metrics
Key Process Indicators
1. Balanced Scorecard:
Financial
Customer
Internal Business Process
Learning & Growth
Business Analysis:
Workout Sessions
Catalyst Sessions
Leadership Planning
SOAR Planning
Service/ Process Design
Strategic Initiatives
Process Improvement
Lean/ Waste Reduction
Just Do It
2. Strategic Improvement Goals:
Based on Key Process Indicators
Tied to Business Metrics
3. Prioritize Opportunities
4. Identify Specific Projects, Resources
Design for Six Sigma
Master Black Belts
Black Belts
PMO
MBB, BB, PMP
Core Six Sigma
Green Belts
8-D, KT Problem Solving
BB, GB or Trained Team Ldr
Lean Thinking
Kaizen
Six Sigma Select Tools
Trained Team
Alternate way of viewing the big picture:
Strategize
Plan
Monitor
Act and Adjust
These four steps map onto the four steps listed in the slide 4

5. Strategize: Where Do We Want to Go?
Strategic planning
Tasks common to the strategic planning process:
Conduct a current situation analysis
Determine the planning horizon
Conduct an environment scan
Identify critical success factors
Complete a gap analysis
Create a strategic vision
Develop a business strategy
Identify strategic objectives and goals
Critical success factors (CSF)
Key factors that delineate the things that an organization must excel at to be successful in its market space
Strategic vision
A picture or mental image of what the organization should look like in the future

6. Strategize: Where Do We Want to Go?
Strategic planning
Strategic objective
A broad statement or general course of action prescribing targeted directions for an organization
Strategic goal
A quantified objective with a designated time period
Four sources for the gap between strategy and execution:
Vision
People
Management
Resources

7. Plan: How Do We Get There?
Operational planning
Operational plan
Plan that translates an organization’s strategic objectives and goals into a set of well-defined tactics and initiatives, resources requirements, and expected results
Tactic-centric plan—tactics are established to meet the objectives and targets established in the strategic plan (used by best practices organizations)
Budget-centric plan—a financial plan or budget is established that sums to the targeted financial values
Financial planning and budgeting
An organization’s strategic objectives and key metrics should serve as top-down drivers for the allocation of an organization’s tangible and intangible assets
Resource allocations should be carefully aligned with the organization’s strategic objectives and tactics in order to achieve strategic success

8. Monitor: How Are We Doing?
A comprehensive framework for monitoring performance should address two key issues:
What to monitor
How to monitor
Diagnostic control system
A system that has inputs, a process for transforming the inputs into outputs, a standard or benchmark against which to compare the outputs, and a feedback channel to allow information on variances between the outputs and the standard to be communicated and acted upon
Pitfalls of variance analysis
The vast majority of the exception analysis focuses on negative variances when functional groups or departments fail to meet their targets
Rarely are positive variances reviewed for potential opportunities, and rarely does the analysis focus on assumptions underlying the variance patterns

9. Monitor: How Are We Doing?
Diagnostic Control System Schematic
Business Strategy
Critical performance variables
Goals
Inputs
Process
Outputs
Adjustments

10. Performance Measurement
Performance measurement system
A system that assists managers in tracking the implementations of business strategy by comparing actual results against strategic goals and objectives
Problems with existing performance measurement systems
The most popular system in use is some variant of the balanced scorecard (BSC)
BSC methodology is a holistic vision of a measurement system tied to the strategic direction of the organization and based on a four-perspective view of the world:
Financial measures supported by customer, internal, and learning and growth metrics
The drawbacks of using financial data as the core of a performance measurement
Financial measures are usually reported by organizational structures and not by the processes that produced them
Financial measures are lagging indicators, telling us what happened, not why it happened or what is likely to happen in the future
Financial measures are often the product of allocations that are not related to the underlying processes that generated them
Financial measures are focused on the short term and provide little information about the longer term

11. Performance Measurement
Effective performance measurement
Basic ingredients of a good collection of performance measures
Measures should focus on key factors
Measures should be a mix of past, present, and future
Measures should balance the needs of shareholders, employees, partners, suppliers, and other stakeholders.
Measures should start at the top and flow down to the bottom
Measures need to have targets that are based on research and reality rather than be arbitrary

12. Performance Measurement
An effective performance measurement system should help:
Align top-level strategic objectives and bottom-level initiatives
Identify opportunities and problems in a timely fashion
Determine priorities and allocate resources based on those priorities.
Change measurements when the underlying processes and strategies change
Delineate responsibilities, understand actual performance relative to responsibilities, and reward and recognize accomplishments.
Take action to improve processes and procedures when the data warrant it.
Plan and forecast in a more reliable and timely fashion

13. BPM Architecture and Applications
Agenda
Business Performance Management
BPM Methodologies
BPM Architecture and Applications
Appendix

14. BPM Methodologies Balanced scorecard (BSC)
A performance measurement and management methodology that helps translate an organization’s financial, customer, internal process, and learning and growth objectives and targets into a set of actionable initiatives
The meaning of balance
BSC is designed to overcome the limitations of systems that are financially focused
Nonfinancial objectives fall into one of three perspectives:
Customer
Internal business process
Learning and growth
In BSC, the term balance arises because the combined set of measures are supposed to encompass indicators that are:
Financial and nonfinancial
Leading and lagging
Internal and external
Quantitative and qualitative
Short term and long term

15. Balanced Scorecard Perspectives
1. Financial: How do we look to our shareholders and how should we look?
2. Customer: How do our customers see us and how should we appear?
3. Internal Business Process: What should we do that is excellent and how are we doing?
4. Innovation and Growth: Can we continue to improve and add value through employee and organization innovation and learning?
Aligning strategies and actions - BSC enables an organization to align its actions with its overall strategies through a series of interrelated steps:
Identify strategic objectives for each of the perspectives (maybe 15 to 25 in all).
Associate measures with each of the strategic objectives; a mix of quantitative and qualitative should be used.
Assign targets to the measures.
List strategic initiatives to accomplish each of the objectives (i.e., responsibilities).
Link the various strategic objectives through a cause-and-effect diagram called a strategy map 17

16. BPM Methodologies: Strategy Map
The economic model of key levers driving financial performance
The identification of targeted customer segments and their value proposition
The process-focused view of the business using the value chain
The intangible assets necessary to drive performance
Financial Perspective
Return on
Investment
A Strategy Map is a visual display that delineates the relationships among the key organizational objectives for all four BSC perspectives
Revenue
Strategy
Productivity
Strategy
Sources of Growth
Sources of Productivity
Customer Perspective
Price
Quality
Time
Function
Image
Relationship
Internal Process Perspective
Build the
Brand
Make
the
Sale
Deliver
Product
Service
Exceptionally
Learning & Growth Perspective
Technology
Infrastructures
Staff
Competencies
Climate for
Action +
MGS 8020 Methods of Business Intelligence 18

17. BPM Methodologies Six Sigma
A project-based performance management methodology aimed at reducing variation (thus defects) in business process opportunities
Lean
A value-stream-based performance management methodology aimed at reducing non-value-added waste in a business process opportunities
Lean Six Sigma
A hybrid methodology combining the business process improvement tools and techniques of Lean and Six Sigma to accommodate business needs in broader range of applications than each methodology can individually accomplish

18. BPM Methodologies Lean Six Sigma The DMAIC performance model
A closed-loop business improvement model that encompasses the steps of defining, measuring, analyzing, improving, and controlling a process
Limitations of Lean Six Sigma
The lack of integration among the various Lean Six Sigma projects across the enterprise
The failure to institute the roles required to support the methodology
Not every business problem lends itself to the DMAIC approach
Six Sigma
Limitations of Six Sigma
The lack of integration among the various Six Sigma projects across the enterprise

19. BPM Architecture and Applications
Agenda
Business Performance Management
BPM Methodologies
BPM Architecture and Applications
Appendix

20. BPM Architecture and Applications
System architecture
The logical and physical design of a system
A BPM system needs three components in order to contribute to the successful implementation of strategy:
Database tier
Application tier
Client or user interface
Database tier designs include:
Transactional data stores
Application data marts
Centralized data warehouse

21. BPM Architecture and Applications
BPM applications:
Budgeting, planning, and forecasting
Profitability modeling and optimization
Scorecard applications
Financial consolidation
Statutory and financial reporting
BPM user interface
The user interface is the bridge between the BPM applications and the end user
The Web browser is currently the primary tool for accessing information in a BPM system
Spreadsheets are a popular alternative when a rich user interface is needed to support the analytical and computation needs of the user
BPM interfaces should provide is guidance to the end user

22. Performance Dashboards
Dashboards and scorecards both provide visual displays of important information that is consolidated and arranged on a single screen so that information can be digested at a single glance and easily explored

23. Simplistic sample scorecard
Quality
Drilldown
Productivity
Drilldown
Skip
Dashboard 26

24. Performance Dashboards
Dashboards versus scorecards
Performance dashboards
Visual display used to monitor operational performance
Performance scorecards
Visual display used to chart progress against strategic and tactical goals and targets
Performance dashboard is a multilayered application built on a business intelligence and data integration infrastructure that enables organizations to measure, monitor, and manage business performance more effectively (Eckerson)

25. Performance Dashboards
Dashboard design
Three types of performance dashboards:
Strategic dashboards
Operational dashboards
Tactical dashboards
“The fundamental challenge of dashboard design is to display all the required information on a single screen, clearly and without distraction, in a manner that can be assimilated quickly" (Few, 2005)

26. Performance Dashboards
What to look for in a dashboard
Use of visual components (e.g., charts, performance bars, sparklines, gauges, meters, stoplights) to highlight, at a glance, the data and exceptions that require action.
Transparent to the user, meaning that they require minimal training and are extremely easy to use
Combine data from a variety of systems into a single, summarized, unified view of the business
Enable drill-down or drill-through to underlying data sources or reports
Present a dynamic, real-world view with timely data refreshes, enabling the end user to stay up-to-date with any recent changes in the business.
Require little, if any, customized coding to implement, deploy, and maintain

27. Business Activity Monitoring (BAM)
A real-time system that alert managers to potential opportunities, impending problems, and threats, and then empowers them to react through models and collaboration
BAM depends on a wide range of technologies working in concert including:
ETL technology
Process modeling technology
Rules engines
Messaging servers
in-boxes, portals, dashboards, and Web services

28. Business Activity Monitoring (BAM)
Benefits of BAM
Real-time data access in a usable format
Access to tools to collaborate and model the problem, leading to a quick solution
BAM Issues
Executives fail to consider the readiness of technology or of the business processes they want to monitor
Change management issues are paramount
Effective BAM requires working closely with the business units to identify the key indicators (CSF) and analytical techniques that provide reliable early warnings of impending issues
Executives must let the responsible managers on the frontlines deal with their problems and issues in a timely manner before reacting

29. Metrics attributes (K. H. Rose, 1995)
Customer-centered
indicators that provide value to customer (quality, dependability, timeliness)
associated with internal work that address system cost, waste reduction, team work, innovation, customer satisfaction
Measure performance across time (trends, not snapshots)
Provide information directly at level they are applied (no further processing)
Linked to business mission, strategy, and actions
Contribute to organizational direction and control
Collaboratively developed by those who provide, collect, process and use the data 32

30. Example: Business Intelligence Evolution
MGS 8020 Methods of Business Intelligence 33

31. BPM Architecture and Applications
Agenda
Business Performance Management
BPM Methodologies
BPM Architecture and Applications
Appendix