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Enterprise Performance Management Analytics Webinar

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Enterprise Performance Management Analytics Webinar

This video is from the Proformative webinar "Analytics-Based Enterprise Performance Management: Making it Work" held on January 15, 2013. This recorded webinar features presentations from Gary Cokins, CEO, Analytics-Based Performance Management, LLC and Jill Haas, Financial Analyst, TMG Health.

Despite recent advances in cloud computing and related technologies, many organizations are still far from where they want and need to be in driving performance. Companies still often apply intuition, rather than hard data, when making strategic and operational decisions. There is much talk about how to leverage analytics to drive performance, but how is it done? This webinar features renowned enterprise performance management (EPM) expert Gary Cokins, Gary discusses how companies are utilizing business analytics, with emphasis on predictive analytics and pro-active decision making, with their EPM methods to become a competitive advantage differentiator. The content also includes a case study for a company that is currently on the path to leveraging business analytics to drive performance across the enterprise.

Enterprise Performance Management Analytics Webinar

Partial Transcript

"Who'll benefit from this presentation? Managers who have previously struggled at promoting financial planning and analysis, enterprise performance management, and integrating business analytics into their decision support systems. Managers who intend to champion any and all enterprise performance management and business analytic improvement techniques, and need a compelling call to action.

The reason I put champion in quotes is it's been my observation that although it's really good to have senior executive sponsorship for improvement initiatives, just too often they may be preoccupied with firefighting or office politics at the top. It's actually been middle managers that I've found who really have sort of that passion, that fire in the belly to basically move their organization ahead.

This is oftentimes who I really like to appeal to. What I'm going to go through is I'm going to try to clarify what enterprise performance management is. There's a lot of  confusion and lack of consensus about it. I will similarly try to cover some of the confusion about what business analytics is. Then I'm going to describe what I consider to be the pressures that have caused the interest in performance management, and then I'll conclude with it as a value multiplier. Let's start with the first topic.

Confusion and lack of consensus by the enterprise performance management, is it human resources? Actually, if you Google performance management, 90% of the hits will be HR, personnel, employee appraisal, but that's really about performance management of the individual. We're talking about of the organization as a whole. Is it score cards, dashboards, KPI measures? Yes, but that's really just a subset. That's kind of the score card strategy map area, as well as the alignment of resources with allocation to which Jill will touch on what they're doing in terms of budgeting.

Is it about process, productivity, and quality improvement? Yes, but that's business process management, a subset. That's that area of lean management and six sigma. Quite frankly, if a big umbrella, a lot of it all fits under that umbrella. The good news is this. Enterprise performance management is not a new methodology that everyone now has to learn, but rather it is the integration of existing methodologies that people are already familiar with, have read about, or maybe their organization has actually been implementing them.

The problem is most organizations implement these methods and systems in isolation of each other, or in a sequence, and you get a lot more synergy when you integrate them, and even more power when you embed in each methodology, business analytics of off labors, like regression, segmentation, cluster analysis, and the like. I provided that definition.

I'll repeat it. Analytics-based performance management is the integration of multiple methodologies, and there are many of them, with each one embedded with business analytics, such as segmentation analysis, but especially predictive analytics. Because my observation is, most executives are moving away from sort of the command and control after the fact approach to much more anticipatory planning where the volume and mix, things are coming at them. They're making adjustments in headcount or
spend, or solving small problems before they become big ones.

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The key is, the real purpose of our enterprise performance management analytics webinar today is to achieve strategy execution and make better decisions. Business analytics, I always liked this quote from Jeanne Harris, who co-authored the "Competing on Analytics Book" with Tom Davenport. "40% of important decisions are not based on facts, but rather on intuition, experience, and anecdotal evidence." I always like to say to an organization, "Do we know or do we think we know? How do we validate?"

There's a lot of confusion about the definitions, and there are many definitions for business analytics. My simple approach is work backwards with the end in mind. Regardless how analytics should be defined, there should be no argument as to its purpose, which are these two things - better decisions and better actions based on those decisions.

Analytics' goal should be to gain insights and solve problems, to make better and quicker decisions with more accurate and fact-based data and take actions. Now, there's also confusion between business intelligence and analytics, and enterprise performance management. This is the way I basically disclose it. Business intelligence reporting consumes stored information often in the data warehouse. In contrast, analytics produces new information from the stored information.

Things like queries can answer questions, which can lead to even better questions. Then, of course, ultimately analytics can help solve those questions. What enterprise performance management does, which is really a set of methodologies, is they deploy the analytics in the context of different missions. I always like to say it's not about monitoring the dials on a dashboard, but rather moving the dials, those actions and decisions.

Now, business intelligence can be considered kind of using a Darwinian approach here as these four steps - standard reports, ad hoc reports, in some cases CIO will give some managers and employees query and drill bound capability, you may have alerts, upper or lower limits. What analytics does is it basically continues with the journey to statistical analysis, then of course moving to the predictive view, forecasting. That would be more for operations, inventory management, and the like.

Then predictive modeling, which is much more in the marketing space, analyzing what type of customer would react to what type of offer or deal. Then, of course, Mt. Everest at the top of the hill, optimization, which is expensive, but it's a goal for people to aspire to.

I love this cartoon. It's got this clerk and the desk with clutter all around, shoulders hunched, sort of frowning. Supervisor at the left in the doorway asking the clerk, "It looks like you've got all the data. What is the hold up?" "I gave you the request this morning. What's the problem? Why don't you have the answer?" That's what most organizations are struggling with, this whole area or topic of big data.

As the title of this presentation indicates, Enterprise Performance Management Analytics Webinar, and as I've mentioned, has really been around for decades, arguably even before computers, so why is there interest in it now? What I'd like to quickly walk through is what I consider to be eight forces, of which I'm going to cover several of them during the rest of the talk.

The first one is executives' frustration with strategy failure. Most executive teams are quite good at formulating strategy, or they'll bring in Mackenzie or [Bruce Allen], one of these classic strategy consulting firms. Their big frustration is failure to execute the strategy. There's a fair amount of evidence, just the high turnover rate of CEOs.

Second force, increase accountability. Accountability is on the rise for everyone, and it's not going to be avoidable. It's going to even be accountability with consequences. Individuals' promotions or jobs may even be at risk. Third force, more rapid decision making. Unlike, I think, five or ten years ago, you could test and learn and have meetings in conference rooms. Today, you may be on the phone and it's a go or no go decision.

The fourth force, mistrust of the managerial accounting system for accuracy and transparency, and when I get to that section I will talk about methodologies like activity-based costing. Fifth area, poor customer value management, organizations are shifting from being product-centric to being more customer-centric, but they're not all doing a good job on serving customers.

The sixth item is the item which Jill will talk about when she follows me at the end of my part, is contentious budgeting, poor resource capacity planning, which is really what a budget is. I'm going to say it now. I think the budgeting process is broken. It's a disaster. I think if you ask most operational managers, raise their hand, "How many of you love doing the annual budgeting process?" virtually none of them will raise their hand. We will talk about what this is all about and Jill will then give examples from her company.

The seventh force, which I won't go into detail is just supply chain management. It's dysfunctional and too much adversarial relationships between suppliers and buyers.They really need to basically operate as if they are a single chain. The last force is what I call unfulfilled return on investment promises from large IT systems. I'm not being critical of ERP, enterprise resource planning, or customer relationship management systems, but I think if you ask most CIOs how well you believe the promise of an ROI from your software vendor met its expectations, they'll be frustrated.

The problem is not that those aren't good systems, or absolutely excellent to putting it in. It's just that we need to basically get the ROI out of the information that's in them. Let's talk about four of the eight forces, and I'll start with this strategy - failure by executives to execute their well-formulated strategy.

Typically what solves this is a coupling together of what's called the balanced score card and strategy maps that go with it, but of course above that is really the vision and mission statement that must come from the executive. That's their job. That's what they're responsible for. The executives, in my mind, are supposed to answer this one question, "Where do we want to go?"

Performance management and all of the managers and operational people below it really answer the second question, "How we will get there?" That's the role of strategy maps and score cards."

End of partial transcript: Enterprise Performance Management Analytics Webinar

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