This article originally appeared on the BeyeNETWORK
Is business intelligence (BI) part of performance management (PM)? Or is performance management part of business intelligence? The question arises because the underlying inputs, processes, outputs and outcomes of an organization – whether a government agency or a commercial business – may arguably have some parts that belong to business intelligence and others to performance management. The key word in that sentence was "arguably." This argument arises because IT-centric people often see an enterprise as a ravenous consumer of billions of bytes of data intended to manage the business (a BI view). In contrast, leaders, managers and employee teams typically view the same enterprise as an organism with a purpose and mission; they desire solutions and applications that achieve improvement. How can we reconcile business intelligence and performance management?
Most folks agree that: 1) business intelligence involves raw data that must first be integratedfrom disparate source systems and then transformed into information, and 2) performance management leverages that information. In this context, information is much more valuable than data points because integrating and transforming data using calculations and pattern discovery results in potentially meaningful information that can be used for decisions. For example, an automobile manufacturer's warranty claims can be globally analyzed to detect a design problem, or retailers can analyze an individual's credit card purchase transaction data to improve decisions that help them better serve the customer.
According to results of a recent survey by the global technology consulting firm Accenture,senior U.S. executives are increasingly more disenchanted with their analytic and BI capabilities. Although they acknowledged that their business intelligence (regardless of how they personally define it) provides a display of data in terms of reporting, querying, searching and visual dashboards, they felt their mainstream business intelligence still fell short. An organization's interest is not just to monitor the dials, but also to move the dials. Merely reporting information does not equate to managing for better results. Actions and decisions are needed to improve the organization's performance. Having mainstream BI capability is definitely important; however, it often comes about as the result of departments needing advances that their IT functions could not provide. Extending business intelligence across the organization so that mini-BI applications can talk is a mission-critical differentiator leading to organizational success and competitiveness.
Managing performance and improving performance are not the same. Many people are managers, like a coach of a sports team, and they get along by doing just that. However, organizations win by improving. Performance management can be viewed as deploying the power of business intelligence, but the two are inseparable. Think of PM as an applicationof BI. PM adds context and direction for BI. As in physics, BI is like potential energy, while PM is the conversion of potential energy into kinetic energy. Coal, when heated, provides power to move things. Using a track-and-field analogy, business intelligence is like the muscles of a pole-vaulter, and PM is that same athlete clearing higher heights. Business intelligence is an enterprise information platform for querying, reporting and much more, making it the foundation for effective performance management. Performance management drives the strategy and leverages all of the processes, methodologies, metrics and systems that monitor, manage and, most importantly, improve enterprise performance. Together, business intelligence and performance management form the bridge that connects data to decisions.
In performance management, strategy spurs the application of technology, methodologies and software. These methodologies are typically implemented or operated in isolation of each other. Once they are integrated, the strength and power of performance management grows. Software technologies support the methodologies. While software is an essential enabler, it’s thinking that is the critical part. In fact, we need to understand the assumptions used in configuring commercial software; and, more importantly, we need to have a vision of the emerging possibilities to apply the new knowledge produced in BI and PM initiatives.
Let’s not waste valuable energy debating the semantics of business intelligence and performance management. Let’s instead focus on where performance management deploys the power in business intelligence with its enterprise information platform so that organizations can advance from managing to improving.