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April 5, 2003

When Time Is Money

Real-time performance measurement can be a big advantage for many business processes

by Justin Langseth & Greg Reilly

The two most compelling trends in business intelligence (BI) are business performance management (BPM) and real-time data warehousing: BPM is gaining momentum as businesses become more focused on the bottom line and the cost and benefit of every function. At the same time, the pace of business is speeding up as customer demands become more intense and competitors move quicker than ever to meet their needs.

Combining these two trends leads us to real-time BPM, which entails the real-time measurement of the performance of critical business functions, and the continual proactive communication of these measurements to those employees within an enterprise who are best positioned to take immediate corrective actions.

Currently, such systems are generally focused on one operational area, as opposed to overall corporate performance. For example, some retailers adjust product placement throughout the day based on near real-time sales performance analysis; Google.com decides which ads to show on top of search results based on real-time click-through performance. While a CEO is unlikely to make a snap corporate strategy change based on a real-time performance indicator on an executive dashboard, thousands of lower-level decisions being made continually across most organizations could benefit from real-time performance-based analytics.

In previous articles (see Resources), we've detailed how to integrate BI into the decision-making fabric of an organization in a proactive way, as well as strategies for implementing real-time data warehouses. In this article, we'll first take a step back to examine two fundamental questions: What should a BI system really measure, and which of these measures are worth calculating and acting on in real time? Before you formulate a BPM strategy, you'll need the answers.

Better Decisions By Managers

The primary purpose of BI technology is to facilitate better decisions by managers. Better decisions rely on high quality, highly relevant, and up-to-date data delivered to the right managers in a timely and easy to understand manner. BPM modules exist within BI systems to assist managers in monitoring existing business operations and to provide guidance in identifying improvement opportunities. BI and BPM systems enable organizations to create dynamic information systems that link managers to business data, making possible the fast and accurate decision-making that's required of an agile enterprise.

Now that the necessary technology is readily available to most companies, a new and perhaps more fundamental challenge is on the horizon: Executives and project managers are rightly asking, "Now that we have the tools to get the information we need to the managers who need it, how do we determine what that information is?"

To truly answer this question requires an understanding of what your business does, what it creates, who it's trying to serve and how, where it's trying to go in the future, and how it will get there. Indeed, the benefit of BI technology is often diminished because many customers struggle to identify and capture the most important information about their business in key performance indicator (KPI) metrics.

Furthermore, before BI technology can enable real-time connections among people, processes, and data, managers need a process for defining what these connections should be, and which of them are time-critical enough to require real-time data movement, warehousing, monitoring, reporting, and alerting. They must have guiding principles that focus their efforts and an easy-to-follow process for defining a linked network of critical success factors and the metrics to monitor them.

Defining Measures

You can determine these measures in various ways. The simplest approach is to use the KPIs you used prior to system implementation. The primary benefit of this approach is more complete and real-time access to existing business information; existing metrics are simply collected, calculated, analyzed, and distributed automatically.

Managers opting to use existing measures often cite the benefit of "taking one step at a time" and focusing on technology implementation before making changes to collected information. But many other managers recognize that the biggest benefits of BI and BPM systems come not just from automating existing management systems, but from the opportunity to redefine the company's approach to management and measurement based on advantages inherent in the new technology.

Value-Focused Management

To gain maximum benefit from the implementation of a BI system, smart organizations invest the time and resources required to redesign their management processes prior to technology implementation. These companies ensure that processes for developing strategy, improving business processes, managing people, and measuring performance are designed and managed to take full advantage of the collection, analysis, and communications capabilities inherent in BI systems. By addressing and improving these management processes, BI systems will provide managers with only the most important information they need.

Each process needs to be carefully analyzed in terms of the required data timeliness. (See Table 1.) Organizations typically have a range of value-creating processes, including developing new products, taking and filling orders, and providing post-sale support. The fastest-paced processes (like taking and filling orders) in industries with particularly dynamic market conditions are candidates for true real-time monitoring. Those that vary during the course of a day will likely benefit from near-real-time measurement. The rest are best handled with a traditional daily data load cycle.