Corporate Performance Management Framework

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Corporate Performance Management Framework

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2 Table of Contents... 2

Conceptual

Overview... 3

Conceptual Overview Diagram... 4

The Foundation ... 4

Analytic Presentation Layer... 5

Reports ... 5

Dashboard ... 5

Interpretive

insights ... 5

Intelligence Data & Cubes ... 6

Enterprise Data Adaptors... 6

“Beyond the Foundation” – Expanded Capabilities ... 6

External Benchmark Data ... 7

Interpretive Knowledge Base... 7

Real-time Competitive Intelligence ... 7

Conclusion ... 8

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3 Conceptual Overview

In recent years, companies have found themselves in the position where they have significant amounts of data from newly implemented Enterprise Resource Planning (ERP) systems. Many initiatives have been started to make the volumes of data from ERP useful for management reporting purposes. Many of the reporting systems in place today provide a good “rear view mirror” picture of the business with limited forward visibility and predictability of company

performance. Most of these reporting initiatives have come under the umbrella term, “Corporate Performance Management” (CPM).

Corporate Performance Management is the collection and alignment of metrics, measurement methodologies, processes, insights and reporting systems. CPM allows an organization to institute a framework where corporate performance can be monitored and measured. Answerport’s approach to CPM accentuates the relevant information affecting a companies business. In addition, our approach to CPM emphasizes the importance of providing valuable interpretive insights. While this paper is not meant to be an all inclusive dissertation on

Corporate Performance Management it is meant to provide a summary overview of CPM and Answerport’s philosophy for achieving real competitive advantage from implementing a CPM system.

Much has been written about Corporate Performance Management systems but there has been little written about the value of extending the reporting capability beyond the traditional reporting spectrum. Essentially, the state of the industry is that organizations are mastering and

converting the reams of data from their existing transaction based systems into information. Now the challenge is in converting that information into “insight” where real competitive

advantage lies. It is Answerport’s position that effective Corporate Performance Management systems require the traditional reporting as a baseline but must go beyond that capability to help companies truly manage performance. The Conceptual Overview Diagram below provides the organizational framework for this paper. First, we will discuss the shaded Foundation area of the diagram which represents the traditional definition of Corporate Performance Management. Second, we will discuss the three (3) shaded boxes along side the Foundation box in the

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4 Conceptual Overview Diagram

Interpretive Knowledge Bases Real-time ____________________ Competitive Intelligence Presentation Layer _______________________________________________________

Intelligence Data & Cubes

Adaptors

Enterprise Systems & Business Data External Benchmark Data IRI, etc.. AC Nielsen Industry benchmark Foundation ERP SCM CRM Etc... Know ledge Rules Application Financial Customer Manufacturing Supplier

Service China, etc.. Interpretive insights Reports Dashboard Dimensions Histor y

Data points . Data cubes

Interpretive insights Reports Dashboard Interpretive insights Reports Dashboard Interpretive insights Reports Dashboard Interpretive insights

The Foundation

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5 Analytic Presentation Layer

It is Answerport’s view that the Analytic Presentation Layer should provide three levels of reporting. Typical CPM solutions define two reporting levels. These two typical reporting levels are reports and dashboards which provide a good view of historical performance. Answerport’s perspective is that the analytic presentation layer should have a third reporting level,

interpretative insights. This third layer builds on historical performance reporting and incorporates additional information to provide interpretive and predictive reporting for management action. As shown in the above diagram, the presentation layer often times is logically organized into specific business areas, units or functions depending on a companies requirements (e.g., Finance, Customer Service, Manufacturing, Supplier, etc.).

The presentation layer should provide management with on-demand information based on a user’s selection of the information they want to view. A further description of each presentation level and how they might work follows:

 Reports. As needed, users should be able to drill into more detailed reporting based on their information needs. For example, from the digital dashboard, where a profit variance may show as unfavorable, the user can drill into the unfavorable geographic location or product area. Reports can be either predefined or allow the user to filter and generate reports on an on-demand basis.

 Dashboard. This is the high-level performance summary that presents key performance indicators in a digital dashboard format. It contains various performance indicators such as revenue indicators, profit variances, expense variances, etc. The performance

indicators are typically color coded to accentuate areas of risk and/or variance from goal (e.g., red, yellow, green).

 Interpretive insights. The interpretive insights level incorporates outside information sources, benchmarking information, and analytical extrapolation with historical

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6 Intelligence Data & Cubes

The Intelligence Data & Cube portion of the foundation is where the data and data relationships reside. This portion of the foundation is the engine that powers the Corporate Performance Management system and contains the data holders for all the reports, dashboards and interpretive insight presentation levels. Careful consideration must be devoted to defining and developing this portion of the system as it defines all of the data relationships from internal and external data sources. In addition, data definitions, various calculations, summary reporting levels, and comparative information rules are established and recorded here. Data is

aggregated and processed against rules and definitions to generate an intelligence engine that provides the core information necessary for fast on-demand access to information. This allows the presentation layer to present on-demand metrics and information based on a user’s input and settings.

Enterprise Data Adaptors

Enterprise Data Adaptors are the interface to a company’s transaction based business systems (e.g., ERP, CRM). Based on a company’s desired measures and key performance indicators, the business application data is extracted from the transaction based systems on a pre-defined basis to populate the Intelligence Data & Cubes in the Corporate Performance Management system. This extracted data can then be transformed into data cubes and dimensions for on-demand presentation. Many standard adaptors are available and compatible with specific enterprise system applications such as Oracle Applications, JD Edwards, SAP, Peoplesoft and Baan.

“Beyond the Foundation” – Expanded Capabilities

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7 External Benchmark Data

External Benchmark Data is typically used by companies as a yardstick for performance across many different areas of the business. By incorporating different benchmarks, companies are able to measure their performance against best practices and industry peers. This comparison technique allows companies to constantly challenge their performance against independent criteria. For example, if a company is turning inventory 18 times per year the conclusion may be that they are doing great in that area. But what if the industry average is 24 turns per year? How does that change the conclusion? What are competitors doing that the company is not? Incorporating benchmark data from leading sources such as AC Nielson, IRI, and/or Gartner will provide the basis for additional insight.

Interpretive Knowledge Base

Another expanded capability that companies should address is the capture and utilization of key company knowledge via an interpretative knowledge base. The Interpretive Knowledge Base provides a repository for key performance indicators and their relationships with both internal (e.g., pricing sensitivity) and external (e.g., commodity future price impact on future profitability) factors. This knowledge, combined with information from the foundation, can provide insight into near and long term performance. This provides companies with increased reaction time for prioritizing initiatives and making decisions. Using an interpretive knowledge base to support concepts such as the Balanced Scorecard, can help companies ensure that success in one measure is not at the expense of another measure.

Real-time Competitive Intelligence

The most advanced implementations of Corporate Performance Management will utilize real-time data feeds. It is our belief that companies will focus on real-real-time data feeds that provide timely competitive and general market information. A simple example would be the monitoring of weather patterns in a geographic area to adjust product sales forecasts. A more

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8 Conclusion

Corporate Performance Management is the collection and alignment of metrics, measurement methodologies, processes, insights and reporting systems. CPM can benefit an organization by:

Aligning business metrics using a top-down approach via the use of key performance indicator dashboards and supporting reports.

Increasing business agility by providing decision-makers with timely access to mission-critical information.

Improving consolidation processes where data across the enterprise is aggregated regardless of the technology platform and software. The consolidation process provides the company with a single version of “the truth” for the entire enterprise.

Understanding competitive posture by comparing against industry benchmarks and allowing proactive planning of competitive actions.

Providing relevant interpretive insights to focus actions. The interpretive insights provide relevant information for more proactive business planning and actions.

Corporate Performance Management not only promotes the ongoing survival of the enterprise in today’s business environment, but can leverage improved performance throughout the

enterprise that leads to differentiation and competitive advantage. Further, the Sarbanes-Oxley Act of 2002, which requires regulatory compliance with financial controls, reporting and auditing processes, can be incorporated as part of the Corporate Performance Management strategy to promote discipline and rigor in reporting practices as well.

While many companies are beginning to address the traditional Corporate Performance Management framework, few have taken an expanded view of Corporate Performance

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