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‘ Balance Score Card
Corporate Performance Management-CPM
KPI – Key Performance Indicators
Business Intelligence
for
Emerging Enterprise’
Diapers and Beer
Wal-Mart, the world’s largest retailer, supposedly found out that there are
certain times at which beer and diapers sell particularly well together - when
on Friday evenings young men make a last dash to the supermarket to get
beer and their wives call after them, “Pick up some diapers, too, honey!”
“Some of the ways Wal-Mart managers found to exploit their findings are
legendary. One such legend is the story, “diapers and beer”. Wal-Mart
discovered through data mining that the sales of diapers and beer were
correlated on Friday nights. It determined that the correlation was based on
working men who had been asked to pick up diapers on their way home
from work. On Fridays the men figured they deserved a six-pack of beer for
their trouble; hence the connection between beer and diapers. By moving
these two items closer together, Wal-Mart reportedly saw the sales of both
items increase geometrically.”
A version with a slightly different view of the roles involved suggests that the
men are sent to the supermarket for the diapers and, because there’s no
time left to go to a bar, take beer home with them. In all versions of the story,
Wal-Mart then puts the diapers closer to the beer and makes a fortune.
Business Challenges
Risk
Management
Market Volatility
Large
Customer base
Skilled Manpower
TECHNOLOGY
Consolidation
Transaction
Volume
Government
Reforms
Credit
Management
Today’s Business Pressures
Accountability, Transparency
• How do I comply with corporate
Rapidly Changing Conditions
• How can I accelerate my planning
governance requirements?
and decision cycles?
• How can I ensure accurate, timely
• How do I monitor conditions and
reporting?
take early corrective action?
Sales
Marketing
Credit
Risk
Finance
Service
Human
Resources
Project Mgmt
Ineffective Decision Support
• How do I filter extraneous data
and focus on relevant information?
• How can I access and rationalize
disparate, fragmented data?
Plan &
Model
Execute
Report &
Analyze
Efficiency & Cost Control
• How can I sustain / improve
profitability?
• How do I keep information
current?
Road signs,
not red lights
Intelligent traffic
lights
for controlling
In the world of the car driver, a traffic light provides two clear signals:
red means stop, green means go.
In business reality, this clarity is painfully lacking,
and it is something that even multi-colored reports cannot create.
At the traffic light we can only either stop, or drive on.
In contrast, a company has countless ways in which it can react to red or
green signals.
Trends are like friends; with values start seeing trends
New World Growth & Drivers
6,000
4,924
Total E-commerce Market ($ Mln)
5,000
4,000
3,077
3,000
1,836
2,000
1,058
1,000
422
2004-05
2005-06
2006-07
2007-08
Year
Source: IAMAI, PhocusWright, Internal Estimates
2008-09
Drivers
•
•
•
•
•
Internet Users: 35M+
Broadband: 2.M++
Mobiles: 130M++
Credit Cards: 45M+
Venture Capital !
How do we measure impact on our business
Unthinkable is Happening around us
Frequency is increasing and we cannot control it
Volumes of Data – How to Extract Maximum Utility
Data
Information
Knowledge
Hindsight
ETL
Sums and Means
Intelligence
Insight
OLAP
Drilldown
Foresight
Advanced Analytics
Statistical Predictions
Operational Decisions
• Exponential growth of corporate data and computing power in
the past two decades
– ETL with sums and means provides hindsight from corporate measurements
– OLAP with drilldown provides insight from the ETL data warehouse
– Only advanced analytics with statistical predictions provides foresight from
the ETL data warehouse
• Data Availability + Computing Power + Advanced Analytics →
Competitive Advantage and Best Decisions
You have data quality reporting issues,
whether you know it or not.
Balanced Scorecard
• In 1992, Robert S. Koplan and David Norton introduced
the balanced scorecard, a concept for measuring a
company's activities in terms of its vision and strategies,
to give managers a comprehensive view of the
performance of a business.
• The key new element is focusing not only on financial
outcomes but also on the human issues that drive those
outcomes, so that organizations focus on the future and
act in their long-term best interest.
• The stratagic management system forces managers to
focus on the important performance metrics that drive
success. It balances a financial perspective with
customer, process, and employee perspectives.
• Measures are often indicators of future performance.
Implementing Balanced Scorecard
• Implementing the scorecard typically
includes four processes:
– Translating the vision into operational goals;
– Communicate the vision and link it to
individual performance;
– Business planning;
– Feedback and learning and adjusting the
strategy accordingly.
Balanced Scorecard Perspectives
• The scorecard drives implementation of strategy
using perspectives which generally include:
– Financial Perspective - measures reflecting financial
performance,
– Customer Perspective - measures having a direct
impact on customers and their satisfaction
– Business Process Perspective - measures reflecting
the performance of key business processes,
– Learning and Growth Perspective - measures
describing the company's learning curve --
Balance Scorecard – Vision and Strategy
KPI – Key Performance Indicators
• Key Performance Indicators (KPI) are financial and nonfinancial metrics used to quantify objectives to reflect
strategic performance of an organization.
• KPIs are used in Business Intelligence to assess the
present state of the business and to prescribe a course
of action.
• The act of monitoring KPIs in real-time is known as
Business Activity Monitoring (BAM)
• KPIs are frequently used to "value" difficult to measure
activities such as the benefits of leadership
development, engagement, service, and satisfaction.
Example of KPI
• "Increase Average Revenue per Customer from
Rs. 1000 to Rs.1500 by EOY 2008".
• In this case, 'Average Revenue Per Customer' is
the KPI.
• KPIs should not be confused with a Critical
Success Factor
• For the example above, a critical success factor
would be something that needs to be in place to
achieve that objective; for example, a product
launch.
KPI's need to be SMART
•
•
•
•
•
S - Specific
M - Measurable
A - Achievable
R - Realistic
T - Timely
KPI (General)
•
EBITDA Profitability
Calculation : EBITDA / Revenue
Information : Operating Efficiency
Frequency : Monthly
Business Value Growth
Calculation : Business Value (current)
/ Business Value (previous period)
Information : Business Management
Frequency : Quarterly
Brand Recognizebility
Calculation : Mentions Number
Received by Representative Sampling
Information : Business Management
Frequency : Quarterly
Market Share Growth
Calculation : Market Share (current) /
Market Share (previous period)
Information : Marketing Efficiency
Frequency : Quarterly
Lost Clients Rate
Calculation : Lost Accounts Number /
Opening Total Accounts Number
Information : Business Risk
Frequency : Quarterly
Prime Clients Rate
Calculation : Clients Generating 70%
of Revenue / Total Accounts Number
Information : Business Risk Indicator
Frequency : Quarterly
KPI (Human Resources)
•
Staff Turnover
Calculation : Staff Leaving over the Month / Staff Number at the Last Day of the
Month
Information : Efficiency Indicator
Frequency : Monthly
Recruitment Quality
Calculation : New Hires Leaving Within 6 Months / Total Hires Over the Year
Information : Efficiency Indicator
Frequency : Monthly
Training Days Execution
Calculation : Actual Training Days / Budget Training Days
Information : Efficiency Indicator
Frequency : Monthly
Fill Vacancy Time
Calculation : Average time HR required to fill 1 vacancy (broken down by grades)
Information : Marketing Efficiency Indicator
Frequency : Monthly
KPI (Information Technology)
•
Data loss accidents
Calculation : Data loss accidents happened
Information : IT efficiency indicator
Frequency : Monthly
Quality of software
Calculation : Average score at 10-grade. Scale obtained at users survey
Information : IT efficiency indicator
Frequency : Quarterly
IT budget execution
Calculation : Actual IT costs / Planned IT costs
Information : IT efficiency indicator
Frequency : Quarterly
•
Quality of communications bandwidth
Calculation : Average score at 10-grade. Scale obtained at users survey
Information : IT efficiency indicator
Frequency : Quarterly
KPI (Internal Operations)
•
Cycle times
Calculation :
Information : Efficiency Indicator
Frequency : Monthly
Inventory turnovers
Calculation :
Information : Business Management Efficiency Indicator
Frequency : Quarterly
Defect rates
Information : Quality Indicator
Frequency : Monthly
Plant utilization
Information : Marketing Efficiency Indicator
Frequency : Quarterly
Unit cost compared to competition,
Information : Marketing Efficiency Indicator
Frequency : Quarterly
KPI (Innovations)
•
Number of new products
Calculation : Number of new products
Information : Efficiency Indicator
Frequency : Yearly
Number of patents
Calculation : Number of patents
Information : Business Management Efficiency Indicator
Frequency : Yearly
New technologies adopted
Information : Efficiency Indicator
Frequency : Monthly
System improvements implemented
Information : Efficiency Indicator
Frequency : Quarterly
Corporate Performance Management
‘Corporate Performance Management (CPM)
is the area of
Business Intelligence (BI)
involved with monitoring and managing
an
organization's performance, according to
Key Performance Indicators (KPIs)
CPM Significance
•
Marketing Departments can develop better products & services, assess the results of
campaigns, better understand their target market, cross sell, upsell…
•
Credit Departments can leverage CPM for collaborative analysis and slicing and
dicing data in new and creative ways
•
Human Resource Departments can use it extensively to analyze the workforce and
the impact of salary and related decisions
•
Executives can get real-time access to key performance indicators, and would be
able to interact and drill-down on data as against a static number
•
Portfolio & Fund Departments can analyse patterns for effective and faster
investment decisions
What CPM enables?
•
Make the right investments in products, people, projects and processes
•
Continuously assess operational performance based on key performance indicators and historical
trends
•
Adjust & re-align strategies as needed to achieve organizational goals
•
Deliver consistent information to all levels within the organization for collaborative performance
•
Visualise enterprise-wide planning and budgeting in a single model
•
Analyze customer, product and services profitability in real-time
•
Consolidate financial data from disparate sources across the entire enterprise
•
Standardise on data communication, data comprehension & data control
•
Optimise IT resources and infrastructure
•
Single version of the truth
CPM Framework
C3 : Communication, Comprehension, Control
CPM Elements
Strategic
Objectives &
Goals
Business
Measurements
Operational
Objectives
IT
infrastructure
Information
Management
Business
Processes &
Activities
CPM factors
Internal
External
Business Functions
Statutory Compliance
Data Integration
Market
Hierarchy
External Entities
Security
Industry Regulations
Operational Discipline
Competition
Initiating CPM
•
Integrate and take advantage of existing IT assets
•
Identify the data integration strategy
•
Identify a Business Intelligence strategy (Operational + Tactical)
•
Blending Business Intelligence with elements of planning, budgeting and
appropriate-time monitoring
•
Identify measurable Business Performance Parameters (BPP)
•
Peg operational data with BPP
•
Improve and simplify pegging continuously
Structured CPM methodology Eg: KPI
KPI Description
Ageing Analysis
KPI Objective
Maintain credit period of less than 3 days
KPI Benefits
Better Cash flow
KPI Start Date
1-Apr-07
KPI End Date
31-Mar-08
KPI Life Span & Reporting Periodicity
12 months, Daily
KPI Unit of Measure & Formula
Days
KPI Target Value
Less than 3 days
KPI Upper & Lower Tolerances
Plus or minus 1 day
Anticipate Upper and Lower Limits
7days, 1 day
KPI Sponsor
Mr. XYZ
KPI Initiator
Mr. ABC
KPI Benefactor
Mr. ABC
KPI Internal or Customer Facing
Both
KPI Data Sources
Back Office application running on Oracle, Transaction application running
on SQL,
Data Communication
Data Comprehension
Data Control
Data Communication
Data Comprehension
Data Control
Summary
• CPM is not a technology, but a Business Strategy
• Core concept for CPM : C3
(Communication, Comprehension & Control)
• Business Intelligence is an Intelligent first step in incorporating
CPM
"If you don't have a
dashboard you can't
drive the car.
Performance
related Information
is like Compass
will give you
right directions
Clear Marketing Directions and Road Map
Thank You!