The Other BPM: Operational Performance Management
While in the past the primary motivation for companies to implement business performance management (BPM) has been the bottom line (with priority given to budgeting and planning applications and scorecards), business, finance, and IT decision-makers now are focusing on creating value by more effectively managing their operations and business processes.
Article Tools
Resource Center
Access white papers, product demos, and presentations from companies whose reputations have been built on helping BPM practitioners get the most from initiatives.
- BPM 101: Selecting a Business Performance Management Vendor" -- new white paper from BPM Partners
- "The Finance Challenge of Aligning the Business With Strategic Goals," a podcast featuring Palladium Group's Phillip Peck
- Ventana Research white paper "Decision-Making and Performance: Improving Essential Business Analytics and Technologies"
- “XBRL at a Glance,” white paper from XBRL US
advertisement
A new discipline -- operational performance management (OPM) -- has evolved that helps organizations do just that. Ventana Research defines OPM as the practice of understanding, optimizing, and aligning operations-centric business activities and processes to a common set of goals and objectives to reach higher levels of business effectiveness.
OPM covers the activities and processes for manufacturing and service organizations, including supply chain and customer relationship businesses. Even though OPM is considered nonmainstream by the BPM industry, smart finance executives have been spearheading new OPM programs.
The industry debate has been over whether ERP systems can perform this function. Most organizations today, however, are looking beyond their transactional systems and data sources to manage operational performance. Thus, how and where to improve operational performance has become critical (which is obvious to finance executives who require more timely insight and visibility into cost and revenue initiatives at an operational level). Unfortunately, the current approaches have been undertaken separately by different departments within the company and are too inefficient and complex for finance organizations to navigate -- which has led organizations to make concerted efforts to streamline their disparate IT approaches and define more efficient business methods to measure and monitor business activities and processes.
With so many questions today about how to improve business processes, Ventana Research conducted the Operational Performance Management Study, which surveyed over 1,300 executives, line-of-business managers, IT managers, and IT staff. The respondents were predominantly from North America (79 percent) and Europe (9 percent), and companies were distributed evenly across number-of-employee and revenue-size categories.
State of Managing Operational Performance
Companies are continuously aiming to optimize operational performance, as logic dictates that measuring and monitoring business activities and processes is vital to their success. CFOs as well have been looking to correlate IT investments to measurable improvements in cost management and returns on customer
relationship investments. Survey respondents indicated that measuring and
monitoring the efficiency of business processes across their enterprise is critical for their organizations, with 63 percent responding that it's "very important" and 30 percent answering "somewhat important."
While these high percentages may surprise some, they come as no surprise to Ventana Research, which has witnessed companies struggling with how to apply IT to improve operational performance. The promise of enterprise applications and ERP systems helping to manage business processes has not materialized. Businesses therefore are seeking better approaches to monitor and measure business activities and processes. Ventana Research recommends, however, that firms go beyond merely measuring and monitoring operational performance to linking these activities to their company's financial performance.
Ventana Research asked respondents to indicate their top three priorities among five provided for measuring and monitoring business activities and processes. As exhibit 1 on page 11 shows, improving efficiency and managing or reducing cost were respondents' highest priorities at 29 percent, followed by increasing the focus on revenue at 19 percent. The emphasis on efficiency is unsurprising, as companies previously have made efficiency gains by automating transactional systems but now are being challenged to drive more effectiveness in their operations.
Ventana Research sees cost reduction as the single largest driver for investing in OPM initiatives today, which is why executive management is leading the charge in driving and sponsoring these initiatives to implement them. Companies wanting to surge ahead of their competition need to examine how to drive effectiveness into their operations -- which may seem self-evident but is clearly not every firm's priority when you look at its IT investments.
