The confusion, ambiguity and lack of consensus about what enterprise performance management is will continue for a long time. Fortunately, many are realizing that performance management is much broader than how it’s often narrowly perceived: as just a CFO initiative with a bunch of dashboard dials and better financial reporting. However, since it is so broad, then what is enterprise performance management?
I have frequently described this much broader view of the performance management framework. Read my article, “Why the High Interest in Performance Management Now?”, if you’d like to learn more about that topic. In this article, I’m going to discuss an essential capability of enterprise performance management – modeling.
Managing performance requires deep understanding of causality. Craig Schiff, a prominent IT analyst and CEO of BPM Partners, has written an article titled “Why Performance Management?” He describes four interconnected segments. In my articles and books I use an analogy of performance management components as meshed gears in a machine with a global positioning system (GPS) for strategy execution navigation.
I like Craig’s fourth segment – operational optimization. I think of this as enterprise optimization. I really like the term “optimization” even though it can be dismissed by some managers as theoretical or impractical to achieve. Enterprise optimization can be described as the pursuit and realization of an organization’s strategic objectives with the least amount of total resources in an ever-changing environment. This pursuit maximizes long-term shareholder wealth creation through a deep understanding of customers.
But this description of optimization is only shallow rhetoric unless we dig deeper. What is the role of business analytics and modeling for enterprise optimization?
Continue reading “Why is Modeling Foundational to Performance Management?”
