Is your business run by chance?
Thursday, June 11, 2009 09:35 AM
perspective As an employee, you trust that those responsible for the processes that help support the organization--such as financial reporting and analysis--have them fully under control.
Further, you probably trust that those is charge are doing everything that they can to ensure that these processes optimize the overall performance of the organization, and that they make use of all the necessary information sources around them--including external ones, such as customers, suppliers and information on competitors.
Well, think again. Research carried out by Quocirca for Oracle shows that the quality of enterprise performance management (EPM)--the art, or science, of creating, monitoring, measuring and optimizing these processes--can best be described as "OK".
Very few organizations are making use of the skills within their supplier and customer value chains, preferring to try and keep all the 'smarts' within the organization.
Yet how can an organization ensure that those value chains are fully optimized if suppliers and customers are cut out of the decision-making process? In our research, only 13 percent of respondents felt they had the right processes in place to successfully engage suppliers in discussions around how best to enhance their processes.
Further, few businesses encourage employees to participate in providing ideas as to how the organization could best improve its processes. This could reflect an organization's security fears, not wanting to share information beyond those entrusted with safeguarding such information, or it could be more along the lines of the 'knowledge is power' ethos.
If the latter, then organizations need to realize that keeping information within the few does not lead to competitive knowledge--it leads to large gaps in the decision-making capabilities. The more an organization's information flows can be opened up, the more ideas will flow because of it, and the more optimized the processes can become.
Overall, in our research fewer than 25 percent of respondents felt there were processes in place to successfully engage the various stakeholders in the business in the decision making process--a lamentable failure, as a politician may put it.
Even at a competitive level, only 17 percent of respondents believed that the resources they had available to them were sufficient to give them a good picture of the market situation, and only 12 percent felt they had strong capabilities in gauging what the likelihood of success of a new product or service in the market would be.
This means that more than 80 percent of respondents are essentially taking shots in the dark when introducing new products or services--they do not have sufficient knowledge of the market nor of the competitive environment to know how well they are likely to do.
Indeed, the main findings from the research were that there are massive disconnects between the various process stages of EPM. For example, the six areas that were looked at (stakeholder environment, market model, business model, business plan, business operations and business results) were seen by nearly 30 percent of respondents as being completely separate and that each could be dealt with in isolation.
Just over half felt that the areas were interlinked and needed a coherent, interlinked approach to dealing with them. That the majority do see the need for linkage is good--that so few manage it is a cause for concern.
In good market times, a lot of this can be hidden; with money rolling in, poor performance matters less. But, as the bad times come in and the instructions from on high fall back on "do more with less", such gaps in capability become all too clear.
Indeed, a prime example of this is within the financial sector. The boom years meant that decisions being made in isolation were just waved through--the profits were there, so no questions were asked. Then, when the first domino was toppled, questions were asked: how was this done? What happened to that? Where is this now?
The gaps in how the performance of the institutions was measured were suddenly all too obvious. Individuals were given too much responsibility that went unchecked, processes bypassed any peer review, financial 'packages' were bought and sold without anyone actually knowing what was in them.
Now, the lack of capability to unravel what has happened has led to banks going bust, being privatized, having central regulation and control being applied. If the correct tools and processes had been in place, then it would have been harder for the situation to arise in the first place, and it would be easier for the problem to be addressed and rectified now.
It may be tempting to say that this is only the banks, and that your line of business would never find itself in such a position. However, many organizations now find themselves without adequate lines of credit, with their suppliers being squeezed and with customers negotiating harder--issues that may have been allowed to go through in the better times could now bring the organization close to failure.
Therefore, being able to measure and understand how you are performing against the general market, against specific products and competitors, and how your suppliers and customers are performing is becoming something that can no longer be seen only as a "nice to have"--it is rapidly becoming a necessity.
There is much that organizations can do to make the situation better--and little of it requires massive investments. Sure, better usage of process-based systems and business intelligence will enable information to be aggregated, filtered and presented in ways that make the decision making process more effective.
But the biggest part of it is down to sitting down and reviewing the various processes used in and across the organization and its value chains. Only then can these be best optimized, creating a coherent and cohesive platform for the future, and creating the flexibility the organization will need to come through the bad times in good shape.
Quocirca's free report on the EPM research can be downloaded from our Web site.
Clive Longbottom is principal analyst at Quocirca. He and five other analysts contribute to ZDNet Asia's sister site, Silicon.com, a regular column that seeks to demystify the latest jargon and business thinking.
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