Operational Performance Management

Mark Smith – CEO – Ventana Research

Summary
For companies to improve profitability, A new business imperative called Operational Performance Management is critical to increase effectiveness by improving business activities and processes.

By strategically integrating software, hardware and business process, companies can exponentially increase value. Ventana Research’s recent Operational Performance Management Study shows that this imperative is considered extremely important by companies and reveals that business intelligence and business process management are more important to measure and monitor business activities than ERP or building systems through application servers or EAI. Companies must use a strategic, methodical process for Operational Performance Management initiatives like the Ventana Research PerformanceCycle that can drive higher levels of efficiency in making effective business decisions.

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Operational Performance Management enables businesses to increase effectiveness (leading to increased profitability) by understanding, optimizing and aligning business activities and processes to maximize output. Ventana Research defines Operational Performance Management as:

The practice of understanding, optimizing and aligning the operational business activities and processes to a common set of goals and objectives to improve effectiveness.

Operational Performance Management can be achieved through the supporting technology of business process management, business intelligence, application server technology, integration technologies and enterprise application software. These technologies can stand alone to help organizations improve operational performance, but when strategically integrated for a common goal these components can exponentially deliver more value to your organization. Aligning these technologies will help companies in areas such as product and service performance management, supply chain performance management, supplier intelligence, demand chain performance management, customer intelligence and IT performance management.

More and more companies see the value in Operational Performance Management. Our recent study, Operational Performance Management examined the importance companies place on measuring and monitoring business processes and what drives the importance. A significantly high level of respondents, 62%, identified measuring business processes as very important. The priorities driving this level of importance included improving efficiency at 30%, managing or reducing costs at 29% and increasing focus on revenue at 29%. The specific pain points that organizations are addressing with this new focus include providing operational information at 24%, improving responsiveness to events or activities at 23% followed by monitoring business activities at 23%.

Historically speaking, Business Intelligence and Enterprise Applications like ERP have been used by organizations to improve operational performance. Enterprise applications delivered the transactional capabilities and operational tasks while BI was used to analyze the results. The Operational Performance Management Study confirmed Business Intelligence as the most utilized software approach today at 32%, Enterprise Applications at 31% followed by Business Process Management at 22%. Application Server and EAI were last at 15%. This provides the basic foundation for most organizations but does not provide for a process context.

Results from the study highlighted a surprising change in the direction corporations are taking as enterprise applications become less a priority than business intelligence, and business process management becomes a higher priority. Business process management provides the capability to define and visualize a business process and automate the control across functional areas unlike traditional ERP systems, which operate in functional silos. When asked which software category companies plan to use to measure and monitor business activities and processes respondents indicated Business Intelligence at 35%, followed by Business Process Management at 26%, Enterprise Applications at 25% and Application Server and EAI at 14%. The study indicated companies over $50 billion in revenue are shifting rapidly away from ERP and that executives and line-of-business managers are moving towards business process management.

Ventana Research believes as organizations become more informed about enterprise-wide operational performance management initiatives they will make a concerted effort to bring business intelligence and business process management closer together. This will help organization develop a comprehensive framework to link the effectiveness of employees with the results of operational processes.

We advise companies that want to improve operational performance management to use a methodical process like the Ventana Research PerformanceCycle. This is a strategic, methodical process for understanding, optimizing and aligning business activities and processes to deploy effective operational performance management initiatives. You can read more about the PerformanceCycle at: http://www.ventanaresearch.com/methodology/methodology.php?id=465

Assessment
It is critical for companies to improve the performance of people and operational processes to increase business effectiveness. Operational Performance Management will require new methods and techniques for monitoring and measuring so companies can fully understand, optimize and align business processes. Ventana Research advises that organizations look beyond the results from Business Intelligence and begin to understand the business process itself.

Ventana Research’s Operational Performance Management Study shows that this imperative is critical to companies and that they are using multiple software approaches to meet the requirements for managing operational performance. While primarily looking towards Business Intelligence and Business Process Management to improve operational performance management, organizations currently continue to use Enterprise Applications. Application Server and EAI are very low on the priority list. Your company must find a consistent approach to measuring and monitoring operational performance throughout the organization and determine which software approach can best fit your requirements.