How do you define the term Business Performance Management?
BPM describes – and herein lies the difference from Business Intelligence (BI) – a comprehensive management system for integrated enterprise management. BI is one of the five components of Business Performance Management. Further ingredients of a comprehensive BPM system are how a company positions itself with regard to its competitors and differentiates itself from them, the corporate and management structure, improved process management and developing and upgrading staff expertise and skills, i.e. what’s often referred to as the intangible corporate values. Admittedly though, the latter is difficult to measure, since it requires great openness from staff.
Why should SMBs deploy BPM?
Let’s take a look at SMBs’ situation today. They have to compete in an environment characterized by multifaceted, ever more complex challenges. I’m thinking for example of globalization, allied with high cost pressures and increasing customer demands for service that is as tailored as possible to their individual needs. Added to this are the risks engendered by ever shorter production – and, therefore knowledge – cycles, and the dynamic development of information and communication technologies. In order to stay competitive, SMBs are forced to make sweeping strategic decisions in ever shorter cycles.
In this turbulent environment, BPM helps companies to keep track of developments in critical areas and to detect new potentialities. This helps enterprises, for example, to decentralize responsibilities and decision-making. This gives staff the information they need directly at their workstations, allowing them to make immediate decisions virtually “on-site”. For example, a controller can perform his core duties – detecting potential improvements and implementing appropriate measures – much more ably if the otherwise time-consuming information gathering process is automated. This also greatly benefits management, especially if, as is usually the case with SMBs, the management teams are small, since more time is left over for strategic tasks and decisions.
And what concrete competitive advantages does this bring?
Let’s look for example at staff expertise, which accounts for a significant part of an SMB’s intangible assets. If highly-qualified staff leave the company, the latter loses value, since they take their knowledge with them. If a firm succeeds in maintaining and developing intellectual capital in the form of staff by giving employees more individual responsibility, this increases the firm’s worth, and ultimately its competitiveness too. Managers who are brave enough to delegate decision-making and responsibility benefit from the experience and expertise of their co-workers.
I can see a large potential for development in this area, not least among SMBs. We can often see that company management, who in the case of SMBs is often synonymous with the company owners, is already implicitly involved in developing and managing these values. Among other things, Business Performance Management now ensures that these values are also communicated openly within an enterprise, making them transparent for all staff and managers. This enables SMBs to improve their decision-making processes while at the same time gaining increased flexibility.
What is BPM’s role in the light of new regulations covering company valuation and accounting, such as IAS (International Accounting Standards), Basel II and KonTraG?
I think a significant one, since, alongside changes to information requirements and the way they are technically implemented in firms, banks and investors no longer trust the primarily backward-looking criteria of “traditional” credit checking, such as evaluating financial statements and securities. Today potential borrowers, alongside the risk report in accordance with KonTraG (= German Act on Corporate Control and Transparency), are required to produce coherent overviews of their business activity and corporate relations.
Thus, besides providing current economic figures, BPM systems will in future have to be able to provide up-to-date business management portraits for any desired points in time. This will support strategic planning and positioning and improve the management of the operational business.
How can an SMB improve business performance and increase its worth using BPM software?
On the one hand, BPM software identifies the ‘performance killers’ in the enterprise, while, on the other, it also provides leverage to bring about improvements. BPM software enables firms to obtain and distribute information much more efficiently, allowing faster, more informed decision-making. In a nutshell, BPM software brings the right information to the right place at the right time, and is therefore a key ingredient for business success.
The software also allows alternative ‘what if?’ scenarios to be played out, for example simulating the effects different courses of action would have on the balance sheet and company valuation. The usefulness of BPM doesn’t therefore necessarily depend of the size of the enterprise, but is more dependent on the complexity of its business and environment.
BPM is a comprehensive approach. However, experts are forever objecting that the discussion focuses too strongly on the software. Do you agree?
Yes, but with reservations. BPM is principally a management philosophy and only secondly a question of IT tools. Nevertheless, businesses need the proper IT tools to be able to practice BPM profitably. There are a whole range of software solutions in this area on the market, many of them targeted toward SMBs.
However, one can also criticize the fact that so far only very few providers support fully integrated BPM. In future, quantitative and qualitative management models and instruments will coalesce further, and approaches from knowledge management, staff development and controlling will be viewed in an integrated way. Finally, productivity can also be improved by a goal-oriented, homogenous corporate culture.
What is your advice to SMBs who want to implement a BPM solution?
The challenge for SMBs lies in choosing the tools best suited to them in a dynamic market. There is a particularly broad range of BPM tools directed at SMBs, ranging from large-scale, integrated “all-rounders” to small, specialized high-performance tools. SMBs must therefore ask themselves the following questions before they start a BPM initiative: ‘What are our areas of application and what functions do we need?’, ‘Which manufacturers offer standard interfaces to our existing solutions?’, ‘Which solutions can be combined with one another easily?’ and ‘What is state-of-the-art for certain application areas?’. An enterprise which can unequivocally answer these questions is well on the way to choosing the right BPM software.