In the past few years, companies have been involved in far-reaching Business Intelligence projects designed to make information available and enable better decisions to be reached. The experience gathered during such projects has shown that, although information is often available, it is not actually set in a business process context and its benefit is therefore limited. To benefit fully from the information available, analytics and operational systems must be brought closer together. To this end, in the Enterprise Services Architecture (ESA) SAP therefore also provides analytical services for any transaction. A trend echoed in the strategic approach of Corporate Performance Management.
CPM is rising to the challenge of ensuring business processes can be measured even while they are running, making it easier for them to be monitored and controlled. In the daily operations of a company processes have to keep pace with the market and problems have to be identified early enough to allow counter measures to be introduced. And here arises the need for “intelligent” processes that can be controlled proactively. In this sense, CPM goes one step further than standard Business Intelligence. The underlying principle is that specific variables (metrics) are assigned to each process. These allow companies not only to measure the extent to which they are on track to meeting their goals, but also to continuously monitor process performance. It also means that a metric can be created while a process is still operational.
Real-time process control
CPM can also be viewed as part of the new Business Process Management (BPM) concept, which is a feedback model with three phases:
- Phase 1: Analyzing, planning, modeling, testing and simulating business processes
- Phase 2: In a service-oriented architecture (SOA), business processes can be controlled as cross-application workflows.
- Phase 3: The actual CPM element – namely, monitoring and controlling performance, and the interplay of all business processes. The results from phase 3 then flow back into a more realistic form of phase 1.
Metric measurements provide an ideal decision-making platform – whether manual or automated – for initiating any measures needed to control processes and activities more effectively (tactical and operational CPM) or to align strategies and goals more realistically (strategic CPM). By way of example, one company goal could be to ensure that 90 per cent of all deliveries placed are made within two days. In this case, one tactical business metric that could be used for a delivery process would be the company’s adherence to delivery deadlines, whereas the fixed minimum stock level in a warehouse could serve as an operational business metric. If the quantity of warehouse stock were to drop below this minimum level, replenishment would be triggered automatically.
This example shows that CPM metrics can be used for future planning. In this case, it is important to ensure that process implementation and process measurement are performed simultaneously – a basic requirement for real-time activities. The metrics must also be constantly adjusted, while all the time remaining consistent. No disparities should exist between the metrics of different processes. The performance of one business process can influence and impact on that of another. For example, a delivery deadline metric may influence a supply chain metric, while a customer satisfaction metric can impact on a CRM metric. Business scorecards have been designed to tackle this problem. These combine all the management strategies from the various departments in a company to create a unified, consistent business management policy.
From the strategy right down to the individual process
CPM benefits all business areas, such as Customer Relationship Management, Supply Chain Management and Personnel Management. Standard Business Intelligence is a bottom-up method of providing information, rather than a process-oriented one. In contrast, CPM is a top-down model that starts with the business strategy and works down. Performance metrics are created to run alongside the processes themselves. CPM is based on the model of an information supply chain that ensures the relevant information can always be provided when required. Business Intelligence can support decisions but does not provide any feedback option, such as allowing suitable measures to be introduced. And because it simply consists of analyzes and diagnoses, it has until now been a purely retrospective model that did nothing to combine operational aspects into one unified approach. CPM, however, offers predictive analyzes that allow possible problems to be identified before they occur. Moreover, by separating and filtering data it creates the basis for what could be regarded as an information democracy. No specialist knowledge about analytics or analytical tools is required to be able to use the predictive analyzes, the result being that analytics can be used by millions of information consumers.
While Business Intelligence is traditionally founded on proprietary technology, CPM is based on an analytical application infrastructure that is part of the Business Process Management infrastructure. Consequently analytics can be integrated into processes as services.
CPM tools for everyone
The technical elements of CPM include metrics and key performance metrics, business rules, scorecards, events/alarms and data exploration. These are implemented using CPM tools. A CPM tool supports implementation of presentation and collaborative services (dashboard, analytical workflow), analytical services (reporting, metrics, key performance metrics, planning, consolidation, simulation), data exploration services (ad hoc analyzes, OLAP, data mining, statistical tools) and administration services (authentication, authorization, licensing and configuration). This kind of CPM tool sits atop a data integration platform that some providers market along with it.
CPM is a tool that benefits all employees and business parties. Intelligent processes are able to solve problems before they arise. Customers with a high credit risk are not eligible for a loan, customers with a high returns rate do not receive any more order catalogs, and supermarket shelves are always kept stocked. The right product is offered to the right customer at the right time, and appropriate measures are taken to ensure customer loyalty. Prompt alignment of processes is also important to ensure that corporate goals can always be attained. It is therefore evident that the main return a company makes on its CPM investment is its ability to monitor and control its own processes perfectly.