Business Performance Management

Originally published on August 2, 2007

BPM is a field that's really been around for a few years, but it's just entering the fringes of the mainstream. Most see it as the next logical step to business intelligence (BI). I tend to agree. I see BI as enabling strategic and tactical workers to mine historic corporate data for insights. I see BPM as throwing the operational workers into the mix as well. BPM is a marriage of BI, which is traditionally used by executive and MBA types, and collaboration software, which has made inroads towards reaching all workers. Now, all workers are in the pool. That "collaboration" software is pretty much Microsoft Office SharePoint 2007 (MOSS)
 
There are two photos associated to this blog. The first (titled "BI, BPM, ... and BPM") illustrates the strategic, tactical, and operational aspects of businesses. The second (the one with three big circles titled, "The Modern Information Worker is ...") illustrates how all workers are categorized as strategic, tactical, and operational, but those categorizations overlap. Primarily, the modern information worker is proficient at all aspects (the commando).


Figure 1 - The Intelligent Business.


Figure 2 - Information Workers.
 
BI, BPM and ... BPM
 
The picture with Jack Welch and Peter Drucker on the top-left corner depicts the system of Business Intelligence, Business Peformance Management, and Business Process Management (the second "BPM"). I'll begin describing this picture starting there with Jack Welch, the iconic CEO, and Peter Drucker the iconic management scholar.This part of the diagram illustrates the strategic part of a business.
 
Every corporation is like any other creature on this planet. It is an organism made up of many components (processes) each providing specific functionality and interacting is well-defined manners. Every creature on this planet is also competing against other creatures for limited resources. Mostly, a creature survives by taking the resources of another creature. Sometimes a creature survives by finding an uptapped resource, whether it's a new invention or a new oil field. It is the job of the CEO to determine the strategy a creature will execute to survive. The CEO's job is never done because other creatures will either counter your strategy or encroach on your previously untapped resource.
 
The CEO and his/her executive team develops strategies for the business. From a high level, these strategies can be very simple. For example, "Everyday low prices". Below that level are sub-strategies for achieving that higher level, and perhaps more levels of sub-strategies. Eventually, a strategy needs to be carried out. Tactics are employed. A tactic would be to ensure everyday low prices by deploying a state of the art distribution network to minimize transportation costs. And, manufacture products in locations where labor is cheap. These tactics are communicated to line managers for execution.
 
The navy-blue circle encases sets of sets of cogs. Each set of cogs represents a distinct business process within a business enterprise. Examples include payroll, billing, inventory management, shipping, accounting, etc. Each of these processes within a business enterprise is automated by software applications usually classed as On-Line Transactional Processing (OLTP). Each process consists of well-defined rules which are feasibly automated by computers. Where each set of cogs touches another set is where a process receives input from another process or hands off output to another process. Notice the iconic operational worker within the navy-blue circle. Each process is manned by armies of such people who carry out specific tasks related to the process.
 
Outside the lower-left of the navy-blue circle stands the iconic line manager. Each of those sets of cogs, representing a business process, is managed by one of those people. It's the managers job to ensure that the process for which he is responsible is operating as efficiently as possible. Each day, he reads a set of reports printed off his OLTP system looking at certain figures indicative of the condition of his process.
 
A while back, line managers realized that they could optimize their processes to greater degrees if they knew more about what was happening in the adjacent processes. To facilitate this, software was written that would allow one OLTP to download data from other OLTPs to incorporate into reports. This integration of information was the first business intelligence, although fraught with problems that the science of ETL (Extraction, Transformation, Load), data warehouses, and OLAP (On-Line Analytical Processing) eventually came to reduce if not eliminate.
 
Additionally, line managers realized if they could automatically transfer information from one OLTP to another, this would minimize human error and certainly eliminate a lot of human labor. This is known as Enterprise Application Integration (EAI). To this simple automatic handoff of data from one OLTP to another was added orchestration of the transfers of this data. This is Business Process Management and the Microsoft offering is BizTalk.
 
At these points of integration, we can capture metrics. These metrics can provide rates of transactions, values of the transactions, etc. Using this data, we can design views to show where things are slipping up when and how. The line managers use these reports to determine why they are slipping up. The CEO and his team can use the same data, but perhaps different reports, to understand that there is a problem and to facilitate cooperation amongst line managers to fix the problem.
 
The Modern Information Worker is Strategic, Tactical, and Operational
 
Consultants epitomize the modern information worker. As a consultant, I spend a lot of time out in the field as an "agent of Microsoft". As a representative of Microsoft, I must carry out our strategy, which stems from our current mission. I execute upon that strategy with an arsenal of tactics. I'm operational in that deliver product; in my case solutions to a problem or guidance.
 
Other modern information workers include doctors (the quintessential IW), lawyers, etc. They are all consultants as well.
 
The modern information worker aren't just white-collared consultants. A good waiter or waitress is all three:
 

The "Modern Information Worker" picture shows three cirles encompassing the three IW modes. In the unoverlapped parts of each circle, we see iconic images portraying the pure role for each IW mode. In strategic, we see a picture of Jack Welch and the insignia of a general. It is the CEO's role to set a strategy for the mobilization towards some goal. That goal can be simply profit, corporate growth, taking market share, etc.

In the tactical section, we see the epitome of a line manager and the insignia of a captain. It's the job of the line manager to ensure the process for which they are responsible plays its part as perfect to plan as possible. The line manager knows how well she is to plan by monitoring key performance indicators (KPI). They measures tell the line manager what aspects of his service level are lacking and points to the possible direction of the causes.

In the operational section, we see the epitome of the line worker, the operational worker who contributes towards the production of the company's goods. This is the worker who is brought to the party by BPM software. The operational worker is now plugged directly into the system as the executives and middle managers were with traditional BI applications. The operational worker can monitor measures for quick feedback into his performance and take measures to improve by seeing where things are weak. Pure operational workers are in danger of being eventually replaced by a robot of some sort.

More interestingly, notice the circles overlap. There are overlaps of strategic and tactical, strategic and operational, and tactical and operational. Additionally, there is an area where all three overlap portraying an iconic  commando. For strategic and tactical, we see a vice-president, a colonel. Not quite a CEO, but in a chief of a division; probably drives a Porsche with a personalized license plate. For tactical and operational, we see the "senior" technician, the sergeant. He is a worker highly accomplished at his job and thus a mentor; not quite a boss, but still a leader; "I have people skills." 

There is no real strategic/operational person. However, all executives have their operational roles such as being the ambassador for the corporation, talking on Mad Money, for example.

May 1, 2008

One thing I failed to mention is that each level from goal/strategy, to objectives, to tactics, to front-line work has progressively shorter timeframes. Goals, developed by the Generals are usually long term concepts. In many cases the goal defines the organization; you can consider that if the goals change, the organization is not the same organization, even if the name is the same.

Strategies are generally long term as well, even though the strategy can change without the goals changing.

Objectives are generally moderate term, perhaps "a five year plan".

Tactics are short-term, maybe a year at the longest for the most part.