By Gary Cokins, Founder of Analytics-Based Performance Management LLC
I was educated as an industrial engineer. Engineers are not perceived as very worldly or sophisticated. They are often pictured with a shirt-pocket protector stuffed with pens. But some engineers, like me, do have appreciation for the performing arts. For example, I appreciate classical music. In particular, I admire and am in awe of the great classical music composers. How did Tchaikovsky and Mendelssohn transcribe such beautiful music as notes from their brain to a page of musical score for so many instruments? (Hint: I don’t think they had a smartphone or email to distract them.)
I believe that in the next few years the adoption rate for enterprise performance management (EPM) methods embedded with business analytics will accelerate. Core EPM methods include strategy management (strategy maps, balanced scorecard, dashboards); profitability analysis (by products, channels, and customers); driver-based budgets and rolling financial forecasts), enterprise risk management (ERM); and continuous improvement (lean and six sigma quality management). They should ideally be seamlessly integrated.
This acceleration will have an effect similar to the one Ludwig van Beethoven’s masterpiece – his third symphony, Eroica – had on the future of classical music. Beethoven followed Eroica with his universally memorable fourth to ninth symphonies, and other great composers emulated him. What connection am I making between classical music and EPM?
Breaking free from tradition
Ever hear much about Beethoven’s first or second symphony? Few people have. That is because it was with Eroica, his third symphony, where Beethoven himself is quoted as saying, “I will now take a new path.” It was a radical change in music composition.
Eroica, inspired by Beethoven’s admiration for Napoleon as a world leader, had true melody. Prior to Eroica, Beethoven’s compositions followed a tradition where melody was rare. He complied with the conventional rules of what tasteful music for the elite should sound like. His prior music was influenced by masters who dared not change from tradition, such as Bach and Haydn. But Beethoven had a strong urge to break free from tradition. With Eroica, classical music was changed forever.
The evidence of the “Eroica effect” is this: How many billions of people, including you and me, will die with little trace of remembrance generations from now but a tombstone? But the works of Beethoven, Mozart, Rossini, Sibelius, Grieg and others in their league will be listened to for a long time to come – possibly for centuries.
Are we now at a point where the implementation of EPM’s suite of integrated methodologies, like Eroica, will also “take a new path?” Yes – because tradition increasingly gives way to change, and organizations are slowly and gradually learning to not just manage change but to drive change.
Will EPM soar in the Cloud?
The acceleration of EPM will not be restricted to only implementing or improving its core methods. With the advent of modern, sometimes futuristic mobile solutions and Cloud technology platforms, the potential is not only for improving EPM, but for radically changing the way it is implemented, deployed and maintained. The potential also impacts the way that information produced by EPM solutions will be consumed by enterprise users. Mobility solutions, which have been around for a short time now, provide a basis on which to extend the use of EPM information and to gather EPM data inputs to global enterprise users. It’s not just a back-room, batch function any more – it’s information for enterprise users, anytime, anywhere! And of course mobile EPM solutions will evolve to support the demands of those enterprise users, who are now more than familiar with mobile devices in their personal lives and which will begin to blend with their working lives too.
Of course the big change, possibly echoing tones of the Eroica effect, is likely to be Cloud. The technology for Cloud EPM has arrived, and is being supported by software vendors eager to gain a lead in this new EPM market area. But, if you take a breath and think about this, Cloud could be something magical for EPM, as well as other areas of Finance. It’s not just about a new way to deploy an old technology, or revamp some old and well known processes, or the ability for EPM users to access, maintain and extend software systems more easily. It’s all of those things and more. It’s an opportunity for software vendors and EPM users to reimagine the way that they implement, deploy, maintain and use EPM solutions – taking the best of what they have done so far, and creating new innovative solutions, led by best practice but built for the rigors of industrial use. Software vendors will craft new EPM solutions built for purpose on a history of experience in the area, and in doing so have an opportunity to propel EPM usage and the benefits derived from EPM solutions to new levels in the Cloud. Such solutions, underpinned by robust Cloud platforms will access the latest collaborative technologies to enable cross-functional EPM approaches in the areas of planning, marketing, sales, distribution, operations, and finance. And the seamless integration of EPM’s core methods, which the software technology enables, will put EPM on steroids.
The future of enterprise performance management
People are what it’s all about, so I honor and respect the importance of applying the principles of behavioral change management. However, my love for quantitative analysis influences me to conclude with a short narration by the great Princeton University mathematician and Nobel Prize winner John Nash. Nash introduced a theory describing how rational human beings should behave if there is a conflict of interest. In the Academy Award-winning movie about Nash’s life, A Beautiful Mind, he said:
“I like numbers because with numbers truth and beauty are the same thing. You know you are getting somewhere when the equations start looking beautiful. And you know that the numbers are taking you closer to the secret of how things are.”
The executive management teams with the courage, will, caring attitude and leadership traits to take calculated risks and be decisive will likely be the initial adopters of a fully integrated EPM system embedded with business analytics. They will achieve the full vision of EPM. Other executive management teams will follow them.
About the Author: Gary Cokins, CPIM
Gary Cokins (Cornell University BS IE/OR, 1971; Northwestern University Kellogg MBA 1974) is an internationally recognized expert, speaker, and author in enterprise and corporate performance management (EPM/CPM) systems. He is the founder of Analytics-Based Performance Management LLC www.garycokins.com . He began his career in industry with a Fortune 100 company in CFO and operations roles. Then 15 years in consulting with Deloitte, KPMG, and EDS (now part of HP). From 1997 until 2013 Gary was a Principal Consultant with SAS, a business analytics software vendor. His most recent books are Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics and Predictive Business Analytics.
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