‘ Balance Score Card

Corporate Performance Management-CPM

KPI – Key Performance Indicators

Business Intelligence

for

Emerging Enterprise’

Diapers and Beer

Wal-Mart, the world’s largest retailer, supposedly found out that there are certain times at which beer and diapers sell particularly well together - when on Friday evenings young men make a last dash to the supermarket to get beer and their wives call after them, “Pick up some diapers, too, honey!”

“Some of the ways Wal-Mart managers found to exploit their findings are legendary. One such legend is the story, “diapers and beer”. Wal-Mart discovered through data mining that the sales of diapers and beer were

correlated on Friday nights. It determined that the correlation was based on working men who had been asked to pick up diapers on their way home

from work. On Fridays the men figured they deserved a six-pack of beer for their trouble; hence the connection between beer and diapers. By moving these two items closer together, Wal-Mart reportedly saw the sales of both

items increase geometrically.” A version with a slightly different view of the roles involved suggests that the

men are sent to the supermarket for the diapers and, because there’s no time left to go to a bar, take beer home with them. In all versions of the story, Wal-Mart then puts the diapers closer to the beer and makes a

fortune.

TECHNOLOGY

Business Challenges

Transaction Volume

Market Volatility

Consolidation

CreditManagement

Government Reforms

Large Customer base

Skilled Manpower

Risk Management

Today’s Business Pressures

Rapidly Changing Conditions• How can I accelerate my planning

and decision cycles?

• How do I monitor conditions and take early corrective action?

Accountability, Transparency• How do I comply with corporate

governance requirements?

• How can I ensure accurate, timely reporting?

Ineffective Decision Support• How do I filter extraneous data

and focus on relevant information?

• How can I access and rationalize disparate, fragmented data?

Efficiency & Cost Control• How can I sustain / improve

profitability?

• How do I keep information current?

Marketing

Risk

Service

Sales

Project MgmtHuman

Resources

Credit

Finance

Plan &ModelPlan &Model

ExecuteExecute

Report &Analyze

Report &Analyze

Road signs, not red lights

Intelligent traffic lights

for controlling

In the world of the car driver, a traffic light provides two clear signals: red means stop, green means go.

In business reality, this clarity is painfully lacking, and it is something that even multi-colored reports cannot create.

At the traffic light we can only either stop, or drive on.

In contrast, a company has countless ways in which it can react to red or green signals.

Trends are like friends; with values start seeing trends

New World Growth & Drivers

Drivers• Internet Users: 35M+• Broadband: 2.M++• Mobiles: 130M++• Credit Cards: 45M+ • Venture Capital !

422

1,058

1,836

3,077

4,924

-

1,000

2,000

3,000

4,000

5,000

6,000

2004-05 2005-06 2006-07 2007-08 2008-09

Year

To

tal

E-c

om

mer

ce M

arke

t ($

Mln

)

Source: IAMAI, PhocusWright, Internal Estimates

Unthinkable is Happening around usFrequency is increasing and we cannot control it

How do we measure impact on our business

Data Information Knowledge IntelligenceHindsight Insight Foresight

ETL OLAP Advanced Analytics Sums and Means Drilldown Statistical Predictions

Operational Decisions

Volumes of Data – How to Extract Maximum Utility

• Exponential growth of corporate data and computing power in the past two decades– ETL with sums and means provides hindsight from corporate measurements

– OLAP with drilldown provides insight from the ETL data warehouse

– Only advanced analytics with statistical predictions provides foresight from the ETL data warehouse

• Data Availability + Computing Power + Advanced Analytics → Competitive Advantage and Best Decisions

You have data quality reporting issues,

whether you know it or not.

Balanced Scorecard• In 1992, Robert S. Koplan and David Norton introduced

the balanced scorecard, a concept for measuring a company's activities in terms of its vision and strategies, to give managers a comprehensive view of the performance of a business.

• The key new element is focusing not only on financial outcomes but also on the human issues that drive those outcomes, so that organizations focus on the future and act in their long-term best interest.

• The stratagic management system forces managers to focus on the important performance metrics that drive success. It balances a financial perspective with customer, process, and employee perspectives.

• Measures are often indicators of future performance.

Implementing Balanced Scorecard

• Implementing the scorecard typically includes four processes:– Translating the vision into operational goals; – Communicate the vision and link it to

individual performance; – Business planning; – Feedback and learning and adjusting the

strategy accordingly.

Balanced Scorecard Perspectives

• The scorecard drives implementation of strategy using perspectives which generally include:– Financial Perspective - measures reflecting financial

performance, – Customer Perspective - measures having a direct

impact on customers and their satisfaction– Business Process Perspective - measures reflecting

the performance of key business processes, – Learning and Growth Perspective - measures

describing the company's learning curve --

Balance Scorecard – Vision and Strategy

KPI – Key Performance Indicators

• Key Performance Indicators (KPI) are financial and non-financial metrics used to quantify objectives to reflect strategic performance of an organization.

• KPIs are used in Business Intelligence to assess the present state of the business and to prescribe a course of action.

• The act of monitoring KPIs in real-time is known as Business Activity Monitoring (BAM)

• KPIs are frequently used to "value" difficult to measure activities such as the benefits of leadership development, engagement, service, and satisfaction.

Example of KPI

• "Increase Average Revenue per Customer from Rs. 1000 to Rs.1500 by EOY 2008".

• In this case, 'Average Revenue Per Customer' is the KPI.

• KPIs should not be confused with a Critical Success Factor

• For the example above, a critical success factor would be something that needs to be in place to achieve that objective; for example, a product launch.

KPI's need to be SMART

• S - Specific

• M - Measurable

• A - Achievable

• R - Realistic

• T - Timely

KPI (General)

• EBITDA ProfitabilityCalculation : EBITDA / Revenue Information : Operating Efficiency Frequency : Monthly

Business Value GrowthCalculation : Business Value (current) / Business Value (previous period) Information : Business Management Frequency : Quarterly

Brand RecognizebilityCalculation : Mentions Number Received by Representative Sampling

Information : Business Management Frequency : Quarterly

Market Share GrowthCalculation : Market Share (current) / Market Share (previous period) Information : Marketing Efficiency Frequency : Quarterly

Lost Clients RateCalculation : Lost Accounts Number / Opening Total Accounts Number Information : Business Risk Frequency : Quarterly

Prime Clients RateCalculation : Clients Generating 70% of Revenue / Total Accounts Number Information : Business Risk Indicator Frequency : Quarterly

KPI (Human Resources)

• Staff TurnoverCalculation : Staff Leaving over the Month / Staff Number at the Last Day of the Month Information : Efficiency Indicator Frequency : Monthly

Recruitment QualityCalculation : New Hires Leaving Within 6 Months / Total Hires Over the Year Information : Efficiency Indicator Frequency : Monthly

Training Days ExecutionCalculation : Actual Training Days / Budget Training Days Information : Efficiency Indicator Frequency : Monthly

Fill Vacancy TimeCalculation : Average time HR required to fill 1 vacancy (broken down by grades) Information : Marketing Efficiency Indicator Frequency : Monthly

KPI (Information Technology)

• Data loss accidentsCalculation : Data loss accidents happened Information : IT efficiency indicator Frequency : Monthly

Quality of softwareCalculation : Average score at 10-grade. Scale obtained at users survey Information : IT efficiency indicator Frequency : Quarterly

IT budget executionCalculation : Actual IT costs / Planned IT costs Information : IT efficiency indicator Frequency : Quarterly

• Quality of communications bandwidthCalculation : Average score at 10-grade. Scale obtained at users survey Information : IT efficiency indicator Frequency : Quarterly

KPI (Internal Operations)

• Cycle timesCalculation : Information : Efficiency Indicator Frequency : Monthly

Inventory turnoversCalculation : Information : Business Management Efficiency Indicator Frequency : Quarterly

Defect ratesInformation : Quality Indicator Frequency : Monthly

Plant utilizationInformation : Marketing Efficiency Indicator Frequency : Quarterly

Unit cost compared to competition,Information : Marketing Efficiency Indicator Frequency : Quarterly

KPI (Innovations)

• Number of new productsCalculation : Number of new productsInformation : Efficiency Indicator Frequency : Yearly

Number of patentsCalculation : Number of patentsInformation : Business Management Efficiency Indicator Frequency : Yearly

New technologies adoptedInformation : Efficiency Indicator Frequency : Monthly

System improvements implementedInformation : Efficiency Indicator Frequency : Quarterly

Corporate Performance Management

‘Corporate Performance Management (CPM) is the area of

Business Intelligence (BI) involved with monitoring and managing

an organization's performance, according to

Key Performance Indicators (KPIs)

CPM Significance

• Marketing Departments can develop better products & services, assess the results of campaigns, better understand their target market, cross sell, upsell…

• Credit Departments can leverage CPM for collaborative analysis and slicing and dicing data in new and creative ways

• Human Resource Departments can use it extensively to analyze the workforce and the impact of salary and related decisions

• Executives can get real-time access to key performance indicators, and would be able to interact and drill-down on data as against a static number

• Portfolio & Fund Departments can analyse patterns for effective and faster investment decisions

What CPM enables?• Make the right investments in products, people, projects and processes

• Continuously assess operational performance based on key performance indicators and historical trends

• Adjust & re-align strategies as needed to achieve organizational goals

• Deliver consistent information to all levels within the organization for collaborative performance

• Visualise enterprise-wide planning and budgeting in a single model

• Analyze customer, product and services profitability in real-time

• Consolidate financial data from disparate sources across the entire enterprise

• Standardise on data communication, data comprehension & data control

• Optimise IT resources and infrastructure

• Single version of the truth

CPM Framework

C3 : Communication, Comprehension, Control

CPM Elements

Business Measurements

Information Management

Business Processes &

Activities

Operational Objectives

Strategic Objectives &

Goals

IT infrastructure

CPM factors

Internal External

Business Functions Statutory Compliance

Data Integration Market

Hierarchy External Entities

Security Industry Regulations

Operational Discipline Competition

Initiating CPM

• Integrate and take advantage of existing IT assets

• Identify the data integration strategy

• Identify a Business Intelligence strategy (Operational + Tactical)

• Blending Business Intelligence with elements of planning, budgeting and appropriate-time monitoring

• Identify measurable Business Performance Parameters (BPP)

• Peg operational data with BPP

• Improve and simplify pegging continuously

Structured CPM methodology Eg: KPI

Back Office application running on Oracle, Transaction application running on SQL,

KPI Data Sources

BothKPI Internal or Customer Facing

Mr. ABCKPI Benefactor

Mr. ABCKPI Initiator

Mr. XYZKPI Sponsor

7days, 1 dayAnticipate Upper and Lower Limits

Plus or minus 1 dayKPI Upper & Lower Tolerances

Less than 3 daysKPI Target Value

DaysKPI Unit of Measure & Formula

12 months, DailyKPI Life Span & Reporting Periodicity

31-Mar-08KPI End Date

1-Apr-07KPI Start Date

Better Cash flow KPI Benefits

Maintain credit period of less than 3 daysKPI Objective

Ageing AnalysisKPI Description

Data Communication

Data Comprehension

Data Control

Data Communication

Data Comprehension

Data Control

Summary

• CPM is not a technology, but a Business Strategy

• Core concept for CPM : C3

(Communication, Comprehension & Control)

• Business Intelligence is an Intelligent first step in incorporating CPM

"If you don't have a

dashboard you can't

drive the car.

Performance related

Information is like Compass will give you

right directions

Clear Marketing Directions and Road Map

Thank You!