Frank Buytendijk Blog

Operational excellence is a term that we all know. It is the umbrella for all activities that we do to improve the quality of our products and services, to speed up the speed of our business processes and to squeeze out the cost. Particularly ERP systems have been very successful here. So what is the business realm of EPM (enterprise performance management). It must be the management side of things. Making the organization smarter, more agile and to create organizational alignment.

This is what is called management excellence. Operational excellence, whether you are good at it or not, increasingly is becoming a given. There is a decreasing competitive advantage in being even faster, or having an even higher quality or an even lower price. The next competitive edge is about having more insight in large and small changes in the market, and doing something with that. Ita??s not the operational processes alone that do the trick, ita??s the management that makes the difference.

Management Excellence is going to be a very important theme for Oracle EPM the coming year. That is why we have launched The Journal of Management Excellence.

In this quarterly publication, we will be exploring all facets of management excellence. In this first issue, we focus on introducing the concept. Please pay special attention to the article on Uncertainty Risk Management, this is a new concept to performance management.

In the second issue, the theme will be a??organizing for management excellencea??, focusing on centers of excellence, or alternative ways of embedding performance management in your organization. Do you feel like contributing an article? Wea??ll make it worth your whilea?|

Best regards, frank

In my blog about the Jean Michel Jarre concert I wrote that the seeds of innovation can often be found many years before.

Jorgen Heizenberg of Cap Gemini responds:

You mention that the seeds of innnovation can be found in the past - which can be true - however I am still waiting for them to bloom! If you look at the functionality of past BI applications (EIS, Decision Support, Expert Systems, Olap, Reporting etc) and the current ones there is not much improvement from the enduser point of view. Sure you now have 'cool stuff' like zero footprint but I am still waiting for intelligent BI tools (Intelligence meaning the possibility to adapt to changing circumstances). For example: Why do I have to look for exceptions in a OLAP Cube i.s.o. of the tool showing this to me proactively. Why do I have to look for a specific report (often in some kind of subfolder with a completely stupid name) that matches with the current business problem that I am facing i.s.o. typing my problem in a Google like environment and sit back for the answers sorted by relevance. And so on... After this whole BI consolidation it has been so quiet in this market. Everybody is figuring out how to integrate the x# solutions in their product stack but where is the real innovation? I am not seeing it! Are you?

Jorgen makes a few interesting points, but I dona??t agree on everything he says. He contrasts integration with innovation, but this a?? in my opinion a?? is not a contrast. Integration of business intelligence technologies and performance management applications is an important innovation. It provides users the opportunity to make use of standard applications for standard problems, and homemade applications for specific problems, within a single environment making use of the same data and metadata. To continue Jorgens thoughts: why do I have to redo half my work if I move from one application to the next? And what about integration of BI and EPM into business applications, so that business processes become smarter. Ia??d call that pretty substantial innovation.

Another point I want to make is that in innovative processes it sometimes takes a while before we get it a??righta??. The seeds are planted years ago perhaps, but it takes a few generations to blossom. Two years ago there was a first round of a??Google search style information accessa?? to BI tools. Most got it completely wrong. Keyword search is virtually useless in BI environments. You may search for a??total revenuea?? and find all kinds of reports, including tax reports for the a??internal revenue service (IRS)a??. But you wouldna??t find the report that lists the different types of revenue, and then the total revenue underlines, like this:

Rev. A 100,000
Rev. B 250,000
Rev. C 150,000

500,000

And this would be exactly the report youa??d be looking for. Already at Hyperion, we developed Google search integration, based on metadata. Perfect? Perhaps not, but a whole lot better than some other stuff out there. And it gets you closer to Jorgena??s vision of sitting back and look for the answers sorted by relevance.

Check out Jorgena??s blog: www.biguru-online.com

frank

Recently we introduced a new product, called Oracle Hyperion Profitability and Cost Management (HPCM). This is great news, as I think profitability management is crucial in todaya??s business. Margins are under pressure due to a variety of reasons and we cana??t take our eyes of the ball in our business operations. Over the last year I have had an incredibly interesting email exchange with an industry expert, called Mike Haley, and I would like to share a few points from the many pages of this email conversationa?|

Profitability management is the new Activity Based Costing
The biggest problem of ABC/ABM (activity based management) is that it is called like that. It is one of those examples where unfortunately the name of the application (I don't mean this in the technical sense but as in "how a concept is applied) is the same as the concept. And it's not. Profitability Management is actually the same as ABC, and so are many other exercises. For many, activity based costing is a loaded term. Many projects in the past failed. The difference today is that there is a much stronger business imperative.

Why so many projects failed in the past
Like with many projects, because of internal politics. In many cases, allocated costs were not seen as an instrument to optimize a value chain, but as a??funny moneya?? to shift around managing budgets. Thata??s disconnected from reality. These politics still exist ofcourse, but with the increased pressure organizations cana??t afford to fail because of internal politics.

Another reason for failure is a??going overboarda?? and looking for precision. Allocating costs and revenues is never a precise exercise. It is based on assumptions and discussion. The goal of profitability and cost management is not precision, but accuracy. The cost and revenue structure needs to reflect the cost and revenue drivers within the organization. Transparency of that process is far more important than creating a a??precise black boxa?? that no one understands.

Despite modern systems to track all kinds of data, the amount of indirect costs is increasing
Many organizations are introducing shared service centers, centralizing certain operations, either in the front or in the back office. The economies of scale outweigh the overhead of such centralized operations, but the overhead still needs to be allocated. On a more esoteric level, customers appreciate working with authentic organizations and it needs to be clear what they stand for. The importance of brand marketing is increasing. How can these efforts directly contribute to various transactions? By nature these are indirect operations that benefit all business units, products and services.

Dynamic product pricing and Service pricing is becoming more important
Most business models today have adopt mass customization principles. Customers can choose their own configurations and timelines for delivery. This is where profitability management is not a controlling activity in the back office anymore, but has become a pricing instrument to compete better in the front office. A radical way of making the old a??ABCa?? a strategic imperative today.

frank

Recently Oracle announced that Wal-Mart, the worlda??s largest retailer, has selected OracleA? Business Intelligence Suite Enterprise Edition Plus to provide comprehensive data intelligence and analysis from across Wal-Marta??s operations.

This is significant news for a number of reasons. First, because it shows that BI can be a strategic deployment. Wal-Mart plans to use the system to administer its logistics, transportation, category management, finance, human resources, real estate, merchandising, store and club operations and other business resources, within Wal-Mart and Sama??s Clubs. I have pointed out for years, and also in this blog, that BI only starts to become strategic, if you apply the concept of a??horizontal alignmenta??. BI starts to make sense if you analyze data and events spanning multiple functional domains. Walmart is a shining example of this. No tactical, silo deployments, but a strong standard across the organization.

Second, the press release states that the announcement builds on Wal-Marta??s strategic relationship with Oracle. BI is not a separate category anymore, but should be seen within a complete ecosystem of business applications.

Wal-Mart sets a new example in best practices.

frank