Description
Corporate Performance Management (CPM) is often referred as the next generation of Business Intelligence (BI).
THE DISTINCTION BETWEEN BUSINESS INTELLIGENCE AND CORPORATE
PERFORMANCE MANAGEMENT – A LITERATURE STUDY COMBINED WITH
EMPIRICAL FINDINGS
Mika Aho
Business Information Management
Tampere University of Technology
P.O. Box 589, 33101 Tampere, Finland
[email protected]
ABSTRACT
Corporate Performance Management (CPM) is often
referred as the next generation of Business Intelligence
(BI). Yet, not much academic research exists in the area,
and especially in its relationships to other interrelated
concepts such as performance management (PM),
performance measurement, and data warehousing. The
paper discusses the differences and similarities between BI,
PM and CPM, and the new advancements that CPM brings
to BI. It also introduces a pyramid that links the interrelated
concepts together. The work is based on a literature study
and action-oriented research. The findings of this study
further extend the CPM research by providing a deeper
understanding on how CPM relates to BI and PM. The
paper also provides understanding to researchers and
organizations about CPM and its potential value.
1. INTRODUCTION
1.1. Increasing needs for enhancing corporate
performance
Business Intelligence (BI), analytics and performance
management (PM) have been the top priority for Chief
Information Officers for the fourth year in a row [1].
Enhancing corporate performance is important when the
economic situation is tough: it can help organizations to
find bottlenecks and inefficiencies or expose areas that are
profitable. However, much confusion remains in what
comprise CPM.
1.2. Research purpose, approach and methods
The paper discusses the differences and similarities
between BI, PM and CPM, and the new advancements that
CPM brings to BI. The work is carried out as a literature
study and action-oriented research. The findings from the
literature are combined with empirical findings in five case
companies where the author participated into CPM
development projects in various consultation roles. The
findings of this study further extend the CPM research by
providing a deeper understanding on how CPM relates to
BI and PM. The paper also provides understanding to
researchers and organizations about CPM and its potential
value.
The case organizations participating in this study are all
manufacturing companies. Three of them are listed in a
Helsinki Stock Exchange. Each of the company has
multiple sites around the world. Of five companies, the
number of employees ranged from approximately 300
employees to over 11000 employees. Total yearly revenue
ranged from 75 to 2600 million Euros. In each case, the
CPM deployments were done at a group level.
2. THEORETICAL BACKGROUND
2.1. Performance Measurement
The performance of an organization is ultimately how it is
achieving its goals. The performance measurement refers to
“a process used to determine the status of an attribute or
attributes of the measurement object”. [2] Measurement is
done by using measures - often called key performance
indicators (KPIs) - which are used to quantify management
objectives. They basically reflect to how an organization is
doing in a specific aspect of its performance [3]. One
characteristic for performance measurement is that the
measurable items are predefined.
A KPI is one representation of a critical success factor
(CSF) which is a key activity needed to achieve a given
strategic objective [4]. The KPIs encourage enterprises to
look beyond traditional financial metrics for an
understanding how the enterprise is performing. Often a
handful of CSFs are identified that comprise every strategic
objective the organization has. In one of the case
companies, the CSF for customer satisfaction was
measured by using two KPIs: availability (can company say
yes to customer requests) and reliability (does the company
keep its promises). For example, the availability KPI was
calculated by comparing a share of real delivery dates with
the customer requested dates.
2.2. Performance Management
PM can be defined simply as “the transition of plans into
results – execution” [4]. In this scenario, PM is the process
of managing organization’s strategy which aims at the
systematic generation and control of organization’s
performance [4,5]. PM is about improvement to create
value for and from customers with the result of economic
value added creation to stakeholders and owners [4].
Earlier in much of the academic literature traditional
PM has been financially biased by focusing only on the
inside of the organization on cost and budget variance data.
The balanced scorecard literature widened the concept of
PM by making executives look externally. As a result,
nowadays companies are focusing in a wider range of
stakeholders to ensure they pay attention to all the
important facets of performance [6].
2.3. Business Intelligence
The term BI was first coined by the Gartner Research
Group in the early 1990s. It can be seen as a method of
analyzing the business environment (markets, competitors
and economic issues). On the other hand, BI refers to an
analytical process that produces insights, suggestions, and
recommendations for the management and decision-makers
by transforming internal and external data into information.
[7] For example KPIs can be monitored and represented by
using BI techniques such as scorecards and dashboards. The
data needed in to calculate the KPIs – like the real delivery
date – also comes from a back-end BI solutions, namely
from a data warehouse (DW). DW is a relational database
in which data is aggregated from several operational source
systems. DWs enable an effective reporting and analysis
without affecting the performance and functionality of the
operational systems.
Although BI offers the tools necessary to improve
decision making within organizations, it is not linked to
organization’s strategy. As such it provides no systematic
means of planning, monitoring, controlling, and managing
the implementation of strategic business objectives [8].
Merely reporting information does not equate to managing
for better results [4]. Actions and decisions are needed to
improve the organization’s performance.
2.4. Corporate Performance Management
CPM is a consolidation of concepts that companies have
been practicing for some time already such as PM, DW, BI
and total quality management. Still much confusion
remains as to what comprise CPM. The most used
definition is from Gartner [9] who defines CPM as an
umbrella term used to describe the “methodologies, metrics,
processes and systems used to monitor and manage the
business performance of an enterprise”. CPM is targeted at
the corporate level. Some researchers see CPM as a narrow
concept that applies to planning, scheduling, and budgeting
practices in business, and some discuss it in the context of
legislation such as Sarbanes-Oxley Act [8].
Often enterprises manage their business by analyzing
financially oriented metrics. All of the case companies
started their BI and CPM initiatives from financial
reporting. Actually, the most used PM process was
budgeting, often focused at the operational level around a
single-year budget. However, CPM brings in new
methodologies and concepts such as Balanced Scorecard,
Activity-Based Costing and value-based management to
broaden the view from a purely financial perspective.
3. THEORETICAL FINDINGS
3.1. Similarities and differences between BI and CPM
Although many use the terms BI and CPM synonymously,
they are distinctly different [8,4]. CPM enhances BI in two
directions: first, CPM is more targeted to support process-
oriented organizations than BI. Second, CPM aims at
providing a closed-loop support that interlinks strategy
formulation, measurement, process design and execution
with BI [5]. CPM also evaluates its progress over time
toward goal attainment by using CSFs and KPIs [8,5].
CPM as a concept represents the strategic deployment
of BI solutions, since BI provides the backbone to
implement CPM. As CPM deploys the power of BI, the two
are inseparable. BI involves the raw data from disparate
source systems that is cleansed and integrated into DW.
CPM is about leveraging that information [4,10]. Once the
data is transformed into meaningful information, it can be
used for decisions.
BI is an enterprise information platform for querying,
reporting and analytics, making it the foundation for
effective performance management. CPM drives the
strategy and leverages all of the processes, methodologies,
metrics, and systems that monitor, manage, and improve
enterprise performance.
Fig. 1 illustrates the CPM concept as a whole. The
mission and vision statements lead to business goals and a
strategy. Strategy states how the goals should be reached,
and CSFs define the prerequisites to reach the goals. The
business goals and imposed strategy lead to objectives and
a policy (business plan). KPIs define how the objectives
will be measured. The imposed policy is stated with
business rules. Within the BI environment, the KPIs are
presented by scorecards, dashboards or other simple
graphical readouts in a front-end web portal or similar
interface, using metaphors such as traffic lights and gas
gauges. From the dashboard, managers can drill down to
study performance data in more detail. CPM requires
underlying data systems which can share cleansed,
consistent and reliable data in a flexible ways. The data
itself is aggregated to a DW from operational information
systems or other data sources.
Fig. 1. The CPM pyramid, amended from [12]
The upper grey part of the pyramid in the Fig. 1 is how
CPM is usually understood, while the bottom section of the
pyramid is what encompasses BI. The bottom can also be
divided into front-end and back-end BI, containing the
reporting and analysis layer, and DW, respectively.
4. EMPIRICAL FINDINGS
Many case organizations used the terms BI and CPM
synonymously. Every company had a DW in place, which
was an important part of the BI/CPM solution. In one case
company the acronym CPM was used to complement the
BI solution in terms of budgeting and financial planning
solutions. Another case company used systematically the
term BI even though it had defined a variety of CSFs and
KPIs. Of the five key companies only two had KPIs in
place which were used to monitor the performance of the
company. In other companies the developed BI/CPM
solution was used to produce information to decision-
makers in terms of reporting and analytics.
Interestingly, many case companies used the vendor
offering (CPM suite/application) to define what does the
CPM acronym stand for. Often the components included
were planning, budgeting, financial consolidation,
reporting, strategy planning and business scorecards. One
case company used the Gartner’s definition for CPM to
represent its BI solution.
5. CONCLUSIONS
It seems the terms BI and CPM are widely used but also
generally misunderstood. In fact, no other terms were used
in the case companies to represent the concept. Even though
no generalizations can be done from such a small sample
size used in this study, it seems the terms BI and CPM still
needs further academic definition. Even in the literature the
two concepts have different meanings. As such, CPM is
still very commercial term. In general, BI is a subset of
CPM, and CPM brings in new concepts and areas where
traditional BI falls short. Both are needed: BI is more
targeted at transforming data into information while CPM
provides a means of combining business strategy and
technological structure to direct the entire organization
towards accomplishing common organizational objectives.
Together, BI and CPM form the bridge that connects data to
decisions. [4]
The topic could be further investigated for example by
accomplishing interviews in the case companies, or creating
a large survey for BI/CPM practioners.
6. REFERENCES
[1] Gartner, 2009. “Gartner EXP Worldwide Survey of More
than 1,500 CIOs Shows IT Spending to Be Flat in 2009 “,
Press Release.
[2] Lönnqvist, A. 2004. “Measurement of Intangible Success
Factors”, Doctoral dissertation. Tampere University of
Technology.
[3] Kaplan, R. 2009. “Measuring Performance (Pocket
Mentor)”, Harvard Business Press, Boston, Massachusetts.
[4] Cokins, G. 2009. “Performance Management: Integrating
Strategy Execution, Methodologies, Risks, and Analytics”,
John Wiley & Sons, Hoboken, New Jersey.
[5] Melchert, F., Winter, R., Klesse, M. 2004. “Aligning
Process Automation and Business Intelligence to Support
Corporate Performance Management”, in Proc. 10th
Americans Conference on Information Systems, New York,
Aug 2004.
[6] Bourne, M., Franco, M., Wilkes, J. 2003. “Corporate
Performance Management”, Measuring Business Excellence,
Vol. 3, no 3, pp. 15-21.
[7] Pirttimäki, V. 2007. “Business Intelligence as a Managerial
Tool in Large Finnish Companies”, Doctoral dissertation.
Tampere University of Technology.
[8] Frolick, M., Ariyachandra, T. 2006. “Business Performance
Management: One Truth”, Information Systems
Management, Winter 2006. pp. 41-48.
[9] Geishecker, L., Rayner, N. 2001. “Corporate Performance
Management: BI Collides With ERP”, Gartner Research
Note, Strategic Planning, SPA-14-9282.
[10] Miranda, S. 2004. “Beyond BI: Benefiting from Corporate
Performance Management Solutions”, Financial Executive,
Vol. 20, No. 2, pp. 58–61.
[11] “Business or Corporate Performance Management”. 2003.
Featured article. International Journal of Productivity and
Performance Management, December 2003, Vol. 52, Issue 7
[12] van Roekel, H., Linders, J., Raja, K., Reboullet, T.,
Ommerborn, G. 2009. “The BI Framework: How´to Turn
Information into a Competitive Asset”, Published by Logica.
doc_320302383.pdf
Corporate Performance Management (CPM) is often referred as the next generation of Business Intelligence (BI).
THE DISTINCTION BETWEEN BUSINESS INTELLIGENCE AND CORPORATE
PERFORMANCE MANAGEMENT – A LITERATURE STUDY COMBINED WITH
EMPIRICAL FINDINGS
Mika Aho
Business Information Management
Tampere University of Technology
P.O. Box 589, 33101 Tampere, Finland
[email protected]
ABSTRACT
Corporate Performance Management (CPM) is often
referred as the next generation of Business Intelligence
(BI). Yet, not much academic research exists in the area,
and especially in its relationships to other interrelated
concepts such as performance management (PM),
performance measurement, and data warehousing. The
paper discusses the differences and similarities between BI,
PM and CPM, and the new advancements that CPM brings
to BI. It also introduces a pyramid that links the interrelated
concepts together. The work is based on a literature study
and action-oriented research. The findings of this study
further extend the CPM research by providing a deeper
understanding on how CPM relates to BI and PM. The
paper also provides understanding to researchers and
organizations about CPM and its potential value.
1. INTRODUCTION
1.1. Increasing needs for enhancing corporate
performance
Business Intelligence (BI), analytics and performance
management (PM) have been the top priority for Chief
Information Officers for the fourth year in a row [1].
Enhancing corporate performance is important when the
economic situation is tough: it can help organizations to
find bottlenecks and inefficiencies or expose areas that are
profitable. However, much confusion remains in what
comprise CPM.
1.2. Research purpose, approach and methods
The paper discusses the differences and similarities
between BI, PM and CPM, and the new advancements that
CPM brings to BI. The work is carried out as a literature
study and action-oriented research. The findings from the
literature are combined with empirical findings in five case
companies where the author participated into CPM
development projects in various consultation roles. The
findings of this study further extend the CPM research by
providing a deeper understanding on how CPM relates to
BI and PM. The paper also provides understanding to
researchers and organizations about CPM and its potential
value.
The case organizations participating in this study are all
manufacturing companies. Three of them are listed in a
Helsinki Stock Exchange. Each of the company has
multiple sites around the world. Of five companies, the
number of employees ranged from approximately 300
employees to over 11000 employees. Total yearly revenue
ranged from 75 to 2600 million Euros. In each case, the
CPM deployments were done at a group level.
2. THEORETICAL BACKGROUND
2.1. Performance Measurement
The performance of an organization is ultimately how it is
achieving its goals. The performance measurement refers to
“a process used to determine the status of an attribute or
attributes of the measurement object”. [2] Measurement is
done by using measures - often called key performance
indicators (KPIs) - which are used to quantify management
objectives. They basically reflect to how an organization is
doing in a specific aspect of its performance [3]. One
characteristic for performance measurement is that the
measurable items are predefined.
A KPI is one representation of a critical success factor
(CSF) which is a key activity needed to achieve a given
strategic objective [4]. The KPIs encourage enterprises to
look beyond traditional financial metrics for an
understanding how the enterprise is performing. Often a
handful of CSFs are identified that comprise every strategic
objective the organization has. In one of the case
companies, the CSF for customer satisfaction was
measured by using two KPIs: availability (can company say
yes to customer requests) and reliability (does the company
keep its promises). For example, the availability KPI was
calculated by comparing a share of real delivery dates with
the customer requested dates.
2.2. Performance Management
PM can be defined simply as “the transition of plans into
results – execution” [4]. In this scenario, PM is the process
of managing organization’s strategy which aims at the
systematic generation and control of organization’s
performance [4,5]. PM is about improvement to create
value for and from customers with the result of economic
value added creation to stakeholders and owners [4].
Earlier in much of the academic literature traditional
PM has been financially biased by focusing only on the
inside of the organization on cost and budget variance data.
The balanced scorecard literature widened the concept of
PM by making executives look externally. As a result,
nowadays companies are focusing in a wider range of
stakeholders to ensure they pay attention to all the
important facets of performance [6].
2.3. Business Intelligence
The term BI was first coined by the Gartner Research
Group in the early 1990s. It can be seen as a method of
analyzing the business environment (markets, competitors
and economic issues). On the other hand, BI refers to an
analytical process that produces insights, suggestions, and
recommendations for the management and decision-makers
by transforming internal and external data into information.
[7] For example KPIs can be monitored and represented by
using BI techniques such as scorecards and dashboards. The
data needed in to calculate the KPIs – like the real delivery
date – also comes from a back-end BI solutions, namely
from a data warehouse (DW). DW is a relational database
in which data is aggregated from several operational source
systems. DWs enable an effective reporting and analysis
without affecting the performance and functionality of the
operational systems.
Although BI offers the tools necessary to improve
decision making within organizations, it is not linked to
organization’s strategy. As such it provides no systematic
means of planning, monitoring, controlling, and managing
the implementation of strategic business objectives [8].
Merely reporting information does not equate to managing
for better results [4]. Actions and decisions are needed to
improve the organization’s performance.
2.4. Corporate Performance Management
CPM is a consolidation of concepts that companies have
been practicing for some time already such as PM, DW, BI
and total quality management. Still much confusion
remains as to what comprise CPM. The most used
definition is from Gartner [9] who defines CPM as an
umbrella term used to describe the “methodologies, metrics,
processes and systems used to monitor and manage the
business performance of an enterprise”. CPM is targeted at
the corporate level. Some researchers see CPM as a narrow
concept that applies to planning, scheduling, and budgeting
practices in business, and some discuss it in the context of
legislation such as Sarbanes-Oxley Act [8].
Often enterprises manage their business by analyzing
financially oriented metrics. All of the case companies
started their BI and CPM initiatives from financial
reporting. Actually, the most used PM process was
budgeting, often focused at the operational level around a
single-year budget. However, CPM brings in new
methodologies and concepts such as Balanced Scorecard,
Activity-Based Costing and value-based management to
broaden the view from a purely financial perspective.
3. THEORETICAL FINDINGS
3.1. Similarities and differences between BI and CPM
Although many use the terms BI and CPM synonymously,
they are distinctly different [8,4]. CPM enhances BI in two
directions: first, CPM is more targeted to support process-
oriented organizations than BI. Second, CPM aims at
providing a closed-loop support that interlinks strategy
formulation, measurement, process design and execution
with BI [5]. CPM also evaluates its progress over time
toward goal attainment by using CSFs and KPIs [8,5].
CPM as a concept represents the strategic deployment
of BI solutions, since BI provides the backbone to
implement CPM. As CPM deploys the power of BI, the two
are inseparable. BI involves the raw data from disparate
source systems that is cleansed and integrated into DW.
CPM is about leveraging that information [4,10]. Once the
data is transformed into meaningful information, it can be
used for decisions.
BI is an enterprise information platform for querying,
reporting and analytics, making it the foundation for
effective performance management. CPM drives the
strategy and leverages all of the processes, methodologies,
metrics, and systems that monitor, manage, and improve
enterprise performance.
Fig. 1 illustrates the CPM concept as a whole. The
mission and vision statements lead to business goals and a
strategy. Strategy states how the goals should be reached,
and CSFs define the prerequisites to reach the goals. The
business goals and imposed strategy lead to objectives and
a policy (business plan). KPIs define how the objectives
will be measured. The imposed policy is stated with
business rules. Within the BI environment, the KPIs are
presented by scorecards, dashboards or other simple
graphical readouts in a front-end web portal or similar
interface, using metaphors such as traffic lights and gas
gauges. From the dashboard, managers can drill down to
study performance data in more detail. CPM requires
underlying data systems which can share cleansed,
consistent and reliable data in a flexible ways. The data
itself is aggregated to a DW from operational information
systems or other data sources.
Fig. 1. The CPM pyramid, amended from [12]
The upper grey part of the pyramid in the Fig. 1 is how
CPM is usually understood, while the bottom section of the
pyramid is what encompasses BI. The bottom can also be
divided into front-end and back-end BI, containing the
reporting and analysis layer, and DW, respectively.
4. EMPIRICAL FINDINGS
Many case organizations used the terms BI and CPM
synonymously. Every company had a DW in place, which
was an important part of the BI/CPM solution. In one case
company the acronym CPM was used to complement the
BI solution in terms of budgeting and financial planning
solutions. Another case company used systematically the
term BI even though it had defined a variety of CSFs and
KPIs. Of the five key companies only two had KPIs in
place which were used to monitor the performance of the
company. In other companies the developed BI/CPM
solution was used to produce information to decision-
makers in terms of reporting and analytics.
Interestingly, many case companies used the vendor
offering (CPM suite/application) to define what does the
CPM acronym stand for. Often the components included
were planning, budgeting, financial consolidation,
reporting, strategy planning and business scorecards. One
case company used the Gartner’s definition for CPM to
represent its BI solution.
5. CONCLUSIONS
It seems the terms BI and CPM are widely used but also
generally misunderstood. In fact, no other terms were used
in the case companies to represent the concept. Even though
no generalizations can be done from such a small sample
size used in this study, it seems the terms BI and CPM still
needs further academic definition. Even in the literature the
two concepts have different meanings. As such, CPM is
still very commercial term. In general, BI is a subset of
CPM, and CPM brings in new concepts and areas where
traditional BI falls short. Both are needed: BI is more
targeted at transforming data into information while CPM
provides a means of combining business strategy and
technological structure to direct the entire organization
towards accomplishing common organizational objectives.
Together, BI and CPM form the bridge that connects data to
decisions. [4]
The topic could be further investigated for example by
accomplishing interviews in the case companies, or creating
a large survey for BI/CPM practioners.
6. REFERENCES
[1] Gartner, 2009. “Gartner EXP Worldwide Survey of More
than 1,500 CIOs Shows IT Spending to Be Flat in 2009 “,
Press Release.
[2] Lönnqvist, A. 2004. “Measurement of Intangible Success
Factors”, Doctoral dissertation. Tampere University of
Technology.
[3] Kaplan, R. 2009. “Measuring Performance (Pocket
Mentor)”, Harvard Business Press, Boston, Massachusetts.
[4] Cokins, G. 2009. “Performance Management: Integrating
Strategy Execution, Methodologies, Risks, and Analytics”,
John Wiley & Sons, Hoboken, New Jersey.
[5] Melchert, F., Winter, R., Klesse, M. 2004. “Aligning
Process Automation and Business Intelligence to Support
Corporate Performance Management”, in Proc. 10th
Americans Conference on Information Systems, New York,
Aug 2004.
[6] Bourne, M., Franco, M., Wilkes, J. 2003. “Corporate
Performance Management”, Measuring Business Excellence,
Vol. 3, no 3, pp. 15-21.
[7] Pirttimäki, V. 2007. “Business Intelligence as a Managerial
Tool in Large Finnish Companies”, Doctoral dissertation.
Tampere University of Technology.
[8] Frolick, M., Ariyachandra, T. 2006. “Business Performance
Management: One Truth”, Information Systems
Management, Winter 2006. pp. 41-48.
[9] Geishecker, L., Rayner, N. 2001. “Corporate Performance
Management: BI Collides With ERP”, Gartner Research
Note, Strategic Planning, SPA-14-9282.
[10] Miranda, S. 2004. “Beyond BI: Benefiting from Corporate
Performance Management Solutions”, Financial Executive,
Vol. 20, No. 2, pp. 58–61.
[11] “Business or Corporate Performance Management”. 2003.
Featured article. International Journal of Productivity and
Performance Management, December 2003, Vol. 52, Issue 7
[12] van Roekel, H., Linders, J., Raja, K., Reboullet, T.,
Ommerborn, G. 2009. “The BI Framework: How´to Turn
Information into a Competitive Asset”, Published by Logica.
doc_320302383.pdf