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5/7/2004
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Getting Better All The Time

About 40% of 150 business and technology executives surveyed in March said their companies have deployed business-performance management technologies and processes, or plan to do so within the next year.

In three years, Nestle Purina Petcare Co., a unit of Switzerland-based Nestle S.A., has gone from the bottom third of the American Customer Satisfaction Index ranking of companies in its industry to No. 1. It ranks among the best in its market sector in processes such as order entry and accounts payable. And retailer Wal-Mart has named the company "Vendor of the Year" for three consecutive years.

The St. Louis maker of pet foods gives much of the credit for these accomplishments to its business-performance management efforts. Nestle Purina evaluates its performance based on about 100 key measures that focus on customers, products and services, marketing, and other factors.

The company is among many that are adopting business-performance management processes. About 40% of the 150 business and technology executives surveyed by Optimize in March said their companies have deployed business-performance management technologies and processes, or plan to do so within the next year.

Business-performance management, though defined in various ways, is generally considered a set of management and analytic processes -- supported by technology -- that addresses financial and operational activities. Businesses set strategic goals and then measure and manage performance against those goals. Core processes include strategic, financial, and operational planning; consolidation and reporting; modeling and analysis; metrics such as scorecards and Six Sigma; and monitoring of key performance indicators linked to organizational strategy using dashboards.

To address some of the confusion about what business-performance management is, a group of vendors, consultants, and analysts recently formed the BPM Standards Group, whose charter is to accelerate adoption of successful projects and establish standards for IT vendors, service providers, consultants, and practitioners. The group plans to deliver a BPM framework in two or three months.

But companies like Nestle Purina are already seeing benefits. See chart here The key is focus and alignment. "We have a vision based on feedback from internal sources and from the marketplace," which Nestle Purina uses to set targets for improvement, says Tom Akright, director of performance excellence at the company.

Akright says Nestle Purina's initiative combines cultural changes aimed at improving the way processes are conducted and technologies that help the company gather information, set goals, and measure progress. Nestle Purina draws data from surveys of customers, suppliers, and employees; its ERP system; financial applications; and other sources, and then feeds the information into an Oracle database. The company also uses business-intelligence reporting tools from Business Objects and creates its own dashboards using Excel spreadsheets so executives can view performance gains.

The effort costs roughly $1 million per year, Akright says, and it more than pays for itself through process improvements. The $4.3 billion company's revenue is growing faster than the average rate of growth in its product category.

Of the companies in the survey that have implemented business-performance management, 20% have deployed it enterprisewide. Nearly 60% first applied BPM to address a particular problem and then rolled it out broadly. Experts say that option is best.

"Where we've seen less success is when companies try to [deploy technologies] all at once," says Craig Schiff, president and CEO of BPM Partners Inc., a Stamford, Conn., consulting firm that helps companies enhance business performance. "Each element of BPM is a project unto itself. Companies need to select areas where they can get fairly quick payback, then progress from there." Schiff says large business-performance projects typically cost $500,000, including software and services, and can run into millions of dollars for larger companies.

InVision Technologies, a Newark, Calif., maker of explosives-detection systems for security, last year began deploying a suite of BPM products from Hyperion Solutions Corp. InVision has rolled out components in stages, says Don Francis, VP and CIO. "We wanted to prove that this was a viable tool, then leverage it further" within the company, he says. Different components of the system handle financial management and reporting; planning, budgeting, and forecasting; and performance metrics. All have shown returns, Francis says.

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