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9/22/2008
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Operational Performance: What Sets Best-In-Class Companies Apart?

Are your daily decisions based on fact? A new report by Aberdeen Group finds that best-in-class companies succeed by finding the right key performance metrics and tying day-to-day decisions to larger corporate goals.

Businesses thrive or fail based on their ability to identify, define, track, and act upon Key Performance Indicators (KPIs). Executives and line-of-business management are increasingly feeling the pressure to enable timelier and more accurate decisions in order to improve operational efficiencies. The faster and more accurately KPIs can be accessed, reviewed, analyzed, and acted upon, the better an organization can manage day-to-day operations and customer interactions.

Companies are focusing on obtaining solutions that address specific business pressures driving operational performance today. These include the need to:

Improve executive visibility to operational drivers. Few companies have achieved greater than a beginning level of maturity when it comes to addressing operational data within a time frame that can affect performance improvement. In fact, 24% of respondents have not yet addressed operational data with any reporting or analytics capabilities.

Replace "gut-feel" decisions with "fact-based" decisions. Interviews with respondents revealed that many operational decisions are based on gut-feel because information is not available soon enough after a business event occurs.

Gain an understanding of operational performance drivers. There are many operational "moving parts" within the organization.

In June and July of 2008, Aberdeen Group investigated a wide spectrum of operational performance management capabilities through a primary survey research program. Based on responses from more than 200 organizations, Aberdeen uncovered the strategies, actions, technology investments, and services that Best-in-Class companies are using to improve operational performance. As explained in this executive summary of Aberdeen's "Operational KPIs and Performance Management" report, Best-in-Class companies tie day-to-day operational decisions and performance to the successful attainment of corporate goals.

PERFORMANCE BECOMES A PRIORITY

Performance management metrics have traditionally been accessed through simple means such as spreadsheets and static reports, as well as advanced methods involving Business Intelligence (BI) technologies such as scorecards, dashboards, operational reporting, analytics, and "automated alerting." Operational managers are increasingly demanding visibility into day-to-day metrics in order to align operational business activity with corporate objectives. This means they must gather, track, analyze, and act upon KPIs that can change multiple times throughout the business day or week.

The creation, management, and continual review of KPIs can be a difficult process, particularly when large, complex data volumes are combined with rapidly changing business dynamics. Projects also often involve the integration of data from disparate sources, complex calculations to derive accurate KPIs, and a host of infrastructure requirements to deliver the information in a meaningful format (reports / dashboards, scorecards, alerts) and via an effective medium (desktop, Web, remote access, email, PDAs, mobile devices).

Operational performance is rapidly becoming a top priority of business intelligence and performance management projects. Respondent interviews revealed that activity and projects are focused on the desire to improve customer service, expense management, and sales operations performance. While this reflects the business areas most concerned, executives are struggling to gain visibility into the operational performance driving the business. Asked to identify pressures driving operational performance management, respondents cited these top-five business demands:

32% Improve executive visibility into operational drivers
29% Replace "gut-feel" decisions with "fact-based" decisions
26% Identify and understand operational performance drivers
23% Control increasing operational costs
23% Accelerate access to operational performance information

Nearly one-third of all respondents are prioritizing executive management visibility into operational performance as the top pressure driving their focus and investment into identifying and managing operational KPIs. This drive toward improved visibility is an internally-focused pressure that directly addresses to the next most reported business concern – replacing "gut-level" decisions with "fact-based" decisions. But in order to accomplish this, companies clearly must have a firm grip on the actual operational performance drivers, and the definition and calculation of operational KPIs that will inevitably produce the desired visibility.

The following sections provide a detailed analysis of the operational performance improvements that "Best-in-Class" companies have achieved through their strategic and tactical actions and organizational investments.

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