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Commentary: A metric system for smart businesses

Good tools aren't enough. To turn business intelligence software into enterprise advantage, companies need to evolve what they measure and how they use those metrics.

Commentary: A metric system for smart businesses
By Forrester Research
Special to CNET
December 2, 2003, 10:15AM PT

By Laurie M. Orlov, Research Director

Tools like Cognos' Metrics Manager help companies with analytics and alerts for better operations insight. But good tools aren't enough. To turn business intelligence software into enterprise advantage, companies need to adjust what they measure and how they use those metrics.

Earlier this year, we caught up with Meg Dussault, director of product marketing for Cognos Metrics Manager, a suite of analytic tools intended to help companies push a "balanced scorecard" across the organization by linking metrics to company initiatives and affected employees. Combined with its recently acquired planning and forecasting tools--originally from Adaytum--Cognos uses Metrics Manager to help C-level executives to do the following:

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• Extend metric usage to the enterprise. Metrics Manager helps companies gain operational visibility that results in smart decisions. Cognos designed its tools to link metrics into a cross-enterprise scorecard comprising goals and tolerance thresholds, owners and affected employees. As a result, companies can do things like track order cycle times to identify delayed orders and point a finger at the group responsible.

• Link dispersed business intelligence assets into strategic-level scorecards. Taking advantage of other assets within Cognos Business Intelligence Series 7, Metrics Manager links current metrics to historical data and ongoing operational events from a wide variety of systems, presenting the results in a scorecard view. Dussault referred to this as "serving up the intersection of metrics like costs and performance, as well as all other data assets, in order to create situational awareness" across the company.

• Convert enterprise scorecards into alert managers. Metrics Manager lets companies centrally configure an action associated with a detected anomaly--and also identify who needs to be notified and how. In addition, the software can detect how performance in one metric affects performance in another. Dussault noted that Metrics Manager's ability to share plans and results in an iterative way enables users to "find and reward teams that are performing well."

Good tools aren't enough
Tools like Metrics Manager sound like a must-have for top executives seeking tighter control over business performance. But companies aren't ready for them. Before companies can use the tools, they face a variety of obstacles:

• "Siloed" business intelligence behavior dominates. Companies have not placed the level of cross-enterprise oversight on business intelligence buying that they showered on enterprise resource planning, strewing potential metric data sources across the company. Business intelligence purchases suffer from a history of relatively small deal sizes, business decisions being made at low levels, and named-user licensing practices.

• Individuals' objectives don't reflect strategic scorecards. Companies often lack alignment between individual organizational goals and corporate plans. For example, purchasing managers frequently work toward narrow targets--like reducing the cost of goods bought for a single product or organization. This approach fails to target supplier-level efficiencies like companywide consolidation of vendor contracts in order to reduce the cost of materials.

• Companies measure function, not process. Companies still roll up metrics from departmental results, delaying or even preventing the visibility of data from multistep and multifunction processes. For example, the vice president of sales might define cost of sales based only on field staff instead of including resources--like those from the call center, the Web site and resellers--managed through other organizations.

Metrics maturity
Before companies can take full advantage of tools like Metrics Manager, they must fill in measurement gaps over time, building visibility and taking action based on metrics. As companies evolve, they will:

• First, craft local metrics and accountability. Individual business units or plants need to identify who is accountable for which key processes. This will enable the establishment of key performance indicators linked to initiatives like improving yield of boards manufactured by a specific supplier or reducing customer returns following a new product introduction. Doing this within a companywide framework will make the next step--enterprise transparency--easier.

• Then establish enterprise metric transparency. After establishing local metrics and data sources, a company must aggregate information from across the enterprise, based on data and metric integration standards. Companies like General Electric and Procter & Gamble focus their day-to-day reporting and "dashboards" on these business unit information sources to ensure that they are making progress on key enterprise strategies like improved quality or cycle times. And Verizon Communications offers "streaming" charts to employees, identifying operational status and metrics like current truck locations, last week's digital subscriber line sales or total work orders in Boston.

• Finally, use metrics to seize competitive advantage. Once an enterprise has visibility into performance, aligned metrics and data become the drivers used to acquire and sustain competitive advantage. This results from configuring alerts about problems and opportunities for specific people across the enterprise, using a role-based scorecard. For example, Southwest Airlines uses shared metrics to identify customer-focused efficiencies for individuals working in gate operations, reservations and baggage handling.

© 2003, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.