This article will discuss how Business Intelligence and Corporate Performance Management systems differ – and how they overlap.
Many find the word ‘Business Intelligence’ (BI) often ambiguous and confusing. It can simply mean that you know something about the business, but Gartner, the world’s leading IT research company, defines BI as “an umbrella term that include the applications, infrastructure and tools, and best practices that enable access to and analysis of information to improve and optimize decisions and performance.” The objective is to provide the right knowledge to the right people at the right time to make informed decisions.
On the other hand, Corporate Performance Management (CPM), also called business performance management or sometimes enterprise performance management, is a subcategory of BI describing the methodologies and processes that help monitor and manage a company’s performance. CPM is important for companies who are looking to remodel their budget, reduce costs, better align Key Performance Indicators (KPIs), upgrade their organization strategy, and improve the financial planning process.
To better understand these two terms, let’s get to know their history. The term BI was first used in 1958 by Hans Peter Luhn, a researcher in the field of computer science for International Business Machines Corporation (IBM), in an article titled “A Business Intelligence System,” published in an IBM journal. Luhn defined BI as “the ability to apprehend the interrelationships of presented facts in such a way as to guide action toward a desired goal.” The original concept of BI continuously evolved during the next three decades, and in 1989, a breakthrough was made when Gartner Research analyst Howard J. Dresner described BI as “concepts and methods to improve business decision-making by using fact-based support systems.” The early 1990’s marked the beginning of data transformation into actionable information. Analysts focused heavily on technologies, processes, and tools to support data storage, report creation, data warehouses, data marts and everything data related.
Where does CPM fit into all of this? While BI was improving as computer technologies were introduced, customer relationship management was also improving. Management techniques combined with new technology enhanced the reporting, budgeting, and analysis in companies. This progress produced an integrated process known as CPM. The concept of CPM was introduced by Gartner Research in 2001. As mentioned above, CPM describes the methodologies, processes, metrics and systems needed to manage the performance of a company. Enhancing corporate performance is crucial when times are difficult because it can help companies find bottlenecks and inefficiencies or expose areas that are profitable. In my research, I have found many describing CPM much like driving a vehicle. The dashboard and mirrors provide you with historical information (powered by reporting and Data warehouses). The driver sees the future (aka budgets and forecasts) by looking through the windshield, the driver drives the car by using a steering wheel and pedals, and the GPS (or another “analytical” passenger) gives you information on where to go next.
We will see the differences between these two terms in areas of strategy, purpose, scope, and data type. First, BI offers the right tools to improve the organization’s decision-making, but it is not linked to the organization’s strategy whereas CPM focuses on providing a closed-loop support that connects to strategy formulation, measurement, process design and execution with BI. CPM is linked to the company’s strategy through critical success factors (CSF) and Key Performance Indicators (KPIs). In terms of purpose, BI helps organizations set and monitor their goals, and CPM guides the organizations toward their goals. BI focuses on the scope of one or more of the company’s departments and functional areas whereas CPM looks at the entire enterprise. Lastly, BI connects to historical data through analysis, dashboards, data warehouses, data mining, and data discovery, and CPM is reactive and produces timely data, focusing on budgeting, forecasting, financial reporting and statutory reporting. BI facilitates decision-making based on archived data. Since CPM is timely data, it is more proactive, and it helps companies improve their ongoing business processes and operations. We can see why CPM is often referred as the next generation of BI.
In an article about the Top BI and Corporate Performance Management Trends for 2016, we see that in both BI and CPM worlds, data is extremely important. BI and CPM are often used synonymously, but they are markedly different. BI provides the foundation to implement CPM. BI involves the raw data that is integrated into the Data Warehouse (DW), and CPM is about leveraging that information. Once the data is transformed into substantial information, it can be used to make decisions. BI is the organization’s information platform for reporting and analytics, making it the backbone for effective performance management. CPM drives the plan and uses all of the processes, metrics, and systems that manage, improve, and monitor the performance of the organization.
Clearly, there is a difference between these two terms, and I hope this information gives you a better understanding between BI and CPM. For deeper insight about BI and CPM, I recommend taking a look at Gartner’s Magic Quadrants, which is a research methodology and visualization tool positioning of four types of technology providers in fast growing markets: Niche Players, Visionaries, Leaders and Challengers. Magic Quadrant reports are highly useful tools for those that are looking to find a company that fits their needs and seeking to compare competitors in their market. As mentioned above, BI tools compile data, transforming it in a way that allows users to understand how a process or operation is performing through visualization. CPM works closely with the data from BI, and that information helps users develop plans to improve or change their process to generate the results they desire. Together, BI and CPM form a bridge that connects data to decisions. If you have any questions, feel free to comment us below.
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