A PM Primer: The Analyst View

Just how similar are BI and PM? How do they complement one another, and how do they differ? The issue might not be as complicated as it looks….

These days, you hear almost as much talk of performance management (PM) as you do business intelligence (BI). Just how the two relate—and how they differ—is a pretty nebulous matter, however. It doesn’t help that most BI vendors are now touting full-fledged PM solutions of their own.

Which brings us to the $64 million question: how similar are BI and PM? To what extent—if at all—do they complement one another, and how—if at all—do they differ? More to the point, are organizations that do PM already doing BI? And if that’s the case, is the reverse true, too?

Not surprisingly, there seem to be as many answers to these questions as there are opinionated—and opportunity-conscious—BI and PM vendors.

But TDWI research director Wayne Eckerson says the issue isn’t really as complicated as it looks. Vendor hype aside, Eckerson says, there’s a very definite relationship between BI and PM

"You need BI to do performance management. PM is about driving behavior to make individuals, groups, and the organization more productive and get everyone marching in the same direction, aligned with corporate strategy and objectives," Eckerson says. In this sense, PM is a distinct complement to—and extension of—core BI practices.

Or, to put it another way, you can do BI without doing PM, but you can’t do PM without first having—and effectually doing—BI. "[O]nce an organization sets a strategy—which involves defining objectives, plans [i.e., budgets and resource allocation] to achieve the objectives, initiatives [i.e. new projects to achieve the plans], and metrics to measure progress towards achieving the objectives—then you instantiate these in the BI layer," says Eckerson.

BPM, or business performance management, is often confused with another kind of BPM, namely, business process management. The two are distinct practices, but—surprise, surprise—have something more in common than just their acronyms. Like that other BPM, business performance management is process-centric in a way that BI is not. To the degree that BPM is mapped to specific processes and defines a highly rigorous way to understand and measure performance—and in turn drive decision-making—it’s much more particular, or—as industry veteran Jill Dyche puts it, much less ad hoc—than vanilla BI.

"Business performance management is more tightly coupled to well-defined business processes," explains Dyche, partner and co-founder of BI and DW services specialist Baseline Consulting. One upshot of this, she says, is that "people know (or should know) how to act on the information they get as a result of performance management"—in part, Dyche indicates, because "the very nature of business performance management involves pre-defined—often painstakingly so—metrics that are usually driven from the top down."

Vanilla BI, on the other hand, is a rather different animal. "BI transcends process-specific business issues and allows companies to examine independent indicators, say revenue or resource utilization, narrowly, with often unestablished decision points or metrics. It allows companies to analyze business issues that aren’t necessarily reported on on a regular basis," Dyche argues. "The most successful BI environments I know deliver ad-hoc, on demand. Nothing about BPM is ad-hoc. If it’s ad-hoc, it’s not BPM."

There’s a healthy debate about the relative merits of BPM, at least as a distinct, process-centric refinement of (or complement to) BI.

Consider industry veteran Mark Madsen, a principal with BI and data integration consultancy Third Nature Inc. (and co-author of Clickstream Data Warehousing, a how-to book about building Web-enabled data warehouses) who says the two practices don’t differ all that much—if at all. Madsen seems okay with the idea that PM describes the discrete application of business practices and methods to the reporting, analysis, and connectivity provided by BI. But he says there’s no pressing need for an additional—and additionally confusing—product or technology category.

"I think the vendors shoved BI aside and call BI performance management now," says Madsen, comparing this displacement with that of "DW" by BI a decade or so ago. "I always viewed BI as the information delivery practices and technologies, and performance management as a business (and maybe IT also) practice that leveraged various elements of BI. But you know how it goes with marketing. Once someone coins a term that people like, it evolves to mean whatever the different vendors want, e.g. "dashboard", "scorecard" [and so on]."Madsen isn’t out there on a limb by himself in this regard. Other industry watchers or vendors have staked out similar ground. (See companion article)

Eckerson, for his part, respectfully disagrees with skeptics like Madsen.

He says BI and PM do amount to separate-but-equally-important categories. PM, at bottom, describes practices that help monitor or drive individual and organizational behaviors, Eckerson explains, while BI provides an infrastructure for the dissemination of plans or strategy and the measurement of performance. Add the two together, he argues, and you’ve got "a powerful agent of organizational change." Which begs the question: just how do the two fit together? Eckerson offers the following example.

"The objectives and metrics go in your scorecards and dashboards," he says, observing that organizations typically use scorecards to measure progress toward their strategy and goals, and dashboards to measure overall progress and performance against the plans, initiatives, and processes that run their business. "You apply thresholds and goals to metrics to create KPIs—the thresholds score your results (A,B,C) for each period against your overall goals, which come from your plans and budgets," he continues.

Once you’ve created your KPIs, you have, in essence, instantiated your strategy, Eckerson explains. "The KPIs thus communicate strategy at a personal level to each individual in the organization and measures their success towards achieving the strategy based on their role. Besides showing people what matters and how they contribute to the whole, it also measures their performance against the goals."

About the Author

Stephen Swoyer is a Nashville, TN-based freelance journalist who writes about technology.