Is your business run by chance?

Quocirca's Straight Talking: Time to take the reins

The discipline you apply to managing your business'underlying processes can make all the difference, especially when times get tough, says Quocirca's Clive Longbottom.

As an employee, you trust that those responsible for the processes that help support the organisation - such as financial reporting and analysis - have them fully under control.

Further, you probably trust that those is charge are doing everything that they can to ensure that these processes optimise the overall performance of the organisation, and that they make use of all the necessary information sources around them - including external ones, such as customers, suppliers and information on competitors.

Well, think again. Research carried out by Quocirca for Oracle shows that the quality of enterprise performance management (EPM) - the art, or science, of creating, monitoring, measuring and optimising these processes - can best be described as 'OK'.

Very few organisations are making use of the skills within their supplier and customer value chains, preferring to try and keep all the 'smarts' within the organisation.

Yet how can an organisation ensure that those value chains are fully optimised if suppliers and customers are cut out of the decision-making process? In our research, only 13 per cent of respondents felt they had the right processes in place to successfully engage suppliers in discussions around how best to enhance their processes.

Further, few businesses encourage employees to participate in providing ideas as to how the organisation could best improve its processes. This could reflect an organisation's security fears, not wanting to share information beyond those entrusted with safeguarding such information, or it could be more along the lines of the 'knowledge is power' ethos.

If the latter, then organisations need to realise that keeping information within the few does not lead to competitive knowledge - it leads to large gaps in the decision-making capabilities. The more an organisation's information flows can be opened up, the more ideas will flow because of it, and the more optimised the processes can become.

Overall, in our research fewer than 25 per cent of respondents felt there were processes in place to successfully engage the various stakeholders in the business in the decision making process - a lamentable failure, as a politician may put it.

Even at a competitive level, only 17 per cent of respondents believed that the resources they had available to them were sufficient to give them a good picture of the market situation, and only 12 per cent felt they had strong capabilities in gauging what the likelihood of success of a new product or service in the market would be.

This means that more than 80 per cent of respondents are essentially taking shots in the dark when introducing new products or services - they do not have sufficient knowledge of the market nor of the competitive environment to know how well they are likely to do.

Indeed, the main findings from the research were that there are massive disconnects between the various process stages of EPM. For example, the six areas that were looked at (stakeholder environment, market model, business model, business plan, business operations and business results) were seen by nearly 30 per cent of respondents as being completely separate and that each could be dealt with in isolation.

Just over half felt that the areas were interlinked and needed a coherent, interlinked approach to dealing with them. That the majority do see the need for linkage is good - that so few manage it is a cause for concern.

In good market times, a lot of this can be hidden; with money rolling in, poor performance matters less. But, as the bad times come in and the instructions from on high fall back on 'do more with less', such gaps in capability become all too clear.

Indeed, a prime example of this is within the financial sector. The boom years meant that decisions being made in isolation were just waved through - the profits were there, so no questions were asked. Then, when the first domino was toppled, questions were asked: how was this done? What happened to that? Where is this now?

The gaps in how the performance of the institutions was measured were suddenly all too obvious. Individuals were given too much responsibility that went unchecked, processes bypassed any peer review, financial 'packages' were bought and sold without anyone actually knowing what was in them.

Now, the lack of capability to unravel what has happened has led to banks going bust, being privatised, having central regulation and control being applied. If the correct tools and processes had been in place, then it would have been harder for the situation to arise in the first place, and it would be easier for the problem to be addressed and rectified now.

It may be tempting to say that this is only the banks, and that your line of business would never find itself in such a position. However, many organisations now find themselves without adequate lines of credit, with their suppliers being squeezed and with customers negotiating harder - issues that may have been allowed to go through in the better times could now bring the organisation close to failure.

Therefore, being able to measure and understand how you are performing against the general market, against specific products and competitors, and how your suppliers and customers are performing is becoming something that can no longer be seen only as a 'nice to have' - it is rapidly becoming a necessity.

There is much that organisations can do to make the situation better - and little of it requires massive investments. Sure, better usage of process-based systems and business intelligence will enable information to be aggregated, filtered and presented in ways that make the decision making process more effective.

But the biggest part of it is down to sitting down and reviewing the various processes used in and across the organisation and its value chains. Only then can these be best optimised, creating a coherent and cohesive platform for the future, and creating the flexibility the organisation will need to come through the bad times in good shape.

Quocirca's free report on the EPM research can be downloaded from here our website.

A leading user-facing analyst house known for its focus on the big picture, Quocirca is made up of a team of experts in technology and its business implications. The team includes Clive Longbottom, Bob Tarzey, Rob Bamforth, Louella Fernandes, Fran Howarth and Simon Perry. Their series of columns for silicon.com seeks to demystify the latest jargon and business thinking. For a full summary of the consultancy's activities, see www.quocirca.com.