Executives stand accused of being blinkered in the way they manage their business processes, operations and information systems, hampering the way their businesses can respond to changes in customer demands and market conditions.
This is one of the headline findings of research carried out for Oracle, which has developed an Enterprise Performance Management Index to rank organisations on the quality of their business processes and information.
The assessment which looked at six distinct areas including the stakeholder environment, market model, business model, business plan, business operations and business results, was conducted across 800 businesses in Europe and North America, including 100 in the UK.
The objective behind the study was to explore how CxOs are managing their businesses on a daily basis, Mark Wilkinson, VP EPM & BI at Oracle told us. “We wanted to see how they assessed the financial health of their operations, and how agile they were in responding to changing business dynamics.”
One conclusion was that executive focus needs to be realigned and not just angled at driving operational excellence but focused on the broader context of management excellence, Wilkinson said.
“One over-arching theme was that businesses have failed to develop an integrated view of their operations and hadn’t coupled the information flows that stem from the ERP systems and business intelligence applications they had already deployed.”
Oracle proposes the enterprise performance management (EPM) system as a means of resolution, funnelling financial numbers, customer information and operational data together to provide an integrated view which is underpinned by a common data model.
“Businesses fail to or are unable to plan at the product level. We believe that a business has to be able to plan at that very detailed level to be able to achieve management excellence.”
The results of the study indicate a generally modest level of achievement, with much work remaining to be done in developing an accurate and up-to-the-minute enterprise-wide picture of current performance, the company said.
Only 12% of organisations consider themselves well placed (they score 7 or more out of 10) to determine profitability by product line, customer segment, market, channel and the like. A similar number score 7 or more in their ability to respond to business or market changes by modifying plans and budgets.
The vendor points to the Hyperion Profit and Cost Management suite as one example of the sort of software support that is needed to shape these detailed views of business operations that can be consolidated to provide the integrated and cross-functional daily guidance needed to drive up management excellence.
Oracle stated that a starting point is to recognise that stakeholder engagement, the competitive environment, the business model, planning, operations and reporting all play a coordinated role in providing a representative view of how the business is performing and how its performance could be enhanced.
Bringing together the information held within these functions, and supporting this with the appropriate business processes, enables the business to act effectively on the insights gained.
The next step is ensuring that there is a feedback loop to all of these processes, so that the business can continually refine and enhance the efficiency and agility of its operations.
“Enterprise performance management is called for that for a reason,” Wilkinson stressed, we need a view of business performance that is enterprise-wide to be able to make the best management decisions. EPM system will provide the necessary integrated framework for financial and strategic operational planning.
Interestingly, “Companies in highly regulated markets performed less well in the Index than others” Wilkinson added, noting that the survey uncovered a high inverse correlation between a businesses Index score and its regulatory environment. On a scale of 0 to 10, the organisations attained an overall score of 5.13. On the whole, the higher the Index, the lighter the regulatory touch.
The public sector and healthcare sectors, as the most highly regulated verticals, have the lowest overall EPM Index scores. Likewise, businesses in the US and the UK were rated lower than comparable organisations in less highly regulated regions such as France, Italy and Benelux.