”If you do not know where you come from, then you don't know where you are, and if you don't know where you are, then you don't know where you're going.”
This is a quote from Sir Terry Pratchett, a brilliant and highly respected British writer who sadly passed away in 2015. While this quote can fit all manner of circumstances, including the turbulent times we are currently living through, on this occasion it just so happens to be the perfect introduction for inlumi’s Intelligent Performance Management. If you will grant me 10 minutes of your time, I can show you why.
The term Enterprise Performance Management (EPM) has been used for decades, albeit with some disagreement on how the term is used. Today, you tend to find that EPM is a term used more by technology vendors or technology-focused people, whereas EPM – and specifically EPM software – is considered to be critical for managing all types of organisations by linking financial and operational metrics and results to insights, supporting strategies, plans, and execution.
Likewise, in the early 2000’s the term Business Performance Management (BPM) was born. BPM was a specific reaction to the improvements in computing power of the time, and re-emerging interest in the internet following the dot-com bubble of the 1990’s to very early 2000’s. The approach was simple: to apply integrated technology to better define and track KPIs and achieve strategic goals. Around this time Gartner published their "Back to Basics" research and referenced the term “Corporate Performance Management” (CPM) as a way of describing methodologies, processes, and systems to manage enterprise performance – specifically from a holistic and technology agnostic perspective – to better track and understand an organisation’s strategic performance. You will tend to find that CPM is a term used more by business strategists and non-technically focused individuals.
So, this is where we are coming from: a collection of different companies and research houses who all claim subtly different things from subtly different times. If we disregard the specifics of who said what first and look at the content, we can see that they all agree on the underlying concept of Performance Management in the context of a business. Some focus more on finance specifics, some more on operational specifics, but the ideology is homogeneous. It is all about how you take the information in your organisation (often financial information, but increasingly non-financial information too), use it to inform and shape your strategy, simplify your day-to-day operations using technology, and then use that technology to track and compare how you perform against your strategy. If you fail to reach the goal, you review what happened and put in place corrective measures.
This is where we are today. Same same, but different...
Intelligent Performance Management (IPM) is our way of unifying the approaches of the past to create a single, finance-first ideology for now and for the future – driven by talent, and with technology at its heart. The yearly cycle remains viewed from an end-to-end perspective, guided by strategic targets and assessed on daily operative data, brought into the 2020's and beyond through the combination of new intelligent technologies and the shifting role of the controller.
The shifting role of the controller is a key point in IPM. We are, in fact, on the cusp of the Fifth Industrial Revolution, where humans and AI technology support one another in value creation. This is the "Intelligent" in IPM, where your people will pull previously unknown insights to the forefront precisely when and where you need them, enabling the key decisions that accelerate your strategy execution and financial performance. This is a clear change to the status quo, the new direction we should all be heading, and something we at inlumi have focused on.
The idea of change is nothing new, especially in business operations. One must change and adapt their business to meet the demands of the market in order to stay competitive. The rate of change is increasing exponentially as digital connectivity has proliferated, and those organisations who don’t adapt faster find themselves getting left behind. One area of business which is so bound to this rate of change, yet so structurally adverse to the uncertainty caused by change is the finance function. As other functions have evolved and embraced the Fourth Revolution (supply chain) and are embracing the Fifth Revolution (sales & marketing, customer service), many finance functions have been frozen in time through technology, process, and regulatory reporting.
This is not a surprise. Those who work in the finance function would like to see change happen, but we have to remember that the finance function is generally more complex than other operational functions and bound by legal requirements on a tight timeline. To make a substantive change to the system that reports to the market is a big undertaking. Often many processes are bound by legacy systems and manual data handling, meaning that change in the finance function is less of an evolutionary step and more of a revolutionary intervention.
Is this revolutionary intervention called Next Generation Finance, Digital Optimisation, Finance Transformation, or Finance 2.0? Call it what you will, as the message is still the same. The rapid shift in how the finance function must operate within those businesses aiming to emerge as leaders is not only a necessity, it is already very much a reality. A recently updated study from Gartner supports this idea, stating that 30% of organisations will gain their competitive advantage in 2020 from the creative exploitation of emerging technologies; such as AI, IoT, and augmented analytics. Finance can no longer afford to lag!
At inlumi we believe your first step into Intelligent Performance Management is to get your organisation fit for the future. We call this Enabling the Insight Engine. Below we have outlined the 4 business critical pillars of IPM. These are the 4 key areas you will need to invest in and develop, in order to see the benefits of what is possible. Each one of these areas is valuable and worthy of investment in its own right, but the sum of all 4 pillars is greater than the individual parts. These 4 pillars combine to deliver the type of intelligent actionable insights we discussed a few paragraphs ago. Each has a critical part to play, like the components in an engine. Once they are built and fine-tuned with one another, the power of your Insight Engine will be unlocked and at your disposal.
These 4 pillars are:
- Embracing technology as the catalyst – Technology provides the platform on which your cross-organisational insight engine will be built, where a proactive relationship between IT and Finance in defining your technology strategy is key. Advances in areas such as machine learning and robotics can eliminate the mundane, freeing your human capital up to focus on deriving AI supported insights for your entire organisation.
- A broker of information – Data is at the heart of enabling your insight engine, and must be collected, refined, and processed in its entirety; not just the financial metrics! With technology as the catalyst, advanced analytics on your "data in motion" will enable informed real-time decision making.
- Processes spanning the organisation – Collaboration is key across the whole organisation for an embedded and integrated finance unit to function as intended. Unified processes supported by the technology platform simplify collation of all data, enabling the smooth running of the insight engine and its ability to deliver actionable insight to the whole organisation.
- Proactive talent management – Demand for traditional financial skills is decreasing as functional tasks are taken over by automation or robotics. The insight engine is built on technology, data, and processes; but it is fuelled by tech-savvy curiosity, adaptability, and inquisitiveness. In the future your people needed to be able to look beyond the financial information and understand all your organisational data to pull AI supported insights, enabling stronger, better, faster decision-making.
Over the coming weeks and months we will explore each one of these 4 pillars in further detail right here at inlumi.com, through a combination of articles, webinars, and Q&A sessions. If this resonates with you, why not get in touch with us and we can explore how your organisation can benefit from Intelligent Performance Management thinking.
You can learn more about Intelligent Performance Management from inlumi here.