BPM: a competitive weapon

BPM Partners’ Karl Mouantri, discusses the benefits of business performance management.

However, for many Asian companies BPM remains a distant vision as they struggle to improve dysfunctional processes and systems for financial and operational reporting. They rarely have the capacity to extend this basic reporting to high-value BPM processes such as strategic planning, profitability analysis, or forecasting.

So, what precisely is Business performance management? As defined by the BPM Standards Group, BPM is: “A methodology to optimise the execution of business strategy that consists of a set of integrated, closed loop, analytic processes supported by technology, that addresses financial as well as operational data. BPM enables a business to define, measure and manage its performance against strategic goals. The core financial and operational processes of BPM include planning, consolidation and reporting, analysis and the deployment of linked key performance indicators (KPI’s) throughout the organisation.”

In essence, BPM enables a business to define its strategy and goals, and then measure and manage performance against those goals.

BPM in Asia today

Among companies in Asia Pacific - in particular, the emerging markets of South East Asia and China – there is typically a lack of understanding of BPM, its processes or its benefits. Though it may be unfair to generalise, the fact remains that within most Asian companies, business and operational information merely exists in pockets of the organisation and is largely isolated within specific departments, subsidiaries, or divisions. Such information is very seldom merged to present a more comprehensive picture of the business and its performance, much less deployed to managers to enable improved decision-making.

Preliminary results from our recently concluded 2006 BPM Pulse Survey provide some quantitative support for this generalisation. Among the companies surveyed in Asia Pacific, we found that nearly 30 percent of the companies surveyed had neither plans for nor current BPM initiatives in progress. That is fairly remarkable in comparison with the 14 percent of North American and 15 percent of European respondents without such plans or initiatives. This could also lead us to conclude that Asian companies, should they fail to recognise the benefits of BPM, may severely fall behind their US and European peers.

With the remarkable benefits attainable through BPM, why would Asian companies be so adverse to such strategic initiatives? Through field observation, some common issues contributing to Asian companies lagging behind include:

• ERP implementations have been longer and more challenging due to language, country-specific business practices, and cultural issues.

• A lack of understanding by senior management of the benefits and needs of BPM and how it can facilitate improved organisational, financial, and operational performance.

• The conventional finance and IT functions are frequently overloaded and are often required to perform multiple tasks or several roles, therefore limiting ability to manage new projects and develop specialised skills. In addition, there is a general shortage of qualified staff in many roles – particularly those with specialised skills.

• Culturally, accountability for results is frequently not borne by an individual but rather by a group or on a collective basis. Therefore, traditional western BPM processes and concepts advocating individual accountability must be adapted.

• The suggestion to distribute business information throughout the organisation is frequently resisted. Traditionally, in many Asian companies there has not been a culture of information sharing; on the contrary, information had typically been released on a “need to know” basis.

Addressing advanced business requirements such as improved systems and processes for planning, forecasting and financial consolidation is frequently viewed as a wish list rather than vital processes to empower management and gain insight. At best, many Asian companies conduct BPM activities (such as budgeting) on a periodic basis with an objective to simply complete the mechanical process rather than a continuous process (such as rolling forecasts or re-forecasting) to manage, measure and review performance.

The net result is that Asian companies may find themselves at a competitive disadvantage due to limited insight into their own businesses as well as the adoption of best practices that BPM initiatives typically sustain. By looking at our research again it became even more compelling by the fact that, when we consider the reasons why companies indicated they do not plan on pursuing a BPM initiative, 21 percent responded that the benefits were not clear to management and 40 percent indicated there was a lack of executive sponsorship.

The conclusion of these findings is that Asian managers and other users of business information, from executive management to line managers and other stakeholders, are not empowered with the right information for strategy all the way through to decision making. A potentially vast performance gap has been neglected and could have been improved had these companies recognised the availability and need for BPM. The phrase “you cannot manage what you cannot see, and you cannot improve what you cannot measure” seems appropriate for many Asian companies.

However, the foreign multinationals may not be as far ahead. Of those foreign multinational companies with BPM project underway in Asia Pacific, we have found that it was often driven by their overseas headquarters and is frequently insufficiently localised or adapted for the Asian market place. In several cases we have found foreign multinationals in Asia that have executed BPM initiatives based on a hybrid of corporate and local requirements. In these cases, we have seen a significantly higher level of ownership and accountability among senior management and field managers.

Another interesting statistic from our survey is the components of BPM that Asian companies tend to favour. Of those Asian companies that did have current BPM projects underway, more than half cited budgeting and forecasting as the current BPM initiative. This is significant because it demonstrates that budgeting and forecasting processes are becoming a very important competitive weapon and enabler to adapt to changing market conditions. This was followed by operational analytics and dashboards to support more real-time decision support.

The future of BPM in Asia Pacific

The Asia Pacific region has maintained rapid growth and, at times, suffers significant economic or social disruption – and this is part of the roller coaster ride to be expected when operating in emerging markets. North American, European and Asian companies continue to invest heavily throughout the region, with increased focus on China and, to a lesser extent, South East Asia. In this environment, Asian companies increasingly find themselves competing intensely with larger multinationals. They must recognise the need to adapt and maintain a competitive footing by leveraging the increased availability of business information to proactively monitor and benchmark their performance against peers and competitors. With constant changes in market and macro-economic conditions, the ability to measure, benchmark and forecast business internally as well externally has become crucial.

In some regions, particularly in Japan and Korea, BPM has been adopted and deployed more aggressively. This is largely due to a strong manufacturing tradition that has fostered a discipline of process control and performance management that has subsequently led to a strong focus on planning and forecasting. Examples of such companies include Toyota, Sony and Samsung, each a leader among their peers in Asia. All of these companies have implemented world-class BPM processes and systems delivering the capability to measure performance, improve decision-making, benchmark internally and externally, and compete more effectively globally.

Interestingly, in countries such as Japan and Korea, it has even become common to create special departments focused solely on planning and budgeting. These departments are frequently detached from finance or accounting and are tasked with what is often called corporate planning, which practically means measuring strategy, KPI’s and other financial and non-financial indicators, and then leveraging and optimising company resources at all times. It also means being prepared to change the course of the company if needed.

The relatively limited number of companies from South East Asia and China launching world-class BPM initiatives may be due to cultural differences or simply the paucity of truly global companies in these regions. However, several companies from this region have been investing heavily in BPM processes, people and systems to attain more significant insight and performance. Singapore Airlines, Petronas, China Mobile and HSBC are among the leading companies that seem to have BPM visions, in addition to continued expansion in the face of intense global competition.

Ultimately, the most significant challenge many Asian companies will encounter in realising a true BPM vision is the ability to tie the execution of strategic plans to the operating plans and goals. Companies must synchronise their strategic and operational planning processes - from developing a long-range strategic plan to modelling different scenarios and strategic initiatives, down to the development of the annual plan and budgets. This is no easy task and requires change in the existing managerial processes. We believe most Asian companies should take some immediate steps to improve their ability to execute their BPM vision, including:

• Empowering their staff by sharing more business information across the organisation. This will not only increase awareness but also lead to increased efficiencies.

• Define company-wide KPI’s that are clearly measured and communicated across the organisation.

• Focus more on external benchmarking with competitors for financial and operational results, as well as adoption of best practices.

• Leverage external expertise to help improve the process rather than relying upon limited internal resources and costly “trial and error” exercises.

• Increase investment in training in subjects such as financial management, operational reporting and business analysis. Most employees’ understanding is limited to what they have gained through past experiences and they are rarely exposed to best practices, benchmarks, BPM strategies, and deployment of BPM systems.

• Recruit employees that have the know-how and the mindset for BPM – staff from multinational companies who have direct experience in BPM initiatives are one good source. In addition, tomorrow’s business leaders coming out of leading MBA programs globally are increasingly BPM literate and frequently have the knowledge, attitude and insight desired.

External stakeholders such as the board of directors, regulators, financial institutions and shareholders are becoming more cognisant of the technologies available and an organisation’s need for BPM processes. These external stakeholders have been developing increasingly high expectations of companies’ ability to provide complex business information and insight into their businesses. In particular, shareholders of listed companies are frequently demanding clear processes to ensure timely and accurate guidance. They demand something more than a guesstimate – anything less than true insight into the business can have severe ramifications for a company’s stock valuation.

As competition stiffens, financial reporting regulation change and disclosure becomes more vital, we expect to see a significant acceleration in the adoption of business performance management among Asian companies. The Asian cultures and values, always a business strength and differentiator, will contribute to this process as the ability to embrace change is one of the few constants. The competitive imperative is the development of the talent, knowledge, and skills to embrace the managerial transformation required among many traditionally managed Asian companies. With everything eventually being equal between companies, business performance management could be a very competitive weapon and a key differentiator for companies operating in Asia Pacific.

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