In early August 2008, some companies announced reduced profits anywhere from 28 to 200 percent. But struggling companies considering restructuring, downsizing or selling off assets may have better alternatives. Independent research announced by SAS, the leader in business intelligence and analytics, reveals ways analytic technology can help organisations grow, even in a down economy.
Tough economic times demand improved organisational performance. Performance management can boost competitive advantage by identifying what drives value, improving agility and optimising resource usage. Employing analytics, organisations can leverage financial and non financial indicators, thus moving from gut reaction to fact-based decisions.
Professor Tom Davenport’s latest study, The Rise of Analytical Performance Management – based on company interviews and a global survey – reveals a clear progression of company activities with regard to analytical performance management. They range from prosaic (inability to file required financial reports) to highly sophisticated (incorporating analytical performance management into decisions and actions).
“Cutting costs for short-term impact without understanding what drives value or profit could threaten long-term competitiveness,” said Davenport, who holds the President's Chair in the Information Technology Management Division of Babson College. “In fact, very few companies employ analytical performance management. This study cites winning examples from Hilton Hotels, Harrah's, Best Buy, Victoria’s Secret, Sears and Toronto Dominion. Using analytics, executives at these companies are learning what factors truly drive their financial performance, and maximising those factors in their businesses.”
More than 40 percent of survey respondents are “definitely moving in a more analytical direction” on performance management. Another 28 percent say they would like to become more analytical. Results suggest that, given better tools, more widespread awareness of benefits, and greater understanding of methods and approaches, substantially more organisations will practice analytical performance management in the future.
“Performance challenges are cropping up faster and faster,” said Davenport. “Companies have increasing amounts of performance data, but they need to take better advantage of it. Analytics can help decision makers identify key business drivers so they can leverage opportunities and mitigate threats faster than competitors.”
Jonathan Hornby, Director of Performance Management Marketing at SAS, concurs. “Through implementing SAS for Performance Management at more than 1,500 customer sites, we’ve learned that a good place to start is using analytic technology to help translate strategy into operational objectives, measures, targets and initiatives.”