Thursday, February 12, 2009

Defining Operational Performance Management (OPM)

OPM is part of a number of buzzwords within the industry that is often used, yet poorly defined. While it is part of a the Performance Management family (which is also overused, generally accepted, yet not well defined). For us to make the niche more credible it is important to have a generally accepted definition of what it means.  

I have tried to frame OPM as a methodology, a framework, a process in which the focus is upon creating value with the customer in mind. Where Financial Performance Management strives to improve the budget development and budget management processes to enhance shareholder value, OPM takes us beyond the constraints of the financial mindset. We need to look at the processes and initiatives that drive customer value creation. Processes and initiatives like sales and marketing, operations, supply chain, pricing and discounting, etc.  
It is clear these two legs (OPM & FPM) must work together, and one should not take priority at the expense of the other. All to often our budgetary process becomes our measure of success, even though it is a lagging indicator. Where OPM becomes particularly valuable is that if we are building customer value correctly, it leads to greater financial results. Are we better off to hit our budgets in a year when the market was wildly successful? If the market grew at 10%, yet one grows at their budgeted 8% - was management successful?

1 comment:

  1. Well said Michael.

    I look at this as well from a slightly different angle. I work primarily with Independent Software Vendors (ISV's) who seek to embed Business Intelligence / Performance Management applications into their own software. Most, however, only leverage these products for basic reporting needs. By doing so, they are often missing out on a great opportunity for additional revenue, customer retention, and higher visibility within their customer's organization.

    If the ISV's would take the time to understand what their customers are needing from their application, they would see that it's not just dumping out log files and providing rows and rows of data or even pretty graphs, it's proof that the investment they've made in this software application is actually working, or at least moving their organization in the right direction.