Introducing the Six Process Spheres
To know where to begin identifying data needed to help your associates maximize your results, it is important to understand the six basic groups of processes (we call them process spheres). The data from these spheres must be connected in order to maximize and sustain business results:
● Strategy is the guiding plan that helps define priorities in each of the mission-critical processes in the other five spheres. The strategy must be aligned with the other five spheres and vice versa in order to optimize business results. To be successful, your strategy needs to be converted into a set of measureable goals and include an action plan of implementation. Business intelligence dashboards play a critical role in communicating the tactics that support the strategy to the organization.
● Customer-facing activities involve any process that touches the customer. Included here are sales, marketing, service (orders on time and complete), logistics, product quality, and any other customer interaction. These activities define:
● How your customers view your company.
● Whether or not your company “qualifies” as a vendor.
● If your company provides value to the customers.
● If your company has a sustainable competitive advantage over your competition.
● Product development/innovation is ideally driven by requirements that come from outside of the company, as opposed to internal requirements. Strategy, customer facing-activities, and research are sources for input into product development/innovation activities. Product development/innovation includes marketing, research, trend data, regulatory requirements, customer requirements, and quality.
● Supply chain activities are essentially what they sound like. They are the chain of activities that allow the organization to supply products (or services) to its customers. The product must be delivered in accordance with agreed upon product specifications, delivery times, quantities, locations, and logistics. Supply chain activities include manufacturing, finished product and component sourcing, inventory management, warehousing, and shipping. Information from customer-facing activities, product development, and strategy are needed in order to optimize supply chain activities.
● Financial management requires accuracy of data transactions and aggregate records to meet the financial requirements of the business. Financial management includes cash flow management, internal controls, financial statement accuracy, and business financing. Without strong financial results, none of the other spheres of mission-critical activities is possible.
● Associate engagement may be the most important activity of all. It is critical that all associates understand how their work supports the strategy of the business and the objectives of each of the mission-critical processes embedded in the six spheres. Using BI dashboards to communicate strategic goals and measures of their achievements can help the company establish a culture of transparency and trust. The culture of trust is essential to driving continuous improvement and to creating sustainable profitable growth.
Understanding the measurements of the processes within these spheres is one key dimension of sustainable excellence in performance; the other key dimension is the connection between those spheres of processes. The connection between them is like the electrical system in your home or office. It’s the conduit of energy that makes things work. This conduit gives your organization the ability to “turn the lights on and off,” if you will. The employees and the technology they use represent the “wiring” in that conduit, and it needs to be in place, maintained, and updated.
Many organizations have what they believe to be the processes they need to manage the business. Every computer system we have seen, no matter how antiquated, has the basic data necessary to enable people to make informed decisions that lead to sustainable profitable growth. Often missing is the technology and the human knowledge necessary for extracting the data from the transactional systems, and the ability to use that data to visualize the six process spheres and the connections between them. Our role, as BI professionals, is to help companies connect the dots between fragmented pieces of information and uncover the “natural synergies” between their processes, their data, and their IT systems.
Figure 1-1 shows that the business world is indeed round, making it a continuum of connectivity that provides feedback to and from each of the six spheres of key business processes. The nucleus of this “world” is the people who interpret and act on the data. The axis around which this world rotates is financial management.
Figure 1-1: The six process spheres
Identifying Business Measures
Even with all the processes and connections in place, it is important to establish the right feedback mechanisms. Those feedback mechanisms include measures of performance and culture. While measurements of culture are extremely important, there is an entire field dedicated to understanding this topic, which is covered in separate literature. This book focuses on the measures of performance.
Business analytics typically look at two types of measures – measures of results and measures of drivers. In the BI jargon, they are called lagging indicators and leading indicators.
Measures of results, or the lagging indicators, communicate the outcome of what just happened. They are financial results and are focused on components of sales, operating income, return on investment (ROI), and cash flow. These are critical measurements of how a business has done, yet analyzing these measurements alone does not always give you the best answers as to why something happened and what will happen going forward, so that the enterprise can proactively make adjustments.
In contrast, measures of drivers, or leading indicators, are designed to reveal the reasons for certain results (good or bad) and possibly provide insight into future performance. Instead of measuring outcomes, they measure processes and activities that drive the outcomes.
For example, every company measures its sales, or top-line revenue, in comparison to the budget and to the prior year. The measurement is usually communicated as a dollar value and as a percentage. This is the measure of a result (or a lagging indicator). On the other hand, sales growth may be driven by many leading indicators, including:
● Change in volume vs. change in pricing
● Acquisition of new customers vs. lost customers
● Revenues driven by new products vs. revenues driven by existing products
● Measures of sales activities, such as the number of sales calls per day, closing ratios, and so on
● Measures of customer satisfaction and customer service
Each item in this list represents one or more of the drivers, or leading indicators, that contribute to the outcome of sales growth. Understanding and communicating those measures can have a significant impact on achieving strategic growth goals.
To give you a feel for the kind of data, the types of measures, and the business spheres that the data and measurements help connect, we have constructed Table 1-1 with some examples.
Table 1-1: Some Examples of Spheres Connected, Measurements, and Data Needed
Recall the example of the company that knew something was wrong but didn’t know what it was, presented in the “The Case for Business Intelligence” section earlier this chapter. The following list discusses how certain drivers could be measured better:
● The measure of service level drives future sales. For the company in this example, it turned out to be a measure that signaled that