In-Depth

Get your balanced scorecard here!

Data warehousing vendors have had more than modest success in recent years, bringing to market a manner of database that is especially useful for analyzing business trends. But the data warehouse and (closely related) OLAP industries have not yet caught fire in quite the way that advocates hoped. What is missing is the "killer app." The Lotus 1-2-3 spreadsheet is still the best previous example -- many desktop PCs sneaked into the enterprise just to run 1-2-3 for a harried department manager. That was a killer app. Will data warehousers discover a single defining application suite that ev-eryone needs and that can be implemented without too much to do?

Some think the balanced scorecard concept, which came out of Harvard Business School in the early '90s, fits the bill. It was formulated by professors Robert Kaplan and David Norton, who sought to combine operational and financial measures of an organization's effectiveness. With the balanced scorecard, a company CEO, for example, could view the firm from several perspectives simultaneously. At this point in our story, some of this is perhaps too familiar to organizations that have spent a lot of money on consulting associated with one or another well-heeled scholarly methodologies (Remember reengineering?).

At any rate, today, Kaplan is a key figure with Renaissance Solutions, a Cambridge, Mass.-based systems integration house that has carried the balanced scorecard banner forward and experienced leaps in revenue. It seems a natural to try and automate this data gathering/performance monitoring methodology, and at least one data warehouse/OLAP vendor -- Gentia Software Inc. of Wakefield, Mass. -- has formed an alliance with Renaissance and tied its star to the balanced scorecard.

Of course, there are things that look a lot like a balanced scorecard, but do not quite fit its definition. IT shops have been keeping track of things for years -- especially in the telecommunications business, where regulators have consistently asked for reams of operational data. Sometimes these things are described as key performance indicators. Other times the discipline is described as "enterprise performance management."

The true "balanced scorecard" stipulates that you stage financial measures (say your -- and your industry's -- ROI), plus specific operational measures. These operational measures should include internal processes, customer satisfaction and gauges of the organization's ability to learn. What some might more simply call a "scorecard" could include what you want it to include; however it would not be a true balanced scorecard by Kaplan's definition.

There are obstacles to compiling scorecards, balanced or otherwise. If your firm does not already have, for example, mechanisms for measuring customer satisfaction in place, setting up such measures can be the most intimidating part of the project. Corporate politics can also be an issue. Lords of in-house fiefdoms will want to define the scorecard so as to succeed -- always elusive, objectivity may be the first casualty.

Again, if this seems a bit familiar, it is. A balanced scorecard report for corporate leaders sounds like the executive information system (EIS) cockpit much discussed in IT circles in the 1980s. What may be the case is that the things that once stopped the EIS movement are less numerous, and the things that enable such systems today are more available. In fact, the accession of the Web client enables more people in organizations to access analytical info, which is one of the precepts of the balanced scorecard.

The ultimate app

"A balanced scorecard is kind of the ultimate business intelligence application," said Wayne Eckerson, vice president of technology services, The Data Warehousing Institute, Gaithersburg, Md. "It has to incorporate all the different technologies that we've been talking about for many years -- warehousing, OLAP, distributed networking and middleware -- to actually pull all the scores from all the individuals, and then consolidate them."

There are a number of companies that play in that space right now, said Eckerson, who expects the number of adherents to grow. But implementation is not without obstacles. "The problem is that it's more of an organizational challenge in many respects to prepare a company to access itself using these kinds of measurements and tools," he said. "It's a big endeavor, and you have to be committed to it."

Few vendors have promoted this "ultimate app" as has Gentia. Last August, the company took a big step toward a mass-
deployed balanced scorecard when it released a Web-enabled version of the "Renaissance Balanced Scorecard." Together with Renaissance, Gentia last year spearheaded the formation of a Balanced Scorecard Council.

There are at least three levels to ascend in the quest for the true balanced scorecard, said Michel Gaiss, vice president of corporate marketing for Gentia. It is worthwhile to outline these steps: Depending on the available budget or the extent of management support, IT might want to bail out of a scorecard project before reaching the ultimate level. Gaiss points to three distinct steps:

PERFORMANCE MEASUREMENT, in which you set up report mechanisms;

PERFORMANCE MANAGEMENT, in which you add accountability to reporting; and

STRATEGIC MANAGEMENT, in which you add control to accountability and reporting.

Gentia was formerly known as Planning Sciences during a long pre-history in an-alytical software markets. The firm, said Gaiss, defines its overall business as "enterprise performance management," which he further defines as a means to help an organization perform the "measurement, control and communication of its objectives, initiatives and progress toward success."

At least one Gentia user said the decision to go with Gentia's software was a "top-down" decision and involved Renaissance consultants. This according to Debbie Smith, director, business development, at Bell Emergis in Ottawa.

The spin-off of a telecom giant (Bell Canada), Bell Emergis was familiar with the thousands of measures that a telecommunications company can fall captive to. Because of this, Bell Emergis explicitly decided not to try and measure too many things on its balanced scorecard, said Smith.

"A telephone company has thousands of measures in place operationally," she said. "The natural inclination might be to say 'We'll stick them on a balanced scorecard.'" Large organizations embarking on a balanced scorecard, she noted, have to work to winnow down a long list of measures.

Smith said Bell Emergis became a lead customer in defining the Web-enabled version of the Gentia Balanced Scorecard software. "The software worked," she said.

The challenges of the balanced scorecard are mainly organizational challenges. "It requires overhead work or back-office type work," Smith said. Individuals have to set up and continually refresh the pertinent data.

Another vendor positioned as a balanced scorecard proponent is CorVu Corp., Eden Prairie, Minn. CorVu recently forged a deal with Atlanta-based Armstrong Laing to provide a combined Balanced Scorecard/Activity-Based Costing system solution. Taken together, the products can provide a framework for setting strategic goals and a means to measure progress toward objectives, said Liz Shahnam, program director at the St. Louis offices of the Meta Group.

The deal is a further indication of the ongoing melding of business process theory and software technology. Moreover, said Alan Missroon, CorVu vice president of marketing, the alliance may provide the first coupling of two business methodologies proposed by business expert Robert Kaplan. Balanced scorecarding is melded here with a methodology that supports Kaplan's theories on activity costing, said CorVu's Missroon. While CorVu products provide the scorecard support, Armstrong Laing's Metify ABM application converts general ledger and other data into business process and activity costs for determining target costing strategies. CorVu and Armstrong Laing, said Missroon, hope this product pairing will help customers automate the balanced scorecard approach in order to track and improve customer and channel profitability.

Other voices, other vendors

It may be too early to tell, but prominent data warehouse vendors can probably be expected to re-tailor their established tools as dedicated scorecard, if not balanced scorecard, offerings. Many are ready to discuss aspects of enterprise performance analysis. Include among these SAS, Seagate, Information Builders Inc. and others.

"It certainly is one of the hot spots in the marketplace today, whether you're talking about key performance indicators or the balanced scorecard," said Donald MacCormick, London-based director of Seagate's Holos product line. What is new? "EIS tended to be hand-fed. But today's balanced scorecard can drill all the way down into the underlying data. If you see a blip, you can dig down [into the background data]," he said.

No, it is not so new, said Mark Moorman, program manager for business intelligence at SAS Institute Inc., Cary, N.C. "We've been a KPI [key performance indicator] company for years. We have historically had tools for financial consolidation, customer relationship management, human resources and data warehouse quality [assurance]." Users can form a useful version of a scorecard from this, he suggests.

"The potential of the balanced scorecard is that it moves you from an anecdotal company to a performance management-driven company. The difference between traditional OLAP and balanced scorecard is the difference between doing things right and doing the right things," said Moorman.

"People go out of business every day 'doing things right,' but not doing the right things right," Moorman remarked. Thus, he infers, the scorecard can bring more sense to the enterprise.

For its part, Information Builders Inc. (IBI), New York City, does not position its InfoCube product as a balanced scorecard. But, in describing it as an application template for managers who analyze sales and marketing performance, IBI reps suggest InfoCube may be simpler to launch and more broadly useful. It is also Web-enabled.

"InfoCube is an analytical application template for use with any industry," said Kevin Quinn, IBI director of sales for enterprise reporting. "It does its work with the assumption that you have [already gathered] this data," he said.

InfoCube is targeted toward financial issues, and follows a 'Rule of 8' schema, assuming that there are eight kinds of dimensions typically measured in sales and financial data analysis. One of the dimensions InfoCube uncovers for analysis is based on a rule of its own. It is the "Pareto" tool, which culls data for signs of the 80:20 rule. With it, you may unearth, for example, that your top 20 customers account for 80% of your business, and, horrors, that 15 of those customers cut back on their business with your organization during the last quarter. This analytical module takes its name from Wilfredo Pareto, the late Italian economist who devised the law of the "trivial many and the critical few" to explain common financial truths.

In one era

Having died in 1923, Wilfredo Pareto clearly missed out on the golden era of high-ticket consulting engagements. In any case, it is the high odds that consultants will be required that will tend to influence the application development manager's "yeah or nay decision" on the balanced scorecard. It is not safe to assume that there will not be business consulting required with the balanced scorecard. Organizations already prone to engage consultants will be more willing to take on such projects.

If the systems they create help companies grow revenue, the balanced scorecard will become commonplace as chief executives grow to depend on these interactive meters of corporate performance.

The goal is eternal -- to turn strategy into tactics via effective feedback. Such systems will be considered because missing infrastructure elements that inhibited EIS in the '80s have become more available. These links include data warehouses based on relational technology, as well as networks and user interfaces based on TCP/IP and HTTP.

Bell Emergis chimes in the decision to go with software from Wakefield, Mass.-based Gentia Software Inc. at a Canadian telecommunications company was a "top-down" decision and involved Renaissance consultants, said Debbie Smith, director, business development at Bell Emergis' offices in Ottawa. Smith was a business planner and process development specialist at Bell Canada prior to joining Bell Emergis, which was spun-off from its parent firm more than a year ago. Bell Emergis' goal is to develop innovative intelligent network applications.

"As a new organization, the leader knew we needed some kind of management discipline," said Smith. "He [James Tobin, executive vice president of Bell Canada, as well as president of Bell Emergis] saw balanced scorecard as a world-class process.

"We started work using the process that Renaissance [Solutions, a Cambridge, Mass.-based systems integration house] used, and it starts with interviewing the leadership. All of the business unit leaders contributed by identifying what they felt the whole strategy was," Smith said. She and two consultants pulled together this information in just six weeks, preparing what she called a straw model that was placed in front of a team of leaders in a workshop.

"We then went away and worked with folks in the organization to determine what appropriate measures would be needed to ensure we were on track to meet strategic objectives," she said. "We kicked that around a lot and there was a fair bit of discussion. This was healthy because we weren't trying to measure things that a telephone company traditionally measures.

"We came away with a long list of measures," said Smith. The next challenge was to shrink it down to a list that was manageable.

Smith looked at other products. "This whole area is still in its infancy, so nothing was extremely mature and nothing had a long list of users," she said. "The Gentia product was out in front quite noticeably in terms of how it adhered to the spirit and philosophy of the balanced scorecard methodology." The main technical requirements from Smith's perspective were that the eventual system be server-based and Web-enabled.

The challenges of the balanced scorecard are mainly organizational ones that the balanced scorecard brings to the fore. "The biggest challenge was in the behavioral [realm]," said Smith. "We were trying to achieve things in the future that were hard to measure. And somebody had to step up to the work.

"It is essential to enlist opinion makers in the organization in order to ensure that peoples' time is freed up for the effort," she added.

Challenges are process-related as opposed to system-related, she noted.

Smith sees the balanced scorecard as a competitive advantage, and so she describes hers in general terms. "You want to look at cash flow and revenue trending, that sort of thing. We have some customer satisfaction measures, too," she said.

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